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ICLG The International Comparative Legal Guide to: Aviation 2019 7th Edition

A practical cross-border insight into aviation law

Published by Global Legal Group, with contributions from:

AEROHELP Law Office K&L Gates LLP Arias, Fabrega & Fabrega Kabraji & Talibuddin ASBZ Advogados Katten Muchin Rosenman UK LLP Azmi & Associates Kreindler & Kreindler LLP Banwo & Ighodalo Kubes Passeyrer Attorneys at Law Cervantes Sainz, S.C. Lakshmikumaran & Sridharan Christodoulou & Mavrikis Inc. LeClairRyan PLLC Clyde & Co Monard Law Dentons Canada LLP Mori Hamada & Matsumoto Dingli & Dingli Law Firm Studio Pierallini Freidenberg, Freidenberg & Lifsic The Maples Group Furtună și Asociații Urwantschky Dangel Borst PartmbB Gongora Reina & Associates VISCHER AG Gross Orad Schlimoff & Co. (GOS) Weerawong, Chinnavat & Partners Ltd. Ince & Co LLP IUNO The International Comparative Legal Guide to: Aviation Law 2019

General Chapters:

1 The Use of Personal Data in the Industry – Alan D. Meneghetti & Yasmin Roland, Katten Muchin Rosenman UK LLP 1

2 Investing in Mid-Life Aviation Assets – Philip Perrotta, K&L Gates LLP 6

Contributing Editors 3 EU Law: Passenger Rights & Protections – Anna Anatolitou, Ince & Co LLP 11 Alan D. Meneghetti, Katten Muchin Rosenman UK LLP 4 Compensation for Non-Pecuniary Losses in Wrongful Death Cases: Addressing the Global and Philip Perrotta, K&L Inconsistency – Marc S. Moller & Justin T. Green, Kreindler & Kreindler LLP 16 Gates LLP 5 on Drone Flights in Japan – Hiromi Hayashi & Koji Toshima, Mori Hamada & Matsumoto 21 Sales Director Florjan Osmani 6 WALA: 10 Years of Growth in the Sector – Alan D. Meneghetti & Michael Siebold, Account Director Worldwide Association (WALA) 25 Oliver Smith Sales Support Manager 7 Liability for Damage in International from a GNSS Perspective – Pablo Mendes de Leon, Toni Hayward Leiden University 28 Sub Editor Jane Simmons Country Question and Answer Chapters: Senior Editors Rachel Williams 8 Freidenberg, Freidenberg & Lifsic: Elizabeth Mireya Freidenberg 33 Caroline Collingwood CEO 9 Austria Kubes Passeyrer Attorneys at Law: Dr. David Kubes & Mag. Tina Vollmann 42 Dror Levy 10 Belgium Monard Law: Birgitta Van Itterbeek & Tine Bogaerts 49 Group Consulting Editor Alan Falach 11 Brazil ASBZ Advogados: Guilherme Amaral & Beatriz Giacomini 58 Publisher Rory Smith 12 British Virgin Islands The Maples Group: Michael Gagie & Rebecca Lee 64

Published by 13 Canada Dentons Canada LLP: Robert Quon & Stacy Shields 71 Global Legal Group Ltd. 59 Tanner Street 14 Cayman Islands The Maples Group: Sherice Arman & Shari McField 79 London SE1 3PL, UK Tel: +44 20 7367 0720 15 Colombia Gongora Reina & Associates: Jorge Góngora 86 Fax: +44 20 7407 5255 Email: [email protected] 16 Denmark IUNO: Aage Krogh 93 URL: www.glgroup.co.uk GLG Cover Design 17 France Clyde & Co: Maylis Casati-Ollier & Benjamin Potier 99 F&F Studio Design 18 Germany Urwantschky Dangel Borst PartmbB: Rainer Amann & Claudia Hess 108 GLG Cover Image Source iStockphoto 19 India Lakshmikumaran & Sridharan: Neeraj Dubey & Rohit Subramanian 117 Printed by Stephens & George 20 Ireland The Maples Group: Donna Ager & Mary Dunne 126 Print Group January 2019 21 Israel Gross Orad Schlimoff & Co. (GOS): Omer Shalev 137

Copyright © 2019 22 Italy Studio Pierallini: Laura Pierallini & Francesco Grassetti 146 Global Legal Group Ltd. All rights reserved 23 Japan Mori Hamada & Matsumoto: Hiromi Hayashi 155 No photocopying 24 Malaysia Azmi & Associates: Norhisham Abd Bahrin & ISBN 978-1-912509-51-5 Nazran Arvind Bin Nahdan Rengganathan 164 ISSN 2050-9839 25 Malta Dingli & Dingli Law Firm: Dr. Tonio Grech 173 Strategic Partners 26 Mexico Cervantes Sainz, S.C.: Luis A. Cervantes Muñiz & Alejandro Zendejas Vázquez 180

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PEFC/16-33-254 www.pefc.org Continued Overleaf

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

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

WWW.ICLG.COM The International Comparative Legal Guide to: Aviation Law 2019

Country Question and Answer Chapters:

32 South Africa Christodoulou & Mavrikis Inc.: Chris Christodoulou & Antonia Harrison 227

33 Sweden IUNO: Aage Krogh 235

34 Switzerland VISCHER AG: Urs Haegi & Dr. Thomas Weibel 241

35 Thailand Weerawong, Chinnavat & Partners Ltd.: Nattaporn Pengkul 250

36 United Kingdom Katten Muchin Rosenman UK LLP / K&L Gates LLP: Alan D. Meneghetti & Philip Perrotta 256

37 USA LeClairRyan PLLC: Diane Westwood Wilson & Rebecca Tingey 270 Chapter 1

The Use of Personal Data in the Commercial Aviation Alan D. Meneghetti Industry

Katten Muchin Rosenman UK LLP Yasmin Roland

The aviation industry, much like any other industry, generates vast amounts of just about every type of data – from engineering and Collection Points scientific data, to flight data and weather data, through to consumer Personal data is collected throughout the entire “passenger data, passenger data, security data, personal and in some cases (what experience” from the beginning, starting with the booking of an we in the EU refer to as) special categories of personal data (that is, ticket, to the potential purchasing of duty-free products on data regarding one’s race and ethnic origins, medical information, board, as demonstrated in the example set out below. religious beliefs and so on) [see Endnote 1]. A passenger wishing to from London Gatwick will log The generation of data gives rise to many questions, including: on to the Gatwick Airport website to find out the best way ■ where that data is collected; to travel to the airport. While browsing the Gatwick Airport ■ how that data is treated by the recipient or holder of that data; website, cookies will be collected which the passenger’s movements through the airport’s website. In certain situations, ■ where that data is stored; the passenger may volunteer their email address and other ■ whether or not that data needs to be stored securely and, if so, personal information in order to be contacted by the airport whether it is indeed stored securely; in the event of delays (due to, for example, bad weather) or ■ if that data needs to be stored securely, the standards of to receive regular updates and news from the airport. Before security to which that data storage needs to comply; leaving their house, or whilst on their mobile, the passenger ■ the use of that data; and may check in online, select their seat on the aircraft and input their meal choice and any other dietary requirements which ■ if that data relates to an individual (a “data subject”), whether they may have (at which point more cookies are collected, the data subject supplied their consent knowingly, willingly as well as personal data, this time by the airline on which and whilst being fully informed of: (i) the uses to which the passenger is travelling). Potentially, special categories of their data will be put; (ii) where their data will be stored personal data can also be collected; for example, pointers to and processed; and (iii) the security arrangements that are in the passenger’s physical health and religion may (although place with respect to their data (and – a corollary of sorts – admittedly not necessarily) be indicated by meal choices and whether they can withdraw their consent and “take their data special requirements (such as, for example, the need for a back”)? wheelchair, extra oxygen on board or special assistance). Naturally, the answers to, and indeed the relevance of, these questions Once at the airport, the passenger will drop their bag at the will depend on the type of data which is involved – flight, weather, airline’s bag-drop counter (again, delivering personal data technical and engineering data (for example) will be treated differently regarding their name, details, address, flight details and viewed by different groups of people than a passenger’s personal and so on), pass through customs and immigration (at which data which might be collected by duty-free shops, the airport (either point more personal data is submitted to the customs and immigration authorities) and proceed to security, where they directly or through its website), the ground handlers and security may be scanned using a full body scanner (which collects companies, or the airline operators. Furthermore, it is worth keeping personal data regarding the passenger, at least to the extent in mind that not all types of data are protected by law – whilst certain to which the scanners are able to identify any physical health types of data (most notably, personal data) will be legislatively issues such as implants, not to mention generating images protected in many , other types of data may be protected of the passenger’s body which raise a number of privacy simply by the parties dealing with that data on the basis that the data concerns for adults, let alone minors [see Endnote 2]). The is confidential or business-sensitive (e.g. the average spend at the passenger may then buy duty-free goods on their debit or various duty-free shops, for example). credit card, showing their card (which is scanned – again, more personal data is collected, this time regarding the In this short chapter we look at some instances where, and at passenger’s whereabouts and purchasing preferences), and which points, personal data is collected in the commercial aviation boards the aircraft where, if they are travelling internationally, industry. We also look at how that personal data might be collected they may have to complete an immigration form requesting (for example, automatically or by its submission by the data subject) further personal data. The passenger may also purchase more and what the potential uses of that personal data are. It is prudent goods on board (on their debit or credit card) and submit their to note that this is a vast topic and one can write chapters and even frequent flyer details. books on the issues raised by, and the answers to, the questions set There are, of course, other scenarios and related collection points out above. As such, this chapter can only endeavour to provide a which are invariably missed out in the above scenario (for instance, starting point for the questions raised. the passenger may have a duty-free loyalty card [see Endnote 3]

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which they scan when purchasing items, thereby allowing the duty- use of the personal data are adhered to and that the personal data is free rights holders the opportunity to collect further data on the only used for the express purposes for which it is collected. passenger’s shopping habits), but the scenario does illustrate the However, contrast this with the situation where the personal data point that, whilst not quite limitless, the opportunities for various of the passenger is collected for commercial reasons; for example, organisations and companies to collect personal data each and every when the passenger purchases an item at a duty-free shop and time a passenger are multifarious. swipes their debit or credit card or loyalty card, when they submit their information (perhaps by dropping their business card into a Treatment of the Data Collected by the box) for the chance to win a prize, or when the passenger checks in for a flight. In the EU there is a general prohibition ofdata Data Controller transfers to non-EU countries that are not officially recognised as having an adequate level of data protection (only a small number As a rather generalised but relatively accurate observation, how the of countries have been officially recognised by the EU as being personal data which is collected is treated by the entity collecting it deemed to have adequate protection [see Endnote 5]). The sharing is, by and large, driven by the purpose for which that personal data of personal data within the EU is now also subject to stricter is collected. Again, simply put, the first question that should be on data processing and sharing. The EU General Data Protection asked is whether the personal data collected was for the purposes 2016/679 (“GDPR”) was transposed into the national of security and/or prevention, or whether it was collected laws of Member States on 25 May 2018. Despite speculation on in order to bolster the collecting entity’s business intelligence and whether the UK Government would introduce new national laws to business requirements (for example, passenger habits, passenger mirror the GDPR, following the result of the to leave the dietary requirements and so on). EU on 23 June 2016, Her Majesty’s Government further enhanced In the case of the former, strict controls exist around exactly: the data protection regime in the UK with the enactment of the Data ■ what personal data may be harvested (usually the minimum Protection Act 2018 (“DPA 2018”), which expressly incorporated which is necessary and which is usually specified); the provisions of the GDPR into domestic UK . The ■ how long that personal data may be kept (this varies from GDPR strengthens the rights of the data subject in many different to jurisdiction, but the usual rule of thumb is areas of data protection, including, but not limited to, the following: as long as may be required, unless otherwise legislatively ■ whenever a company is required to obtain the consent of the specified); and data subject, this consent will have to be given by means of ■ whether that personal data may be transferred out of the an unambiguous and clear affirmative action (such as ticking jurisdiction or to other crime prevention agencies (generally a box on the company’s website) in circumstances where this will be acceptable if the purpose of the transfer is to that data subject acts freely and is fully informed as to the prevent the occurrence of ). purposes for which their personal data will be processed; Furthermore, in the case of personal data collected for security ■ the data subject has, in certain circumstances, a right to object purposes, the issue of whether the data subjects concerned have to the processing of their personal data under Article 21 of the consented to the collection of their personal data and its subsequent GDPR, such as when the company collecting that personal use does not usually arise, as this data may be collected without the data intends to use it for marketing purposes; consent of the data subject, provided it is required for the purposes ■ the data subject also has a ‘right to be forgotten’ under Article of the prevention of crime and is collected and held in accordance 17 of the GDPR, where a request can be made to the company with the relevant legislation. collecting that personal data to stop processing the data subject’s personal data if it is unable to provide a legitimate On 14 April 2016, the European Parliament approved the terms reason for retaining that personal data; and of the EU Passenger Name Record (“PNR”) Directive, obliging ■ when a data breach occurs (for example, personal data has been flying into the EU to hand the EU destination country unlawfully accessed by a third party), the company collecting their passengers’ personal data in order to help the authorities fight that personal data (which will usually be the data controller) is terrorism and serious crime. Member States had until 25 May 2018 under a legal duty to inform the data subject ‘without undue to implement the Directive into their national laws. As at the time delay’ and immediately notify the relevant data protection of writing this chapter, only 13 Member States had implemented the supervisory authority of that breach [Endnote 6]. Directive, with 10 indicating that they will apply the Directive to The GDPR applies to any entity that controls or processes intra-EU flights. The Directive requires Member States to set up personal data of any individual in the EU (regardless of whether “Passenger Information Units” (“PIUs”) to manage the personal data that processing takes place in or outside the EU or whether that collected by airlines. The information has to be retained for a period individual is an EU resident or not). Taking our example scenario of five years, but after an initial six-month period, certain data is to above, this would apply to a wide range of businesses from loyalty be removed (such as the name, address and contact details of the card providers to airlines. The legislation does not, however, apply passenger). While this Directive only applies to flights originating to authorities which process personal data for the purposes of public outside the EU, Member States may decide to extend this requirement security, such as customs authorities (this type of processing is to internal flights within the EU, as well as require tour operators and subject to other legislative requirements) [Endnote 7]. The example travel agencies to hand over the personal data they have collected to of the prize draw is a more challenging one – section 352 of the PIUs. In turn, the PIUs are ultimately responsible for transferring Gambling Act 2005 (the “Gambling Act”) (which is the main legal the personal data (if required) to the relevant national authorities as in the UK that governs prize draws) states that any disclosure well as liaising with other PIUs to improve European co-operation in of personal data must comply with the DPA 2018. Similarly, the tackling terrorism and trafficking [Endnote 4]. GDPR applies equally to activities that fall under the Gambling Act. It is fair to say that for all jurisdictions which have data protection Currently a major challenge for those operating prize draws, raffles laws of which the authors are aware, personal data collected for the and the like is if a form is completed to enter into a prize draw, it purposes of crime prevention may be collected without the consent may have terms and conditions regulating the collection of personal of the data subject. Of course, this statement is subject to the proviso data but, in the authors’ view, if the form only refers to terms which that all relevant legislative controls in relation to the collection and cannot be read at the time of completion of the form, it may be

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difficult to enforce these terms against a consumer. Similarly, when the location of that storage. Further concerns arise out of the transfer a business card is dropped into a box for a prize draw, it is rare of personal data, in particular to whom that personal data may be for terms and conditions describing the processing of the personal transferred (whether as a result of the sale of a marketing list, an data collected to be shown, with the subsequent challenge for the intra-group data-sharing arrangement or otherwise). The ability of a data collector (usually the data controller, but in cases where the company to store and transfer a data subject’s personal information collector is only collecting the data on behalf of another and is not has been further limited by provisions in the GDPR, in particular determining the use to which that personal data may be put, the through the requirement for the company not to store personal collector may only be the data processor) of demonstrating that it data for a period which is longer than required for the purpose for has the requisite consents in place to use that data (for example, which that personal data was originally collected [see Endnote 11]. to contact the data subject regarding future promotions and so on). In addition, the data controller must establish, pursuant to Article It is, of course and at least in the EU, incumbent upon the data 25 of the GDPR, appropriate internal technical and organisational controller to establish, in the event of a challenge [see Endnote 8], measures which are designed to implement the data protection that the data controller has the required consents in place, even more principles and protect the rights of the data subjects. so with the new data protection laws applicable under the GDPR. In Unfortunately, length constraints do not permit this short chapter to particular, the new requirement under the GDPR for the data subject look into these issues in any depth; however, it is worth noting that to give their consent by a clear affirmative action (the so-called “tick data controllers need to be constantly mindful of the consents which box” requirement) may require operators of prize draws to clearly they have obtained from their data subjects, as well as what the data display the terms and conditions, and obtain the data subject’s controllers are permitted to do in the absence of those consents [see express consent evidenced by a clear affirmative action, before the Endnote 12]. data subject is allowed to participate in the prize draw. In the case of passengers travelling by air from the EU to the USA, personal passenger data (ranging from the passenger’s name Breaches through to their frequent flier information, billing information and all available contact information) may be transferred from the EU Breaches of the relevant legislation invariably lead to administrative to the USA under the terms of a PNR agreement between the USA fines and penalties in the jurisdiction concerned. This is especially and the EU [See Endnote 9]. We note that a similar arrangement the case under the GDPR where a penalty for non-compliance has been put in place between the EU and Canada and the EU and can see a company being fined up to €20 million, or 4% of annual Australia; however we further note that in July 2017 the global turnover – whichever is higher [see Endnote 13]. In addition, of of the European Union found that the PNR agreement pursuant to the GDPR, ‘appropriate measures’ may be taken by between the EU and Canada may not be concluded in the form it the supervisory authority to deal with data breaches: for minor was in at that time because several of the provisions set out in the infringements (dependent on the nature, gravity and duration of the PNR agreement were incompatible with the fundamental rights incident), this may be in the form of a reprimand, while very serious recognised by the EU. infringements could carry criminal penalties under the laws of each Member State [see Endnote 14]. In non-EU jurisdictions where data With respect to business-to-business transfers, an agreement was protection legislation is still relatively new [see Endnote 15], it is reached in 2016 between the EU and USA which allows US companies often a challenge to know what approach the relevant regulator will to store, share and use the personal data of EU citizens, provided the take to breaches, and what types of fine they are willing to mete out. company can meet a number of criteria. Referred to as the EU-US Privacy Shield, the aim of the legislation (which came into force on 1 August 2016) was to re-establish a transatlantic data framework In Conclusion after its predecessor (known as the “Safe Harbor” mechanism) was struck down by the European Court of Justice in 2015 for failing to The opportunities which data, and in particular personal data, adequately protect the personal data of EU data subjects. provide to businesses operating in the commercial aviation sector There is a long list of criteria that a US company must satisfy in are as vast as much as they are valuable, both from a financial as well order to obtain EU-US Privacy Shield , including: as a business intelligence perspective. However, the enthusiasm of ■ providing the EU data subject with a right to limit how the the business community in this sector should be tempered by an company can use their personal data; awareness of the applicable legislation and the rights of the data ■ keeping the data subject informed of how their personal data subjects. is being used; and It has been a busy year for data protection law and many of these ■ storing the personal data only for the time needed and after changes will have already had, and will continue to have, a direct that time destroying the data subject’s personal data safely impact on the aviation industry in the months and years ahead. and securely [Endnote 10]. The next challenge for the aviation industry will be the proposed Personal data may also be transferred from the EU outside of the implementation of the draft EU ePrivacy Regulation (“ePrivacy European Economic Area where the parties, between which the Regulation”) which was published in January 2017 by the European personal data is being transferred, have entered into an agreement Commission. Although it is still uncertain when this legislation incorporating the Standard Contractual Clauses adopted by the will be agreed, yet alone be enacted through the Member States, European Commission. Personal data may also be transferred it is intended that it will replace the current Privacy and Electronic between companies operating within the same corporate group Communications Directive 2002/58/EC on Privacy and Electronic structure through approved Binding Corporate Rules. Communications. The scope of the ePrivacy Regulation is that it will supplement Other Concerns the GDPR to address in detail electronic communications and the tracking of internet users more broadly. The aim is to enhance security and confidentiality of all electronic communications and Other concerns arise in relation to the: (i) collection; (ii) retention; technologies that process personal and non-personal data. Like (iii) use; and (iv) storage of personal data, and in particular around

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the GDPR, the ePrivacy Regulation will not just affect airlines 2. This is a concern which many privacy advocates argue is physically in the EU, but also any airline that deals with data disproportionate to any gains in security which body scanners originating in the EU. may offer. As the aviation industry typically carries out large amounts of 3. Such as any airport rewards programme. online marketing and digital services, the effects of the ePrivacy 4. The Passenger Name Record Directive (EU) 2016/681 of the Regulation are likely to be felt throughout the industry. European Parliament and of the Council of 27 April 2016. From the data protection laws that have been implemented at EU 5. The jurisdictions which, at the time of writing, have been deemed level, it seems that data protection is moving in many different adequate by the European Commission are Andorra, Argentina, Canada (commercial organisations), Faroe Islands, Guernsey, directions. Firstly, the introduction of the PNR Directive shows Israel, Isle of Man, Jersey, New Zealand, Switzerland, that counter-terrorism and serious crime prevention is at the top of and the United States of America (limited to the Privacy Shield EU and national governments’ priorities, to such an extent that the framework). Adequacy talks are ongoing with South Korea. protection of personal data is willing to be sacrificed in the interests The adoption procedure of the adequacy decision concerning of national and global security. Japan was launched on 5 September 2018. The new EU-US Privacy shield, as well as the Standard Contractual 6. The General Data Protection Regulation (EU) 2016/679 of Clauses, show that the EU is determined to create a more globalised the European Parliament and of the Council of 27 April 2016. network of data sharing in an attempt to promote business and growth 7. Such as the PNR Directive. between the EU and other areas of the world, while the GDPR at 8. Whether by a data subject challenging the legitimacy of the same time introduces stricter measures on how businesses use the data controller’s right to contact them, or the relevant personal data. data protection supervisory authority (usually investigating Several leading data protection experts, including the European complaints from data subjects, around those data subjects being contacted by the data controller without their consent). Data Protection Board, have been quick to criticise the new EU-US Privacy Shield for failing to safeguard the rights of the individual 9. Agreement between the USA and the EU on the use and (as well as for ignoring fundamental EU data regulation principals transfer of Passenger Name Records to the United States Department of Homeland Security (Interinstitutional File that are reflected in the GDPR). It is for this reason that many are 2011/0382 (NLE)). expecting the EU-US Privacy Shield to face intense legal challenges in the European in the near future. 10. Commission implementing decision of 12 July 2016 pursuant to Directive 95/46 EC of the European Parliament and of the In any event, it is fair to say that operators in the aviation sector Council on the adequacy of the protection provided by the will have their work cut out for them in the future as they continue EU-US Privacy Shield. the process of implementing the new regulatory changes into the 11. See Article 5 GDPR and, in particular, Article 5(1)(e). industry. Whilst the benefits of collecting and retaining personal 12. For example, without the consent of the data subject, data data will continue to grow, the regime in which operators work is may be transferred out of the EU to organisations in countries becoming stricter and is requiring more attention, not only to the which have been endorsed by the EU as offering ‘an adequate manner in which personal data is collected and the consents which level of protection’. are required to be obtained, but also to the way in which that personal 13. See Article 83 GDPR. data is stored, processed, managed and safeguarded. 14. See Article 83 GDPR. 15. For example, South Africa obtained its first data protection- Endnotes specific legislation, the Protection of Personal Information Act, in 2013 (the Act was passed into law on 26 November 2013), 1. For a list of what constitutes special categories of personal although at the time of writing this chapter (November 2018) data in the United Kingdom and the requirements around the the Act had yet to fully commence – certain sections of the Act processing of that data, the reader is referred to Article 9 of became effective from 11 April 2014 and it is believed that the the GDPR and sections 10 and 11 of the UK Data Protection Act will commence in the first quarter of 2019, with companies Act 2018. being given a 12-month grace period for compliance.

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

Tel: +44 20 7770 5232 Tel: +44 20 7770 5245 Email: [email protected] Email: [email protected] URL: www.kattenlaw.com URL: www.kattenlaw.com

Alan D. Meneghetti is a partner in the Corporate group at Katten Yasmin Roland is an associate in the Corporate group at Katten Muchin Rosenman UK LLP. He undertakes a full range of privacy, Muchin Rosenman UK LLP. She specialises in privacy and general commercial and regulatory work in the general commercial, aviation corporate matters, as well as regulatory and commercial matters with and manufacturing sectors. His practice ranges from handling a particular focus on data protection and the drafting and negotiating regulatory issues to the procurement of suppliers and responses of various commercial agreements. She has deep experience in to tenders, to data protection and privacy, information technology, advising clients on data protection and privacy matters, in particular intellectual , and the drafting and negotiating of various the General Data Protection Regulation and the impact this will have commercial agreements, such as outsourcing, supply, service, and on businesses worldwide. research and development. He has worked extensively on matters in She UK and international clients in the general commercial, Africa, the Americas, and the United Kingdom. telecommunication, fashion, retail, consumer goods and aviation sectors. Alan is a regular contributor to publications and speaker at conferences in these sectors, and his articles and book reviews have been widely published.

Katten is a full-service, international business-oriented law firm providing sophisticated, high-value legal services across the world, with more than 650 lawyers located across the USA, Middle East, Asia and the UK/EU in 14 offices. Our international experience and focus means we are well-placed to help you succeed where you currently operate and also to gain ground and traction in new markets. With over 650 lawyers, our reach is truly international and our long-standing track record demonstrates our commitment to client goals and project delivery. The firm’s core areas of practice are corporate, financial services, aviation, insolvency and restructuring, litigation, real (including construction), environmental, commercial finance, , structured finance and securitisation, and trusts and estates. Katten represents public and private companies in numerous industries, including a third of the Fortune 100, as well as numerous government and not-for-profit organisations and individuals.

ICLG TO: AVIATION LAW 2019 WWW.ICLG.COM 5 Chapter 2

Investing in Mid-Life Aviation Assets

K&L Gates LLP Philip Perrotta

stock of used aircraft and/or engines which the relevant operator or 1. Introduction/Historical Context aircraft owner is motivated to re-deploy by way of a sale or another lease. One of the enduring features of aircraft procurement in the commercial aviation sector is the publicity surrounding, and Of course, the complexities involved in this exercise are considerable therefore broad interest in, new aircraft technologies, large volume and involve a high degree of advance planning by either the new aircraft orders and the increasingly diverse customer base for airline’s fleet development section or the remarketing capability new aircraft. of the individual aircraft owners, especially where several tens of aircraft are often involved, but nevertheless the waterfall effect of Significant attention is given to events as the two global aircraft new aircraft creating a cascade of available aviation assets is well- manufacturing behemoths dominating the industry, Airbus and established and well-understood by the market. Boeing, compete directly and constantly scramble to announce news of their latest successes mostly in and around the series This aspect of activity rarely attracts the type of press-coverage, of ‘air shows’ during the calendar year. This is particularly true general interest and focus that is consistently enjoyed by an when the bi-annual events at Farnborough (near London, in the announcement that airline or lessor X has agreed with Airbus or United Kingdom) and Paris (in France) become the focal points for Boeing (or sometimes both at the same time) to purchase Y number everyone and anything connected to aviation and aerospace and the of Z-type aircraft. In many ways, however, it is of more fundamental inevitable series of new aircraft orders makes the headlines. importance to the functioning of the industry, the ability of operators to further embed air into communities and populations and In many respects, this also reflects the vast of amounts of capital thereby drive economic growth and social welfare, and to generate investment and therefore risk involved in the relevant aircraft the type of forward momentum on a global industrial scale which programmes, as well as the way in which is now perhaps, counter-intuitively, the original equipment manufacturers fundamentally integrated into the economies and daily lives of engaged in aircraft production so heavily rely on in their future the world’s population. In other words, “Airbus”, “Boeing” and forecasts and appetite for assuming increasing risk in the various “new aircraft” have become concepts owned and appreciated by aircraft programmes with which they are involved. the general public at large, as well as for many informed observers including certain professionals and a swathe of industry participants who view new aircraft and their placement as the only genuine 2. Trend/Development of the Phenomenon indicator of vibrancy and trends in the sector. This myopic approach does, however, neglect another aircraft As regards the historic development of this phenomenon which is industry segment which has become increasingly relevant over a effectively the ongoing demand for “old” aircraft, it is helpful to put significant period of time, enduring through several of the inevitable some definition around the nature of the product which is the subject industry cycles for which aviation and aerospace is famed, and of so much interest and appetite on an ongoing basis, as well as the actually set to become arguably even more apparent going forward, context in many (but not all) cases. It is also relevant to consider namely the appetite for used aircraft of certain specific types and the opportunities this demand creates for suppliers to the industry, particularly when the airframe concerned is matched with certain which in turn helps make the process more efficient and supportable specific engines (or “power plants”), as we shall consider inthis and therefore enduring in its broadest sense. general article. The demand for old aircraft, or at least “non-new”, because the In many respects, this appetite is of course directly related to the age of an aircraft is also relevant in relation to certain regulatory series of new aircraft orders and delivered to operators and leasing restrictions which apply in a number of jurisdictions as regards companies which are now so much a feature of the aviation operation and safety, is driven by a number of factors not necessarily landscape well into the 21st century. linked to the supply opportunities created by new aircraft orders. Leaving aside the firm phenomenon, particularly in Asia, which is These factors themselves are partly inter-connected; however, to a the growth from a position as a start-up of several low-cost carriers greater extent they are a function of the individual requirements of who are strongly backed by industrial conglomerate shareholders or an airline’s particular business plan and the financial circumstances simply mega-wealthy entrepreneurs, as new aircraft are absorbed which surround it. into the airline’s fleet and enter into service they tend to replace, on a As a general principle, first and foremost it is a truism as well as an unit-by-unit basis, older aircraft types which are phased out and de- industrial fact that not many airlines (in fact, statistically speaking, commissioned. This in turn creates a supply of often high-quality the majority of airlines globally) have the capital resources or indeed

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the credit rating according to international standards to acquire new incredibly cheap compared to previous eras in aviation. With aircraft by way of purchase or lease, nor on an ad hoc or consistent the inevitable greater flexibility of aircraft supply solutions when basis as part of a cohesive and co-ordinated fleet expansion strategy. it concerns used aircraft as opposed to new equipment which is As a result, the operators concerned, which as noted above constitute generally a financed purchase or long lease (possibly combined with the vast majority of the carriers worldwide, must simply get by with the option for the aircraft operator lessee to purchase the aircraft and used, older aircraft to facilitate their fleet development plans in the end of such lease by which time it has invested a considerable support of their business plans. amount of capital by way of lease rental), the effectively greater Secondly, there are certain macro-economic developments which supply of used aircraft at reduced lease rates has stiffened that tend to influence equipment acquisition decisions, and no greater segment of the market considerably, both as regards established example of that is the price of crude oil, or rather its tendency operators and also new-entrant or start-up carriers whose sensitivity to fluctuate to sometimes surprising levels both upwards and to costs and the need to manage them is probably the most of all, downwards. Crude oil directly affects the cost to an operation of leading to an ability and willingness to commit to longer lease kerosene aviation fuel which represents one of the most significant periods for used aircraft and engine equipment. expenses proportionally speaking for an airline. The oil industry itself is characterised by economic booms and busts which then 3. The Nature of the Demand inevitably pass on to the cost of fuel and directly to the bottom line of an aircraft operation. All of these things together, plus some other more bespoke It is of course possible, and not infrequent, for an airline to manage developments in the case of individual carriers which affect their the associated risks and a negative financial impact on its fleet immediate environment and own markets as regards their aircraft operations in this regard by utilising a series of financial instruments equipment choices, have given rise to the market’s consistent and generally referred to as “hedging”, albeit this is with some upfront sustained mainstream interest in used aircraft, more particularly in cost and therefore not within the economic possibilities for many so-called “mid-life” aircraft types. operations. However, a general trend in any case over the most The implication that the phenomenon is generally applicable recent industry cycles has seen crude oil drop in price in overall to all used aircraft is (if it indeed arises) misleading in any case. terms as a result of a number of factors, including: an extremely For example, aircraft of a certain vintage (generally, with an age strong US Dollar driving as always a fall in commodity pricing since its respective year of manufacturing of between 15 and 20 generally; a genuine resolution by OPEC (Organization of the years) are very limited in their scope of operations regardless Exporting Countries) to stabilise the oil markets by not of the aircraft type and the support still provided by an aircraft cutting production in a novel approach which has generally created original manufacturer. Several jurisdictions, and not just the (in an oversupply of crude oil; a widespread overall decline in demand aviation terms at least) established first world of USA, Europe and for crude oil as a result of increased engine efficiency across a range Australasia, have passed very effective legislation and regulation of mobile assets including motor vehicles, ships and of course which prohibits the operation of certain vintage aircraft for safety aircraft; along with China’s elected currency devaluation which left and environmental reasons, principally in relation to air and noise the world’s largest oil importer reducing its purchases on account of pollution and the need to protect its population from the social and the increased cost to it of crude oil and a consequential wholesale other effects arising. dumping of oil shares by the trader community. As a result of all this and the associated relative cheapness of kerosene aviation fuel, Then, there is the perception of particular used aircraft types as many airlines which had previously pursued the savings available regards characteristics such as their utility, passenger appeal, and with new-technology, fuel-efficient aircraft are electing to either operating history, which as regards the latter point unfortunately defer or even cancel their new aircraft orders and continue with may include a somewhat chequered past as regards an accident their existing fleet composition or to target older equipment which record and pattern of technical unreliability, whether related to can still sustain business plan profitability due to the price and wide the airframe itself or its engines. Additionally, certain initially availability of kerosene aviation fuel worldwide. interesting used aircraft are no longer in production by their original aircraft manufacturer for a variety of reasons unconnected to the Thirdly, the aircraft original airframe manufacturers (inevitably led product itself (typically bankruptcy of the owning business) giving once again by Airbus and Boeing) working closely in conjunction rise to the notion that they are part of an “orphan” fleet of aircraft with their industrial partners and counter-parties at the engine which is therefore unsupported in terms of safety procedures, manufacturers (principally General Electric and its range of joint- reliable spare parts and invested interest in their safe operation on venture guises such as CFM International with Safran, Pratt & behalf of its customer airlines and leasing companies, and in turn Whitney and Rolls-Royce) have made significant investment in their own customers. technology insertion packages into their existing products. While most well-known among this type of technology innovation is the Finally, and possibly most critically of all given the significant sums NEO (New Engine Option) aircraft offered by Airbus across its very of capital still required to be committed to a used aircraft whether by popular A320 and A321 aircraft range, a number of other design way of upfront acquisition costs of through the term of an operating modifications from several manufacturers giving rise to features lease which requires supplemental payments, not all used aircraft such as extended range fuel tanks, carbon-fibre fuselage components are viewed positively by the financing community generally; in fact, and enhanced winglets have had the effect of allowing older aircraft the opposite is more often than not the case. It is a significant hurdle to operate more efficiently and relatively longer. This has led to an to overcome, therefore, that there is this absence of available capital increase in interest from aircraft operators and leasing companies and/or an associated appetite for deploying what in many cases are in the possibility of extending aircraft possibilities longer into their quite eye-watering sums as an upfront financial commitment to the economic lives and the associated fleet management decisions financing of used aircraft. which see non-new aircraft feature more prominently than before. Financing in its simplest terms, especially asset-backed financing As a final example of the factors stimulating demand in used aircraft, where the aircraft itself forms the risk that any loans advanced historically rock-bottom interest rates over the recent historical will be capable of repayment by way of security to the relevant period has generally made the costs of renting or leasing aircraft financier, usually requires a solid and predictable view of residual

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values without which most conventional banks will not proceed. aircraft currently on lease to an aircraft operator, await the scheduled This leads most prospective financiers to focus on predictable expiry of the lease and the planned return of the aircraft to its owner new aircraft trends and comfortable relationships with the relevant and then engage in a termination process which sees the engines original aircraft manufacturers which they hope will act as a buffer removed for sale, the airframe scrapped for spare parts often in high- in circumstances where their aircraft financing fails. demand among a secondary and tertiary airline customer base and However, historical data is available to prove the fact in relation the opportunity to make a significant profit on the associated asset to certain used aircraft types that a strong residual value is sales, all in circumstances where the existing airline operator has maintainable due primarily to demand the ability to re-market the agreed to contribute in some way to the overall financial outcome aircraft in case of default. Even where that is not the case, the for the new owner in exchange for relief on its lease redelivery relevant lease rates for certain used aircraft types in the future obligations, such as allowing the new owner to retain in full and will, in all probability, sustain their current levels while the aircraft without any claims the amount of maintenance reserves which residual value depreciates, meaning that a combination of aircraft have been paid in parallel to rent throughout the relevant lease and and lease security can sometimes sustain a lender’s repayment risk. allocated for scheduled and certain unscheduled maintenance events This analysis has led to a notably robust market for certain used during the lease. aircraft as a financing instrument also, capable even of being pooled As can be seen, the types of profit which are attainable in this market together with others being leased for a long period on good terms which does not enjoy anything like the publicity or general interest to operators of a certain quality and sold into the capital markets of the new aircraft world can be more than significant and have at a significant profit without disturbing the underlying leasing reliably and consistently been obtained by those willing to invest arrangements unduly in a so-called “securitisation” programme. time as well as money in the process. All of these things have collided in the marketplace to give rise to a strong and historical interest in so-called “mid-life” aircraft on 4. Typical Transaction Structure and Legal the part of certain operators, certain leasing companies and certain financiers, which shows no sign of abating. On the contrary, new Issues and Risks (A Flavour) aircraft continue to proliferate as deliveries to airlines ramp up in As referenced above, the typical transaction structure in an acquisition support of the huge volume orders made in recent years. Furthermore, of a mid-life aircraft generally works as follows (although clearly the top 10 companies continue to focus almost exclusively on new there will be variations depending on the circumstances of the aircraft and long order streams leading to significant offloading of opportunity involved and the particular motivations of all the parties their older aircraft assets to either secondary lessors or operators involved for looking to transact the particular business). with either or both a lack of a long operating history or an uneven credit rating. A used aircraft will be currently on lease from its owner to an aircraft operator and entering its later years as regards its book value “Mid-life” has become something of a term of art for this market for accounting purposes, hence the aircraft will be depreciating at a phenomenon and, although as referenced elsewhere in this article it faster rate than the lease rental rates it is able to generate. The aircraft itself can relate to a number of different used aircraft types and ages, itself will be something which an operator is viewing increasingly as it generally (at least from the perspective of a leasing company, a disproportionate cost where it is obliged at the end of the relevant which tends to be a reliable gauge of market trends) refers to aircraft lease term to carry out a significant amount of engineering work on which are entering into their second lease since a leasing company the owner’s property pursuant to the relevant lease agreement in took delivery from the original aircraft manufacturer. In other words, order to comply the so-called contractual “redelivery conditions”. the aircraft will typically be around 12 years old and, with most The current aircraft owner is likely on the other hand to be concerned accounting standards allocating long-life asset status to aircraft as at the inherent risk it now has in an older aircraft asset which it may regards depreciation, the aircraft will therefore be close to economic view as difficult to re-market given its focus on new aircraft and maturity at the end of its second lease (all things running smoothly primary airlines and other aircraft operators. as regards lease defaults and aircraft accidents, which is the nature of the business risk aircraft leasing companies assume in return for Once the relevant commercial negotiations are completed, typically their projected investment returns at the outset). This essentially through the vehicle of a partially-binding commitment agreement means that a purchaser of the aircraft “mid-life” is likely to obtain an such as a “letter of intent” or “term sheet” signed by the existing aircraft generating significant lease returns and which is soon fully owner and the prospective new owner, the transaction written down as regards its book value such that any subsequent sale typically prepared by the existing owner become the subject of generates a pure cash profit which market values (particularly for much further focus and preparation with the aid of professional perennially attractive aircraft examples such as Airbus A320 CEO advisers. The existing aircraft operator in possession of the aircraft (Current Engine Option) and Boeing 737-700/800 aircraft) will will be obliged to participate in the sale and acquisition process very likely always sustain in view of the extensive demand factors and broadly agree to it by virtue of the terms of the existing lease described above. agreement (subject to one or two conditions, which usually revolve around there being no extra obligations arising to the new owner This is particularly true in relation to the particular engines which when compared with the existing owner as its lessor). may be fitted to the relevant aircraft, particularly in the latest years of an aircraft’s depreciation programme such that engines can In parallel, the new owner’s technical team spends several long account in that period for as much as 80 per cent of the value of days and nights examining the aircraft records and inspecting the a mature aircraft type. Inevitably perhaps, this has given rise to a aircraft itself to ensure that there is nothing significant in terms of segmentation of the market for “mid-life” aircraft where speculators omissions, irregularities or outright damage which would affect the seek to obtain access to specific engine types (again, only specific value of the investment it is about to make. It is a truism that the engine types, and sometimes only specific derivatives of them, have value of an aircraft is directly connected to the quality of the records the strong demand patterns which are of relevant interest) for on- which are associated with it, and any discrepancy, omission or sale or leasing as spare engines to operators looking to support their inconsistency going “back to birth” when the aircraft was delivered fleet operations with additional assets at an economic rate. These from the factory by the original aircraft equipment manufacturer can investor-types are prepared to acquire (in some cases very) mature have a material impact on the value of the aircraft and therefore the

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motivation of the new owner to proceed with its investment and (b) No or minimal impact from the aircraft sale on its scheduled acquire the aircraft. At that stage therefore, the pressure and focus operations or maintenance programme. is very much on the expertise and experience of the personnel who (c) No trailing obligations in relation to the aircraft/engines or are conducting the relevant inspections and broader technical due lease to the existing owner. diligence on behalf of the prospective new owner. It can be seen, therefore, that there are a number of elements to The product of all of this effort should then manifest itself in a be drawn together in terms of the acquisition of a mid-life aircraft binding sale between the existing owner and the new owner or engine asset and it is not an uncomplicated task to bring these and a connected lease novation contract whereby the existing lease together in a synchronised and co-ordinated fashion, particularly is transferred from an arrangement between the existing owner when as is often the case the parties involved and the aircraft and and the operator to one between the new owner and the operator. related engines themselves are located across jurisdictions and Both contracts will stipulate the conditions to be fulfilled and the time zones a long away apart. As a result, it has become the case procedures involved before the respective sale and lease novation that a relatively small group of investor speculators have become is completed. prominent and recognised for their ability to identify mid-life By way of further context and illustration, a flavour of the typical aircraft opportunities and deploy the necessary project management concerns of the three parties involved and which they will strive and professional skills to complete the transactions quickly and very hard to negotiate and include in the relevant binding agreement efficiently while minimising the risks involved as an aircraft and in order to risk-manage effectively might therefore include the engine owner. And it is that group that stands to benefit most from following as a non-exhaustive list: this market segment going forward, as opportunities arise and the number of competitors drawn away from relatively modest returns on investment in the real estate sector is likely to increase. 4.1 Existing Owner

(a) Unconditional receipt of purchase price for the aircraft/ 5. Lessons Drawn and a Crystal Ball engines. (b) No trailing obligations whatsoever as regards the aircraft/ For the reasons analysed above, the interest in and around mid-life engines and the lease to the aircraft operator. aircraft and other aviation assets is now very much a feature of the industry landscape. The relative lack of glamour and publicity connected with the acquisition and deployment of “older” aircraft 4.2 Prospective New Owner should not detract at all from the fundamental role such aircraft play in the sustained growth of passenger numbers, worldwide economic (a) development, and also in enhanced returns for investors prepared to (i) Fully effective and unconditional good title to the aircraft/ risk extremely significant sums of capital in a segment of the market engines. which is sometimes quite misunderstood. (ii) Full set of uninterrupted bills of sale or other title documents It is true that a lot of learning has resulted from this type of “back to birth”. transaction, some of which have caused new aircraft owners to (iii) No liens or third party interests; for example mortgage, lose significant sums of money on their original investment and unpaid landing charges or Eurocontrol fees. projected rates of return. The reasons for those are multiple and (b) probably the subject of a follow-up article; however, the ability to (i) No adverse tax consequences connected with the aircraft/ identify a particular aircraft or aircraft engine (or even a specific engines purchase. derivative of them) which will sustain its appeal in the long-term (ii) Location of airframe and engines (if different) at the point to owners and operators is paramount, as is the talent for managing of sale to be tax-optimised. aviation assets in sometimes difficult jurisdictions with not always (iii) Customs and import status of the aircraft and engines to cooperative aircraft operators and the initial ability to conduct deep be fully understood. but rapid on the condition of the aircraft, engines and (c) aircraft records involved. (i) Technical integrity and the condition of the aircraft and Clearly, an established contractual supply arrangement with aviation associated records are satisfactory. services providers to scrap in an environmentally-friendly fashion (ii) Statement by the existing owner that there has been the relevant aircraft and/or assets and the end of their economic no major incident as regards the aircraft or the engines lives or lease termination, plus a connected distribution network for historically. used aircraft components then completes the picture of an efficient (iii) Aircraft records are complete, intact and showing no project management process designed to maximise the returns, material omissions or deviations. minimise the risks and all the while maintaining good relationships (iv) The relevant Certificate of Airworthiness is valid, current with an aircraft operator and leasing company base which will likely and not showing any exceptions or derivations. give rise to further similar opportunities going forward for the same (d) reasons. (i) Registration of its ownership interests on the relevant In summary, the embedded interest in and demand for mid-life aircraft register and (if relevant) the International Register aircraft will continue to be a major part of the aviation landscape established under the Cape Town Convention. worldwide and may increase going forward. The entrepreneurial eye of the new aircraft owner, the decision-making process of the 4.3 Aircraft Operator (Lessee) existing aircraft owner, and the ability of the aircraft operator to deliver on its own business plan (all with the support and guidance of their expert professionals advisors) are set to be tested and (a) No increased costs or obligations arising from the new arrangements with a new lessor. scrutinised even more in the future, which is surely a good thing.

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

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

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

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

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EU Law: Passenger Rights & Protections

Ince & Co LLP Anna Anatolitou

even where an infringement did not achieve its illegal purpose (such Introduction as hard core restrictions involving price-fixing, customer allocation, bid rigging or market sharing). EU legislation is wide-ranging and far-reaching, often having extra- territorial effect, extending well beyond the EU. It is frequently emulated in other non-EU jurisdictions and seen as something of a Banned Carrier List gold standard. The aviation sector is heavily regulated by the EU, with legislation covering aspects as diverse as: the internal market Regulation (EC) No 2111/2005 — on the Establishment of a list and harmonisation; the establishment of and governing framework of air carriers subject to an operating ban within the EU and on for a single European sky and Air Service Agreements with third informing air transport passengers of the identity of the operating countries; aviation licensing and the supply of services; and aviation air carrier (Regulation 2111/2005). safety and security. The EU has also implemented significant Regulation 2111/2005 seeks to ensure that passengers are safe to fly legislation relating to general , much of which on any airline to, from or within the EU, since every airline permitted has a significant impact on aviation. to operate there must comply with minimum safety standards and This chapter examines some of the core passenger rights and have received air safety authorisation from EASA. The Regulation protections afforded by the EU and will briefly touch upon Brexit also ensures that passengers know the identity of the airline they fly and the likely, although as yet largely unknown, impact it will have with (irrespective of their booking method, whether direct with the on this area of law. For reasons of space, this chapter does not airline or through a travel agent or other ticketing agent). provide an exhaustive summary of the extensive EU legislation that Airlines which do not meet the minimum safety standards or which is relevant to passenger rights and protections. are from countries with notoriously poor safety standards are placed on the EU’s Safety List, a banned carrier blacklist which is published in the EU’s Official Journal and available to the public on the internet. Airlines are given the opportunity to be heard if the Commission EU competition rules seek to promote open, effective and adopts a decision to place them on the banned list but once on the list, competitive markets, which ultimately benefit consumers. The removal is challenging and can often take several months, if not years. rules prohibit agreements between competitors which restrict The EU Safety List is in fact two lists: Annex A contains a list of all competition, regardless of their form. The EU competition rules airlines which are entirely banned from operating in Europe; and Annex are principally set out in Articles 101 and 102 of the Treaty of the B lists those airlines that are restricted from operating in Europe, save Functioning of the European Union and apply to all companies under certain conditions (for example, they may operate into Europe, active within the EU. They are not restricted to the aviation sector. only with a particular aircraft type or by wet-leasing aircraft from Anti-competitive restrictions take many forms, including: restrictions another carrier that is not banned, provided relevant safety standards by object (i.e. agreements or arrangements that restrict competition are complied with). The List is prepared and updated each year on by their nature and affect the key parameters of competition); or by the advice of the EU Air Safety Committee, which decides whether a effect (i.e. agreements or arrangements that have restrictive effects on partial or a complete operating ban within the EU is appropriate. the market and require a case-by-case EU competition compliance In 2018, the list contained over 200 airlines from 16 countries and in assessment). The airline industry, being a network industry, is based 2017 and 2018, eight airlines were added to the list. The list is freely on cooperation between airlines, largely pursuant to various airline available and can be searched online. alliances and/or codeshare agreements. This type of cooperation has Passengers are entitled to reimbursement or re-routing if the airline been considered to be pro-competitive, since the benefits generated for is placed on the banned list after they make their booking. passengers (more available routes, better connectivity, wider access to frequent flyer programmes, both accruing and redeeming miles on a wider network, etc.) outweigh the restriction on competition arising Data Protection and Privacy (GDPR) from cooperation between air carriers. th The European Commission may impose substantial fines on On 25 May 2018 Regulation (EU) 2016/679 on the protection of companies that infringe EU competition rules, as high as 10% of natural persons with regard to the processing of personal data and a company’s annual worldwide turnover. Fines may be imposed on the free movement of such data (EU General Data Protection Regulation (“The GDPR”)) was implemented throughout the EU.

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The GDPR has already had a profound impact on the aviation the applicability throughout the EU of the Convention for the industry, affecting airlines, airports, booking agents and many other Unification of Certain Rules for International Carriage by Air (the service providers. It applies to the processing of personal data ). by data controllers established in the EU (regardless of where the Regulation 2027/97 (on air carrier liability in the event of accidents) processing takes place) as well as those not established in the EU if imposes unlimited liability on EU carriers in the event of death or the data relates to goods and services offered to, or the monitoring of injury to passengers. behaviour of, people within the EU. This means that any air carrier Regulation (EC) No 889/2002 applies the rules of the Montreal with an EU presence will likely be within the scope of the GDPR, as Convention to all flights, whether domestic or international, well as air carriers with no EU presence if they market to or provide operated by EU carriers. flights to passengers based within the EU. The scope of the Montreal Convention regime is the subject of “Personal data” means any information that can be used to identify numerous texts and across the globe, the complexities an individual, and “processing” includes most typical activities such of which cannot be addressed in this brief summary but we have as collection, recording, transfer and storage of data. By the nature sought to highlight some of its key provisions. of their business, air carriers collect and process vast quantities of passenger personal data, including names, addresses, passport The Convention sets out uniform legal rules and principles numbers, dates of birth and so on. Air carriers also collect certain governing air carrier liability in the event of damage caused to special categories of data which may identify a passenger’s sensitive passengers, or goods during international carriage by air. characteristics, such as religious beliefs or health through requests An air carrier has unlimited civil liability in the event of a passenger’s such as meal choices (e.g. Halal, Diabetic) or notifications about death or bodily injury resulting from an accident during the carriage medical conditions (e.g. pregnancy or mobility issues). by air, embarkation or disembarkation. Liability of the carrier is The GDPR imposes much stricter obligations than previous data split into two tiers: strict liability for damages of up to 100,000 SDRs protection laws and requires organisations to comply with a number (special drawing rights, as defined by the International Monetary of key principles. These include the obligations: to process personal Fund); in excess of that amount, a carrier may avoid liability only by data lawfully, fairly and transparently; to collect it only for specified, proving that it was not at fault (the burden of is on the carrier). explicit and legitimate purposes; to ensure the data collected is In the event of death or bodily injury, the passenger or (in the event limited to what is necessary for purpose; to keep it accurate and up of death) their dependents are entitled to advance payments from the to date; to store it for no longer than is necessary; and to process data airline to cover their immediate economic needs. in a manner that ensures appropriate security and protection against The passenger or those other persons entitled to compensation (e.g. unauthorised processing and accidental loss, destruction or damage. dependents) may bring a legal action before the courts in several However, personal data can be collected and processed as long as there possible jurisdictions set out in the Convention, including but not is a lawful basis for doing so. These include where the individual has limited to the passenger’s principal place of residence. expressly consented to the processing (e.g. by ticking a box during the Compensation is also payable in respect of delay to passengers, and online booking process), where the processing is necessary to perform delay, damage to and loss of baggage, subject to prescribed liability a contract (such as the contract of carriage), or where the processing limits. is necessary for the carrier to pursue its “legitimate interests” (e.g. The Convention sets out clear rules on the respective liability of marketing or customer behaviour monitoring for service improvement). the contracting carrier (the air carrier whose name or code is on the There are also less commonly used lawful justifications, such as ticket) and the actual carrier (the carrier performing the flight may where processing is necessary to protect a person’s vital interests (e.g. not be the same as the contracting air carrier). disclosure of a medical condition in the event of an emergency), to comply with legal obligations (e.g. revealing passenger details when The Convention also provides for modernised transport documents required by government authorities for tax or immigration purposes), (e-tickets and electronic airway bills) and established an obligation or to perform a task in the public interest. on air carriers to maintain adequate insurance to cover their likely Convention liability exposures. In practice, air carriers should ensure they have a GDPR-compliant privacy policy on their website which provides all relevant information to passengers including what types of personal data Minimum Insurance Requirements for Air are collected, and why and what the data is used for. Air carriers Carriers are also required to comply with other obligations under the GDPR such as responding to Subject Access Requests within one month Regulation (EC) No 785/2004 – insurance requirements for air and reporting any relevant personal data breaches within 72 hours carriers and aircraft operators establishes minimum insurance to the supervisory authority (and to affected individuals if there is a requirements for air carriers and aircraft operators in respect of high risk to their rights and freedoms). passengers, baggage, and third parties. Failing to comply with the GDPR can have very serious consequences, The regulation applies to all air carriers and aircraft operators with supervisory authorities able to prohibit organisations from flying within, into, out of or over the territory of an EU country processing personal data or restricting the circumstances in which they and requires that air carriers and aircraft operators must be insured can do so. Significant fines can also be imposed for infringements (and if requested, provide proof of their insurance), in particular in of the GDPR, with a maximum fine of €10 million or 2% of global respect of passengers, baggage, cargo and third parties, and risks turnover (whichever is greater) for minor breaches, and €20 million or associated with aviation-specific liability (including acts of war, 4% of global turnover for more serious breaches. terrorism, hijacking, acts of sabotage, unlawful seizure of aircraft and civil commotion). Montreal Convention on Air Carrier Liability Commercial air carriers are required to carry the following minimum insurance: Decision 2001/539/EC on the conclusion by the European ■ Liability in respect of passengers – 250,000 SDRs per Community (now the EU) of the Montreal Convention ensures passenger.

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■ Liability in respect of baggage – 1,131 SDRs per passenger. Denied Boarding, Delay and Cancellation ■ Liability in respect of cargo – 19 SDRs per kilogram. of Flights ■ Liability in respect of third parties – requires minimum insurance cover per accident and per aircraft, the amount of Regulation (EC) No 261/2004 – establishing common rules on which depends on the maximum take-off weight (MTOW) of the aircraft. compensation and assistance to passengers in the event of denied boarding and of cancellation or long delays of flights (“Regulation EU countries must ensure that air carriers and aircraft operators 261”). comply with the regulation. Sanctions for infringements must be effective, proportional and dissuasive and can include the Regulation 261 was introduced to reduce passengers’ “trouble and withdrawal of an operating licence or the refusal of the right to land inconvenience”, which at the time of drafting, was largely related in the EU (for non-EU carriers). to airlines’ overbooking capacity for commercial reasons. The Regulation ensures that carriers must provide passengers with full compensation and assistance in cases of denied boarding, flight Passengers with Reduced Mobility delay and flight cancellation. Regulation 261 applies to all passengers (a) departing from a Member Regulation (EC) No 1107/2006 – Rights of disabled persons with State, or (b) on a flight arriving in a Member State provided that the reduced mobility when travelling by air (the “PRM Regulation”). operating carrier is a Community Carrier. To benefit from Regulation Air carriers are prohibited from refusing to board or carry passengers 261 passengers must (a) have a confirmed reservation, and (b) have because of their reduced mobility or disability. Reduced mobility refers presented themselves for check-in as stipulated by the carrier. not only to those passengers who are physically disabled (whether or The express wording of the Regulation has been significantly not they are wheelchair users) but also to the elderly and those people extended by the Courts and has attracted significant debate. who have difficulty with social interaction and communication, such as those with autism, dementia or similar diseases. Cancellation and denied boarding Passengers with reduced mobility are legally entitled to receive free-of-charge assistance to enable them to use air transport on an Regulation 261 requires carriers to provide compensation to equal footing with other passengers. This “Special Assistance” the passengers whose flight is cancelled unless the passenger should be made available from the moment the passenger arrives is informed of the cancellation at least two weeks prior to the at their departure airport. It can take many forms, depending scheduled time of departure. In the event of notification that is two upon the disability and can include assistance by wheelchair if weeks or less prior to departure, carriers must provide compensation necessary, to help the passenger travel with relative ease through as set out in Article 7, unless they are offered re-routing which the airports for departure, arrival and during any transit. It extends departs within the parameters set out in Article 5(1)(c). to assistance both on the ground at the airport, as well as embarking and disembarking the aircraft and on board the aircraft, including In addition, carriers must provide compensation to passengers if assistance with the transport of mobility equipment and guide dogs. they are denied boarding against their own will. Assistance also extends to the retrieval of baggage at the destination airport. Both airlines and airports are affected by the legislation. All Delay EU air carriers and airports are required to offer special assistance to passengers, and non-EU carriers are required to do so in respect of The Regulation itself does not state that compensation is payable flights operating from the EU. The managing bodies of airports may in the event of a delay. However, in line with the EU’s “equal fund these services by levying a specific charge on airport users. treatment” principle, the European Court of Justice (ECJ) sought Passengers who want to avail of special assistance should provide to extend the treatment of (long) delayed passengers in line with their airline with at least 48 hours’ notice of the help they require. those affected by flight cancellation or denied boarding. In the However, even if shorter notice is provided, assistance should still conjoined cases of Sturgeon v. Condor Flugdienst GmbH (C402/07) be given where possible. and Bock and Lepuschitz v. Air France (C-432/07) the ECJ found There are limited exceptions where special assistance may not be that any passenger who reaches his final destination in excess of provided to a person with reduced mobility or disability, including three hours after the scheduled time of arrival is to be treated as a (i) where the size of the aircraft or its doors make carrying the passenger whose flight has been cancelled and is therefore entitled person physically impossible, or (ii) in order to meet applicable to compensation. safety requirements. The carrier may impose certain requirements Recently, in the landmark of Gahan/Buckley v. Emirates such as the PRM having to be accompanied by another person who [2017] EWCA Civ 1530 the English Court of Appeal extended the could assist them. effect of Regulation 261 further, arguably giving extra-territorial In either of these situations, the person affected must be immediately effect, to a carriage entirely outside of the EU on a non-EU carrier. informed of the reasons. Reasonable efforts must be made to offer The Court held that where a carrier provides a passenger with that person an acceptable alternative. Passengers who are denied more than one flight in order for the passenger to arrive at his final boarding for these reasons have the rights to reimbursement or re- destination (via a connecting flight(s)), the flights are taken together routing according to Regulation 261/2004 (see below). for the purpose of assessing whether there has been a three-hour delay. The Court held that a non-community carrier was still required Which brings us to perhaps the most famous, or infamous and certainly to pay compensation to a passenger who departed a UK airport and the most controversial of EU passenger protection legislation. travelled to their final non-EU destination via a connecting flight in a third non-EU country, where a delay to the first leg had caused the passenger to miss their connection at a non-EU airport and resulted in a delay of more than three hours in arrival at their final destination.

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The Courts have however clearly distinguished that “reasonable Re-routing and compensation measures” must not place carriers in a position where they must make “intolerable sacrifices”. Where a passenger’s flight is delayed for over five hours, the carrier must provide re-routing to the final destination at the earliest opportunity. In the event of a cancellation, the carrier must also Right to care provide the passenger with the choice of a full refund and a return flight to the departure point, or later rerouting at the passenger’s In the event of qualifying denied boarding, cancellation and convenience. delay, carriers must provide passengers with free of charge meals Where a carrier must pay compensation to a passenger, Article 7 sets and refreshments, two free of charge telephone calls and, where out the amounts payable as follows: appropriate, overnight hotel accommodation.

Distance Conditions Compensation Reduction Downgrading 1,500km or less All flights €250 n/a Intra- Over 1,500km n/a Community In the event of a downgrade, carriers must pay the downgraded €400 1,500km – Not intra- passenger a proportional refund of the purchase price, the proportion n/a 3,500km Community amount being dependent on the flight distance. When a As detailed above, the effect of case law has resulted in Regulation passenger 261 having been extended beyond its original written scope and its arrives within three and four amendment has long been mooted. However, for various (largely Not intra- hours of the political) reasons (see below), amending this piece of legislation has Over 3,500km €600 Community scheduled stalled. Brexit will change the political landscape within the EU and arrival time, may pave the way for a revision to Regulation 261. compensation may be reduced by 50% ADR – Disputes Between Consumers and Traders Extraordinary circumstances and all reasonable measures Directive 2013/11/EU on alternative for consumer Carriers are not obliged to pay compensation if they can prove that disputes (the “ADR Directive”) requires EU countries to ensure that the cancellation is caused by “extraordinary circumstances” which all contractual disputes that arise from the sale of goods or provision could not have been avoided even if all “reasonable measures” had of services between consumers residing in the EU and traders been taken. The Courts have gradually refined and narrowed the established in the EU can be submitted to an alternative dispute circumstances which are considered “extraordinary circumstances”, resolution (“ADR”) entity. It applies to both online and offline sales such that only very limited circumstances now exist where carriers and services across all market sectors (including aviation), with the are not obliged to pay compensation. exception of health and higher education. Delays and cancellations as a result of acts of sabotage and security, The ADR Directive provides passengers (consumers) with a choice serious medical grounds affecting a passenger or a crew member of either pursuing court litigation (which many do) or submit their and severe meteorological conditions and natural disasters which contractual disputes to a neutral third-party mediator, ombudsman are incompatible with the safe operation of the flight are, at the time or similar to be resolved by way of ADR. of writing, still considered to be “extraordinary circumstances”. The deadline for EU countries to have incorporated this Directive Additionally, the ECJ in Pešková and Peška v. Travel Service A.S. into national law was 9 July 2015. Since then, there has been a (C-315/15) held that a collision between an aircraft and a bird is significant increase in claims against airlines now being dealt classified as an “extraordinary circumstance”. with by ADR, particularly lower value claims relating to baggage, In the case of technical defects, the Court has significantly narrowed downgrading, delay, denied boarding and flight cancellation. the circumstances considered to be “extraordinary circumstances”. ADR has been heavily promoted and encouraged by civil aviation In Van der Lans v. Koniinklijke Luchaart Maatschappij (C-257/14) authorities across the EU, with many airlines having signed up to the Court held that whilst difficult technical problems may or some form of ADR. Carriers must inform consumers about ADR may not be foreseeable, those which are inherent in the normal on their websites and in their general terms and conditions/general exercise of the carrier’s activity cannot qualify as an “extraordinary conditions of carriage. circumstance”. The Court limited “extraordinary circumstances” in Each EU country must designate a competent authority to oversee respect of technical defects to those which are hidden manufacturing ADR entities, which must meet certain quality requirements. defects affecting the immediate safety of flights. The ADR entities themselves must be effective, transparent, In respect of each qualifying “extraordinary circumstance”, carriers independent and fair. Their websites must be clear and understandable are under an obligation to take all “reasonable measures”, such as, and must set out the types of disputes they handle, as well as any in the case of a bird strike, measures to prevent the presence of costs, average length and legal effect of the outcome. They must such birds. Furthermore, the Court in Eglitis v. Latvijas Republikas also exchange best practices among themselves and with national Ekonomikas Ministrija/Air Baltic (Intervener) (C-294/10) held authorities about the settlement of disputes. carriers must take “all reasonable measures” at the stage of organising the flight to take account of the risk of delay connected to the possible occurrence of “extraordinary circumstances” and consequently provide a reserve time to the flight to be operated once the extraordinary circumstances end.

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Brexit Certain laws, such as Regulation 261/2004, may finally be amended by the EU. The Regulation has been the subject of industry-wide criticism and numerous discussions. Amendment proposals have No chapter written on EU law this year would be complete without largely been unable to progress due to a political stalemate between addressing the issue of Brexit. At the time of writing, no Brexit the UK and Spain over Gibraltar. With the UK leaving the EU, the deal has been finalised or formally approved, so it is impossible to revisions to Regulation 261 should be able to progress within the EU. outline what the future may hold with any degree of certainty. Brexit will undoubtedly pose many challenges in the years ahead It is presently anticipated that the UK will leave the EU on 29 March but there will also be significant opportunities. Opportunities for 2019. There may be a transition period of an additional year or two. other EU Member States who seek to take the lead in areas where The EU (Withdrawal) Act 2018 will convert, if required, existing EU the UK has been a leading EU force and opportunities for the UK, law (including all aviation law) into the laws of the UK, and preserve which must now balance the need for continued alignment and existing UK laws which implement EU obligations, ensuring a cooperation with the EU, whilst setting its own course for the future. smooth and orderly exit. Some changes will of course need to be made to ensure that those laws are legally operable between the EU and the UK when it becomes a third country. It is anticipated that the UK will continue to mirror EU aviation regulations for at least a two-year period beyond March 2019. Anna Anatolitou For aviation, the implications of Brexit are vast. Unless otherwise Ince & Co LLP Aldgate Tower negotiated, the UK will no longer be a part of the European aviation 2 Leman Street market. The EU will treat UK airlines as third-country operators. London, E1 8QN The UK will no longer be a party to any EU-level Air Services United Kingdom Agreements with third countries, such as the EU-US Openskies Tel: +44 207 551 8265 / +44 795 812 3904 agreement. The UK will no longer be included in EU-level Bilateral Email: [email protected] Agreements. There will be no automatic mutual URL: www.incelaw.com recognition between the EU and the UK for aviation licences, approvals and certificates. EU issued licences and approvals (issued Anna Anatolitou is a Partner, specialising in Aviation & Travel. when the UK was an EASA member) will continue to have validity She is English and US (New York) qualified, practising English law, under UK law but may no longer be recognised by EASA for use and has a significant knowledge of UAE law, having spent seven on EASA Member State-registered aircraft. For its part, the UK has years working in the UAE, where she was group General for a leading airline group and subsequently headed the regional aviation indicated that it intends to minimise disruption and uncertainty. All practice of another firm. licences issued by the UK CAA under EU legislation, and all types Anna’s practice includes aviation and travel litigation, regulatory and approval certificates and third-country approvals issued by EASA commercial work. She is recognised as a leading expert by The Legal under EU legislation, will continue to have validity under UK law, if 500 and several other directories. they were effective immediately before exit day. The UK also plans She has worked on a diverse range of matters, including handling to minimise additional requirements for licences, approvals and numerous high value, multi-party, cross-border litigation matters, such certificates from EU aviation and aerospace companies providing as , and leasing disputes, as well as services and goods in the UK. managing a team responsible for defending thousands of Regulation 261 claims. She has handled several high-profile major losses for It is foreseeable that the UK will remain a member of EASA (which airlines and their insurers, as well as GA losses. She has advised is open to non-EU Member States). However, if the UK withdraws on airline and new hub start-ups and on a variety of other regulatory completely from the EASA system, the UK’s CAA will need to make issues. Her commercial contracts and transactions experience ranges arrangements to fulfil the various regulatory and safety functions from negotiating several aircraft acquisitions and leases, to negotiating agreements with airports, MROs, GSAs, GHAs and fuel suppliers. which are currently undertaken by EASA.

Ince & Co LLP is an international firm that serves its global client base from offices across Asia, Europe and the Middle East. We provide the best-quality legal advice and strategic guidance to clients based in four core sectors: transport; trade; energy & infrastructure; and insurance. By combining our sector expertise, legal knowledge and market experience, we deliver services in support of our clients’ most complex disputes, transactions and projects. We have 13 global offices, practising English, Irish, French, German, Greek, Hong Kong, PRC and UAE law. Our Singapore law advice is provided by the Ince Law Alliance, a Formal Law Alliance with Incisive Law LLC. At the time of publication, it has been announced that Ince & Co and Gordon Dadds have approved the terms of a merger to create the UK’s largest listed firm, Ince Gordon Dadds LLP. This cutting-edge merger will build upon our complementary strengths in terms of industry expertise and range of services and enable us to extend our client offering.

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Compensation for Non-Pecuniary

Losses in Wrongful Death Cases: Marc S. Moller Addressing the Global Inconsistency

Kreindler & Kreindler LLP Justin T. Green

based upon the proof presented of the victim-survivor relationship. I. Introduction A brief survey below of some representative national laws on point highlights the inconsistencies. See III infra. Domestic and international aviation accident cases put non- pecuniary loss compensation in wrongful death cases front and In this context, the importance of victims’ families carefully centre because of its impact on the awards that surviving relatives addressing complex jurisdiction issues when deciding where to can expect to recover in the claims resolution process and litigation litigate their wrongful death claims cannot be overstated. The choice that inevitably follows aviation disasters. of forum can have an especially dramatic impact on the recoveries because of the different ways non-pecuniary loss is treated in the There is a remarkable lack of consistency among EU countries, and EU. Jurisdiction and compensation standards are inextricably indeed globally, concerning the right of close relatives of wrongful linked. In wrongful death cases arising out of international death victims to recover damages for the non-pecuniary losses they commercial air transportation accidents, Article 33 of the Montreal suffer by reason of those deaths.1 By contrast, the right to recover for Convention of 1999 limits the jurisdictional options available to their economic or “pecuniary” losses is unchallenged.2 “Pecuniary” the families of crash victims, but does not specifically address the losses are calculable and are based primarily upon the history of a choice of law regarding compensation. Consequently, despite the decedent’s earnings which then can be translated into prospective loss fact that a tragedy makes no distinction among the passengers, of support denied to surviving relatives to the end of a decedent’s the right to compensation for their deaths may be dramatically work or life expectancy. “Non-pecuniary” losses, although no less dissimilar. The air carrier’s place of business, the place of purchase real, cannot be measured by a mathematical calculation. Those of the passenger’s ticket, the transportation described in the ticket, “non-pecuniary” losses are sometimes described in terms of the the passenger’s principal residence or domicile and the places of bereavement or grief that attends the loss of life of a close relative business of the air carrier, singly or in combination, all weigh upon and the resulting loss of society and companionship. These so-called the jurisdiction options in international air transportation cases. “non-pecuniary losses” are different in kind from actual bodily or Moreover, in EU countries, whether a death is caused in the course mental injury a surviving relative may sustain when he or she learns of international or domestic air transportation, an EU Regulation about a close relative’s wrongful death. Provable physical or mental commonly referred to as Rome II as of January 11, 2009 determines injury sustained by a close relative of a victim are considered by the the controlling applicable national law and the recoverable damages laws of some countries to be direct harm and compensable as such. if an eventual is filed in an EU Member State. Rome II was The European Group on Law published its “Principles of intended to harmonise choice of law rules within the EU in civil and European Tort Law” (PETL) in 2005 and stated that among peoples’ commercial matters, including specific rules for tort-delict claims. protected interests “[l]ife, bodily or mental integrity, human When wrestling with the jurisdiction issue it is equally important to dignity and liberty enjoy the most extensive protection”. PETL determine whether what may at first appear to be a non-pecuniary 2:102(2). PETL continues, “Considering the scope of its protection loss, in fact, may involve a compensable “injury” sustained by a (Article 2:102), the violation of [a protected interest] may justify surviving relative. Traumatic grief, for example, can result in a mild compensation of non-pecuniary damage. … Non-pecuniary damage traumatic brain disturbance or injury. can also be the subject of compensation for persons having a close personal relationship with a victim suffering a fatal or very serious Put another way, there is a growing body of scientific that non-fatal injury”. PETL 10:301(1). in many cases there is a biological and neurological component to traumatic grief that could be deemed an “injury”. Making that With that understanding, this article invites consideration of determination is critically important, for example, when Germany or the proposition that at least within the EU Member States the the Netherlands are among the jurisdiction options. The laws of those European Convention on (ECHR) offers a rationale countries presently do not provide a basis for treating bereavement for overriding national laws that deny relatives of wrongful death and grief as a compensable non-pecuniary loss for surviving relatives victims the right to recover damages for non-pecuniary losses, i.e. in wrongful death cases. In those countries a surviving relative’s for their traumatic bereavement and grief caused by such deaths. In “nervous shock” as a result of a relative’s death, however, is short, the ECHR offers an avenue for the elimination of inconsistent compensable if it is medically diagnosed by a physician or requires treatment of non-pecuniary loss by relatives in wrongful death medical care or treatment. Traumatic grief in appropriate cases, cases brought in the EU. We do not address the quantum of such therefore, may allow a damage recovery that previously was thought damages other than to say the amount should be sufficient to fairly to be foreclosed to relatives. One should not assume, therefore, that and reasonably recognise the magnitude of the losses in each case bereavement is not accompanied by a compensable injury.

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Within the last few years, accumulated research, validated by judicial recent, Protocol 16, came into force on August 1, 2018. The dates decisions, has recognised that events like confronting the sudden are important. Every Protocol effectively reaffirms the original death of a family member, like deaths in a plane crash, can produce Convention and previous Protocols and their enactment presumes a diagnosed “injury” far more significant than profound grief and an awareness of the existing body of national laws of EU Member sadness. The psychological effects of the traumatic death of a child, States. As a general rule, the ECHR and its Protocols supersede spouse, parent or other relative is often referred to as “traumatic national laws that may be in conflict with the “obligation to respect grief” [Jacobs, S. (1999 “Traumatic Grief”, American Journal of Human Rights” set forth in the Convention and those rights may not Psychiatry, 154, 904–910)], “complicated mourning” or causing be impaired. “traumatic stress” [Rando, “Treatment of Complicated Mourning”, With that as a preamble, a guiding principle underlying all Research Press, 1993]. While it is true that birth and death are part provisions of the ECHR was to establish uniform standards for of life and necessarily are accompanied by normal joy and sadness, treatment of citizens and residents within the EU Member States when the death of a loved one is sudden, totally unexpected and and harmonising national laws. It was likewise a goal that finds especially when caused by a horrific preventable wrong, the subject expression in PETL. The right to secure the integrity of the family of great media attention, and revisited with painful repetition, the unit including the mutual benefits inherent in family relationships surviving relatives are “injured”; they are not simply mourners. This should be considered a “protected” human right. The ECHR, can bring the relatives’ response within the scope of compensable therefore, offers a strong text-based argument that Member States “nervous shock”, traumatic grief, or trigger a post-traumatic stress are not only prohibited from committing tortious acts that harm disorder. There is no question that for family members, “nervous people physically, they may not adopt or enforce or interpret laws shock”, etc. has life-altering effects that have been compensable or regulations or issue judicial that interfere with protected under German law since 1931 even if they were not immediate human rights and freedoms. Indeed, Article 1 ECHR imposes on witnesses to the death-causing event, but only learned about it. See all EU Member States the obligation to “secure to everyone within RGZ 133, 270 VI. Civil Senate = JZ 1929, 914 (VI 149/31); Case their jurisdiction the rights and freedoms defined in Section 1 of this Note by Prof. Basil Markesinis, U. of Texas Law School, https:law. Convention”. This is a positive mandate. utexas.edu/transnational/foreign-law-translations/german/case.ph To be sure, when the ECHR came into being, its principal objective ….; [j]udges “enjoy a wide range of discretion … provided they was to prevent the kind of atrocities that were committed at give adequate reasons to justify their decision”. Karapanau and government direction during World War II. That objective, the Louis Vissuher, “Toward a Better Assessment of Pain and Suffering protection of human rights, was advanced by the ECHR through Damages”, p. 56 Universiteitsbibliotheek, 2/17/12. “Nervous shock” the adoption of a super-national body of principles and laws that is traumatic bereavement by another name. It cannot be brushed off would over-ride any national law that deprived people of their by making an assumption that “it will pass”. Simply put, there is a “right to life”. Article 2.1. Put another way, the ECHR signatories biological and neurological basis for arguing that it will not “pass”. committed to the proposition that if any of their own national laws Abundant medical and psychological literature confirms that the were in conflict with the Convention’s human rights protections, impact of an aircrash experience causes long-term negative quality those national laws would be subordinate to the Convention. Since of life impairments. E.g., Silverman, G.K., Jacobs, S.C., Kasl, S.V., it came into force, the trend has been to interpret the ECHR more Shear, M.K., Maciojewski, P.K., Noaghoil, F.S., and Prigerson, H.E. expansively. That is to say “human rights” that are protected by the (2000) “Quality of Life Impairments Associated with Diagnostic ECHR are defined more broadly today than merely insuring safety Criteria for Traumatic Grief”. For the families of air crash victims, from atrocities. The text of the ECHR, therefore, should be read and nothing will ever be the same. applied in that expansive light. With that as background, the fact that the laws of some countries Articles 1, 2, 8, 13 and 41 are unambiguous and offer national court allow relatives to be compensated for their bereavement and text-based logic to award non-pecuniary loss compensation related emotional effects while others deny or limit that right, to family members when death of a close relative is caused by a remains a matter of considerable controversy. Why that should tortious actor. be the case is a bit of a mystery, especially since those kinds of claims are insurable at modest, if any, incremental cost, especially Sec. I, Article 2.1 states that “Everyone’s right to life shall be protected in the aviation insurance sphere. Everyone understands that non- by law”. Decisions of the European Court of Human Rights confirm pecuniary losses relatives suffer in the wake of a tragedy can have that the “right to life” includes close relatives’ right to compensation a far greater impact on their quality of life than economic loss, for bereavement in wrongful death cases. That “right” is confirmed and yet those non-pecuniary losses remain undervalued or are not in at least two decisions of the European Court of Human Rights compensable at all in some legal systems. Understandably, although (ECtHR) wherein it held that the “right” could not be infringed and the valuation of non-pecuniary or non-economic losses by definition compensation for non-pecuniary damage should be available as part cannot be “calculated”; fair compensation for those losses can be of the remedial package for relatives of wrongful death victims. left to the subjective judgment of a reasonable fact finder. Given the Keenan v. United Kingdom3 involved a mother who sought to limitations of the law, money is the only currency that can attempt recover compensatory damages for inhumane treatment suffered by to redress the non-pecuniary harm relatives suffer. her son while he was in detention and for her own suffering. Those claims were for “non-pecuniary” harm and were not compensable under the U.K.’s Fatal Accidents Act of 1976. In response to Ms. II. The European Convention on Human Keenan’s argument that the U.K. and the ECHR were irreconcilably Rights (ECHR) in conflict, the ECtHR stated that “the ECHR … will in appropriate cases award just satisfaction, recognising pain, stress, anxiety and The European Convention for the Protection of Human Rights and frustration as compensation for non-pecuniary damage”. The Fundamental Freedoms, commonly referred to as the European ECtHR went on to say that Ms. Keenan “… should have been able Convention on Human Rights, which came into force in 1953 and is to apply for compensation for her non-pecuniary damage that [she] binding upon its signatories, means all EU Member States. Several suffered...”. Though Keenan involved a tortious act by a State, what Protocols to the Convention were subsequently added. The most is important is that Keenan defined “non-pecuniary damage” caused

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by an infringed right as compensable under the ECHR and that the ECHR superseded a national law that precluded recovery. III. Non-Pecuniary Loss Inconsistencies in National Laws In Bubba v. United Kingdom,4 the ECtHR was faced with the question whether Keenan should be extended to claims The summary below is a representative sample of existing national between private parties. The plaintiff’s position was straightforward laws that allow, limit, or disallow close relatives of a wrongful death and uncomplicated. If the “right to life” was a fundamental ECHR victim to secure compensation for non-economic or non-pecuniary right, a fortiori, it should have made no difference whether the loss sustained in wrongful death cases. tortfeasor was a public government or private party. The injured party, in either case, should have “an effective remedy” guaranteed by Article 13. Though the ECtHR declined to extend Keenan to Germany private claims between private parties, it made clear that non- pecuniary harm is damage to an infringed right. The general rule applicable to the recovery of damages for wrongful At first blush Keenan and Bubba would seem to be unhelpful to the death are embodied in the German Civil Code, BGB Sec. 249 position we advance in this chapter. However, the ECtHR is not (Nature and Extent of Damage) and BGB Sec. 253 (Intangible holding that national courts cannot apply the ECHR as we propose. Damage). Unless a head of damage like non-pecuniary loss It is essentially saying that the ECtHR is not a forum within which to is provided for by the civil code, it can neither be claimed nor litigate private claims that do not involve governments. That being recovered. Non-pecuniary loss by relatives for bereavement is not the case, national courts can apply ECHR principles in litigation covered by German . However, if the close relative suffers between private parties. a medically defined injury as a result of the death, compensation is allowed. The injury is sometimes referred to as “mental shock” or “Damages in wrongful death Cases in the Light of European Human “Schockschaden”. The claim is then considered a direct injury to Rights Law: Towards a Rights-Based Approach to the Law of the relative covered by BGB Sec. 253. See BGB Sec. 823. Swiss Damages” is an excellent article that elaborates on the proposition law follows the German approach.6 we advance here.5 The abstract of that article summarises the argument as follows: The Netherlands “European human rights law is superior to the national laws of damages. The case law of the European Court of Human Rights now provides a sufficient reason for national Compensation for bereavement damage, i.e. non-pecuniary loss lawmakers to rethink their concept of non-pecuniary damage. experienced by close relatives of a wrongful death victim, has long The fact remains that the ECtHR in its case law finds a breach been unavailable in the Netherlands. “Nervous shock” experienced of fundamental right and remedies that breach, whereas that by a relative may be a compensable loss if it can be proved that it is a national law of damages affords the possibility of awarding medically confirmed injury and not simply an “emotional” reaction compensation for non-pecuniary loss if the aggrieved party to a loss. The denial of the right to compensation of a secondary is injured. A conflict results: on the European level a rights- relative for non-pecuniary harm continues the harsh impact of a based approach is applied, and on the national level a damage/ 1983 decision by the Dutch Supreme Court. More recently, as of injury-based approach prevails. In this article we advocate a change in the national law of damages in order to ensure April 10, 2018 statutorily limited bereavement damages will be that the law of damages remains durable and consistent available to families of deceased victims, effective January 1, 2019. when confronted with judgments of the ECtHR: we advocate accepting and incorporating a rights-based approach.” United Kingdom ECHR Article 41 adds weight to the proposition we advance here. Under the heading “Just Satisfaction”, Article 41 states that: “If the Bereavement damage is fixed by law at GBP 11,800. Court finds that there has been a violation of the Convention or of the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only ‘partial ’ to be made, the Italy Court shall, if necessary, afford just satisfaction to the injured party.” Allowing only compensation for economic or pecuniary loss while Italian law links the right to recovery for economic and non-economic disallowing compensation for non-economic or non-pecuniary loss loss to the Italian . Under the Constitution, the right to is clearly, and at best, “partial reparation”. health is guaranteed and is known as “danno alia salute”. Bereavement in a wrongful death context is considered a non-pecuniary loss and is To be clear, judgments of the ECtHR are judgments against nation compensable. See Sec. 2059 Italian Civil Code. states and public authorities and not judgments in cases between private civil litigants, but the ECtHR’s interpretation of rights and obligations of States under the ECHR treaty are particularly relevant when France considering the claims of private parties in civil litigation in national courts when ECHR “rights” have been impaired. Furthermore, Article Under French law, Sec. 1382 of its civil code allows compensation 13 is explicit in stating that when there has been a deprivation of a for non-pecuniary or bereavement damage on the assumption that private right people “shall have an effective remedy before a national the surviving relative’s life has been disturbed. ...”. To hold otherwise would be a breach of Article 13. It follows that to deny compensation for the impairment of that right for cases brought in “national ” is to deny an “effective remedy”.

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Spain Conclusion

In 2016, Spain reassessed its system for fixing damages in road Even if there is disagreement about the amount of compensation that accident cases, including compensation in wrongful death cases. should be awarded for bereavement or grief or loss of mutual benefits The tables will likely be used as references for the broad spectrum derived from family relationships by relatives who assert wrongful of tort cases, but that is not yet clear. A goal of the Spanish death claims, the right to be compensated for those losses should be reassessment was to bring road accident recoveries more in line universally recognised. We think it is clear that there is a need for with the experience in other EU countries. Compensation for non- harmony in recognising the magnitude of what is an invasion of one’s economic loss is allowed and liberal. right to a good life. People’s quality of life is determined in large measure by the family relationships established and the emotional dependency those relationships carry with them. The earnings of Australia a wrongful death victim is only one measure of family dependency and often far less important than the emotional ties that bind a family Limited compensation for non-pecuniary loss is generally permitted, together. The fact that some countries’ non-pecuniary loss awards but in amount it is really “token” compensation. may be generous, i.e., the United Sates, Spain, France, is evidence that uncertainties about the quantum of damages for such losses can Malaysia be resolved through good judgment and experience.

The right of close relatives to recover “bereavement” damages is Endnotes limited to 10,000 ringgits, i.e. the equivalent of U.S. $2,500, which must be divided among all the claimants entitled to share in such 1. Lahe and Kull, “Compensation of non-pecuniary damage to award. That group usually includes the spouse, parents and children persons close to the deceased or to the aggrieved person”; of the deceased. International Comparative , Vol. 2, Issue 2, September 2016 pp. 1–7; Wuensch, “Non-Pecuniary Damages in the Age of Personality Rights: A Search for a China Fair and Reasonable Framework Comparing the German and Italian Legal System”, SSRN, December 16, 2013. The basic tort compensation system in China, including wrongful 2. “Principles of European Tort Law”, European Group on Tort death cases, adheres to the principle that damages must be Law, Springer Wien New York, 2005, Article 10:301. calculable. Compensation for emotional distress claims historically 3. ECtHR April 2001, Application No. 27229/95. were either grudgingly recognised or disregarded. However, as of 4. ECtHR March 17, 2005, Application No. 50196/99. 1988 when a series of rules and regulations were promulgated to implement the “General Principles of Civil Law of the People’s 5. Rijnhout and Emaus, Utrecht Law Review, Vol. 19, Issue 3 Republic of China”, the right to recover damages for emotional (June) 2014. distress was recognised. The compensation debate then shifted 6. Under current interpretation of German law, there is no from whether there was a right to recover for negligently inflicted German law that specifically allows recovery for bereavement emotional distress to the method and the amount of compensation or grief. That said, however, there is no law that specifically disallows recovery for non-economic loss, i.e., bereavement, to be awarded for infringement of the right. In any event non- in wrongful death cases. The distinction could support the pecuniary loss recoveries are de minimis. proposition that there is no conflict between EU and German law. If the EU guarantees a recovery for non-economic loss and German law does not prohibit it, the EU “right to life” principle in Article 1 could be deemed controlling. Furthermore, ECHR Article 2 creates a mandate the states must protect the “right to life … by law”. The absence of a law that protects the right to recovery for “non-pecuniary” harm could be deemed a violation of ECHR.

ICLG TO: AVIATION LAW 2019 WWW.ICLG.COM 19 Kreindler & Kreindler LLP Compensation in Wrongful Death Cases

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

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

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

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

20 WWW.ICLG.COM ICLG TO: AVIATION LAW 2019 Chapter 5

Regulations on Drone Flights in Japan Hiromi Hayashi

Mori Hamada & Matsumoto Koji Toshima

A. Introduction B. Overview of the Regulations Under the CAA The following laws and regulations are the material legislation in Japan on the flights of unmanned aircraft vehicles (drones) (“UAVs”): The CAA provides for the definition of UAVs, the prohibited (i) Civil Aeronautics Act; airspaces for flight, the operating limitations and penalties for (ii) Act Prohibiting UAVs’ flights over the Houses of Parliament, violations. If a person intends to fly UAVs in prohibited airspaces, the Prime Minister’s Official Residence, other important beyond the limitations of allowed operations, then it must have buildings and nuclear facilities; permission or approval from the MLIT. However, according to the (iii) Civil Code; Q&A published by the MLIT, if an operator flies UAVs within a (iv) Radio Wave Act; and closed area where there is no possibility for them to leave the area, then permission or approval is not necessary. (v) local regulations (jyourei) legislated by local governments. The MLIT publishes the standards (the “Standards”) which MLIT The Civil Aeronautics Act (the “CAA”) is the key legislation for will apply when examining applications for permission or approval. aviation safety in Japan. On December 10, 2015, an amendment to The applications may be made at the following website, which is the CAA which introduced safety rules regarding unmanned aircraft available only in Japanese: https://www.dips.mlit.go.jp/portal/. vehicles (drones or “UAVs”) took effect. Before the amendment, there was no regulation on the flights of UAVs. But the Japanese public According to the Standards, an operator must submit the application and the government turned their attention to UAVs after a drone was for permission or approval, in general, 10 business days before the found on the roof of the Prime Minister’s office on April 22, 2015. On flight of an UAV. A permission or approval is generally effective April 24, 2015, two days after the discovery, the Japanese government for three months. However, if a person will continuously fly UAVs set up the Conference for Liaison between Governmental Bodies to under the same conditions, it can apply for permission or approval discuss how UAVs should be regulated. It took less than eight months that is effective up to one year. This type of application is usually to enact the 2015 amendment, and that was extraordinarily rapid in made by mass media organisations which use drones in Japan. terms of legislative amendments in Japan. 1. Definition of UAVs Further, governmental bodies and the private sector set up the Council The CAA defines UAVs as follows: to Improve the Environment regarding UAVs (the “Council”) in (a) airplanes, helicopters, gliders, airships and other facilities 2015. The Council holds ongoing discussions on regulations to that are available for aviation uses designated by the develop the commercial use of UAVs. In June 2018, the Council relevant of the CAA; published the “Roadmap towards the Industrial Revolution in the (b) on which human beings cannot ride due to its structure; and Air” (the “Roadmap”). According to the Roadmap, there are four (c) which can fly by remote control or automatic operation phases on the use of UAVs. On the first and second phases, UAVs based on programs, may fly within a visual line of sight. On the third phase, UAVs may (d) except when such facility weighs less than 200 grams. fly beyond a visual line of sight (“BVLOS”) over areas where it is Therefore, only very light drones (e.g., toy drones) can be exempted unlikely for a third party to enter (e.g., mountains, sea, rivers, lakes from the definition of UAVs. Further, the Standards classify the and forests). Finally, on the fourth phase, UAVs may fly BVLOS requirements for those which weigh less than 25 kg and those which over areas where a third party may be located. The Roadmap are 25 kg or more. The requirements for UAVs weighing 25 kg or scheduled the third phase to begin in earnest in fiscal year 2018, more are stricter than those for the lighter ones. The requirements and the fourth phase in the first half of the 2020s and to reach higher discussed below are for UAVs weighing less than 25 kg. operating levels (e.g., for logistics services in cities). In line with this plan, in September 2017, the Ministry of Land, Infrastructure, 2. Prohibited airspaces Transport and Tourism (the “MLIT”), which is the principal It is generally prohibited to operate a UAV in the regulator of aviation matters, and the Ministry of Economy, Trade following airspaces: and Industry (the “METI”) established a study group (the “Study (a) airspaces in which the UAV is likely to affect the safe Group”) for UAVs’ flights BVLOS and over third parties to examine operation of aircrafts, which airspaces can be further the requirements. In addition, in October 2017, a sub group (of classified into (i) airspaces above airports and their which the author is a member) of the Study Group was established vicinity (which differ for each airport), and (ii) airspaces which are 150 metres above ground or the water surface to examine the requirements for logistics services. level; and

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(b) airspaces which are above a “densely populated area”, ■ “Hazardous materials” under (e) means explosives, high- which is defined as a densely inhabited district (jinko pressure gas, inflammable fluid and other harmful materials shuchu chiku) (“DID”) designated based on the results of that are the same as materials which airplanes are prohibited the national census. A DID is, in principle, an area with from transporting. a population density of 5,000 people or more per square ■ To “drop any object from UAVs” under (f) includes spraying kilometre. An example of a DID is most of the Tokyo water or other liquids (e.g., agricultural chemicals). Metropolitan area. A person who intends to fly a UAV without complying with the The foregoing airspaces can be summarised in Figure 1 conditions above must obtain the prior approval of the MLIT. The (please see end of chapter). application must comply with specified requirements under the Any person who intends to fly a UAV in a prohibited airspace Standards. For example, if an operator intends to fly UAVs BLVOS, must obtain the prior permission of the MLIT. An application then it must show that, among others, (i) the UAVs have a fail-safe for permission must provide certain information required by, and meeting specific requirements of, the Standards, function, (ii) it has experience in flights BVLOS, and (iii) it has an including (i) the applicant’s name and address, (ii) information assistant to oversee the flight. identifying the UAVs to be flown (e.g., manufacturers, and (2) Revised Standards requirements for BVLOS without assistants the name and weight of the UAVs) except for UAVs that To achieve the third phase of the Roadmap (see Section A.), the Study MLIT has identified on its website (e.g., Phantom series Group has examined the requirements for operating UAVs BVLOS manufactured by DJI), (iii) the purpose, date and time, route without assistants, from September 2017 to March 2018. Based on and altitude of the flights, (iv) the reason for flying in the prohibited airspace, (v) the functions and performance data the results, in September 2018, the Standards were revised to add of the UAVs, (vi) flight records and ability of the operator, conditions for flights BLVOS without assistants. The conditions and (vii) the manual for safe flights. Examples of specific are stricter than those for flights BLVOS with assistants, in terms requirements include, in the case of item (vi), the operator of UAV functions, the operator’s experience and safety measures. having at least 10 hours experience of flying the same kind of For example, the additional requirements include (a) the flight UAVs covered by the application. route being in areas where it is unlikely for a third party to enter 3. Operational conditions (e.g., mountains, sea, rivers, lakes and forests), (b) manufacturers (1) General certifying that the functions of the UAVs will not harm third parties, Under the CAA, UAV operators must: (c) ability of operators to determine, through the use of the UAV’s cameras or ground cameras, whether third parties can enter areas (a) operate UAVs only in the daytime; directly below the UAV flight routes or surrounding areas, and (b) operate UAVs within the visual line of sight of the (d) ability of operators to confirm, through the use of the UAV’s operator; cameras or ground cameras, the status of airplanes which may fly (c) maintain a certain operating distance (30 metres) into the UAV flight route. However, there are alternative options between UAVs and persons or on the for requirements (b) to (d). For example, requirement (b) does not ground or water surface; have to be satisfied if the UAV operator controls, by prohibiting or (d) not operate UAVs over event sites where many people restricting entry by third parties, the area over which an UAV in gather; flight may fall as calculated by UAV manufacturers. (e) not transport hazardous materials specified in the (3) Guidelines for cargo delivery relevant ordinance by UAVs; and On September 18, 2018, the sub group of the Study Group (f) not drop any object from UAVs except for the goods specified in the relevant ordinance. published the guidelines regarding the delivery of cargoes by UAVs (the “Guidelines”); these guidelines are not legally binding. The For purposes of the foregoing conditions: Guidelines stipulated (a) obligations which business operators ■ “Daytime” under (a) means from sunrise to sunset, as are strongly expected to comply with at the minimum, and (b) announced by the National Astronomical Observatory of obligations which business operators are encouraged to voluntarily Japan. Thus, this differs depending on the area and time of comply with. Minimum obligations include not overloading UAVs year. with cargoes and taking insurance to cover damages caused by ■ “Visual line of sight” under (b) means that the operator is able falling UAVs and cargoes. Voluntary obligations include properly to oversee by using his eyes, but does not include overseeing packing the cargoes properly on the assumption that they will fall through binoculars. off the UAVs, and verifying the proper loading of the cargoes on ■ Under (c) above, “persons” do not include persons who the UAVs (for example, by using a sensor with a simple structure). are, directly or indirectly, related to the UAV operator (the “Related Persons”), and “properties” do not include properties (4) Penalty controlled by Related Persons, such as cars, , vessels, A person who violates CAA regulations may be subject to a fine of airplanes, construction machines, buildings, houses, factories, up to JPY 500,000. storehouses, bridges, power plants, telephone poles, telephone (5) Supplemental provision cables, traffic signals, and street lights. “Properties” donot include land and nature (e.g., trees, grasses and weeds). In this When the CAA was amended to introduce the regulations on regard, if an operator flies UAVs in a city area, it would not UAVs, it also stipulated a supplemental provision that the State will be easy to find an area where there are no persons other than examine possible actions to make further contributions to the safe Related Persons and no properties other than those controlled flights of UAVs and to serve the sound development of businesses by Related Persons. Thus, UAV operators will need approval using UAVs, based on the progress of technologies relating to UAVs, to fly outside the parameters of item (c). the diversification of the use of UAVs and other circumstances, ■ As for “event sites” under (d), the CAA cites festivals and and the State will take necessary measures based on the results of exhibitions as examples. According to the Q&A published that examination. While further amendments to the CAA are not by the MLIT, if many people gather on specific dates or envisaged at the moment, discussions regarding regulations on the in specific locations, such as concerts and demonstration development of the commercial use of UAVs are in progress (see marches, these will be considered as event sites. Section A.).

22 WWW.ICLG.COM ICLG TO: AVIATION LAW 2019 Mori Hamada & Matsumoto Regulations on Drone Flights in Japan

an operator. Under the Radio Wave Act, an electric facility which C. Act Prohibiting UAV Flights Over transmits and receives radio frequencies and its operator are the Houses of Parliament, the Prime collectively defined as a Radio Station (musen-kyoku). Establishing Minister’s Official Residence, Other a Radio Station generally requires a licence, except for a Radio Important Buildings and Nuclear Facilities Station which transmits a very weak radio wave or is specifically excluded by the Radio Act and its ordinance. UAVs which are commercially available to consumers are generally equipped with This law was enacted on March 17, 2016 and took effect on April 7, a device that does not require a licence to operate. However, 2016, just before the G7 Foreign Ministers’ Meeting in Hiroshima, the device which uses a system for transmitting data from UAVs Japan. It prohibits flights of UAVs over important facilities, (musen-idotai-tsushin system), which was introduced on August including the Houses of Parliament, the Prime Minister’s Official 31, 2016, so that UAVs can transmit large-volume data, requires Residence, buildings of the government Ministries, the Supreme a licence for establishing a Radio Station. Further, the operator of Court, the Imperial Palace, and nuclear plants, and areas within a Radio Station must have the qualifications designated under the approximately 300 metres of these facilities. The purpose of the Radio Wave Act and its ordinance. law is to prevent danger in the facilities and to secure the central affairs of the State, maintenance of good international relationships When the said system was introduced, a trial licence to use the device and public safety. Thus, it differs from the purpose of the CAA, on UAVs in the same manner as a mobile phone was put in place. which is to secure the safety of aviation. Under this trial licence, a device on UAVs can transmit data directly to Radio Stations which are base stations for communications The definition of UAVs under this law is basically the same as under through mobile phones. It means that UAVs can transmit large- the CAA. However, this law prohibits the flights of UAVs weighing volume data without passing through a controller and while flying less than 200 grams. Under this law, UAV flights over important over a large area covered by multiple base stations. The Ministry of facilities and surrounding areas are allowed only if the operator (i) Internal Affairs and the Communications, which is the key regulator is an administrator of the facilities or has obtained the consent of the of the Radio Wave Act, will examine the technical requirements by facility administrator, (ii) owns the land or has obtained the consent the end of March 2019 and will introduce a licence, instead of a of the owner of the land, or (iii) flies the UAV to perform services mere trial licence, for such a device on UAVs. for the State or local governments, and submits a notification to the Public Safety Commission through the Station with jurisdictions over the facilities, 48 hours prior to the flight. Any F. Local Regulations (jyourei) person who violates this law may be subject to imprisonment for up to one year or a fine of up to JPY 500,000. Local governments such as the Tokyo Metropolitan Government and other prefectures have the authority to establish regulations D. Civil Code (jyourei) covering areas governed by them to the extent that they do not conflict with national laws. For instance, many local governments have regulations for the use of public gardens. Most The handling of land ownership is material to the further development of them prohibit and penalise acts that impede the management of of flights of UAVs. Under the Civil Code, land ownership extends public gardens. For example, under the Regulations for Gardens of above and below the land and allows owners to exclude third parties to the Tokyo Metropolitan Government, a person cannot make an act that extent. Any person who violates land ownership may be subject that hampers the management of gardens without the permission of to tort action under the Civil Code, and the owner may seek damages the Governor under the threat of penalty of up to JPY 50,000. against that person. In addition, the owner may seek an injunction to prevent that person from violating the owner’s rights of ownership. While there are no provisions which set the limits as to how far G. In the Future ownership extends over or under the land surface, it is generally interpreted that ownership extends to the extent that the owner’s On August 27, 2018, the MLIT announced five locations where interests exist. For instance, for flights of airplanes, it is generally the will be conducted to study how logistics services in rural considered that they would not constitute a violation of land ownership areas can be achieved. The trials involve private business operators because airplanes fly considerably higher up and thus, it is beyond the providing trial delivery services. For example, Japan Post Co., Ltd. altitude where the owner’s interests exist. However, UAVs usually and Autonomous Control Systems Laboratory Ltd. will implement fly lower than airplanes. In fact, a permission is required if UAVs fly trial service runs to deliver mail by UAVs between post offices in airspaces within 150 metres of the ground or water surface level in the Fukushima Prefecture, with which deliveries are usually (see Section B.2). Further, to develop logistics services by UAVs made by cars. On October 26, 2018, the first approval for BVLOS in city areas during the fourth phase of the Roadmap (see Section without assistants under the revised Standards was obtained for A.), it would be almost always necessary to fly closer to the ground the Fukushima trial run. The study at the five locations will be surface. In this regard, governmental bodies have not been proactive completed by the end of fiscal year 2018 (that is, March 31, 2019). in discussing possible rules or guidelines to deal with the relationship According to the announcement by the MLIT, the cost-effectiveness between land ownership and UAV flights, and there are no rules at the of delivery by UAVs will be examined and any task to make logistics moment. While it would be difficult to set a clear line as to how UAVs services by UAVS useful will be sorted based on the results of the should fly over private lands without violating the rights of owners, it trials. In addition, there is already a proposal to expand or revise the is necessary to provide certain comfort to business operators of UAVs. Guidelines based on, among others, reviews of possible regulations relating to flights over areas where a third party may be located and the use of radio frequencies together with developments in UAV E. Radio Wave Act technology, so that logistics services in cities may begin in earnest in the first half of the 2020s. UAVs are operated by telecommunications, using radio frequencies Further, according to a supplemental document to the Roadmap, between a device on the UAV and the controller in the hands of the government plans to look into and sort the issues in reaching

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the third and fourth phases, not only for logistics services but also relationship between land ownership and flights of UAVs, privacy for other services such as rescue work during emergencies (e.g., protection, and cybersecurity. It is anticipated that the progress earthquakes), inspection of infrastructures, surveys, and services for of technology and regulatory amendments will promote the agricultural businesses. These issues include the UAV registration commercial use of UAVs, which will solve, to a certain extent, the system, investigations and analysis of incidents involving UAVs, labour shortage resulting from Japan’s declining population. dealing with injuries to persons or property (e.g., insurance), the

(a)(ii) Airspaces 150 metres above ground or water

Allowed if permission is granted

(a)(i) Airspaces above airports and their vicinity (b) Airspaces above DID Airspaces other than (a)(i), (a) (ii) and (b) Allowed if permission is granted Allowed if permission is granted No need for permission

Figure 1 From the website of the MLIT, with modifications added by the author for this chapter.

Hiromi Hayashi Koji Toshima Mori Hamada & Matsumoto Mori Hamada & Matsumoto Marunouchi Park Building, 2-6-1 Marunouchi Park Building, 2-6-1 Marunouchi Chiyoda-ku Marunouchi Chiyoda-ku Tokyo 100-8222 Tokyo 100-8222 Japan Japan

Tel: +81 3 5220 1811 Tel: +81 3 5223 7789 Email: [email protected] Email: [email protected] URL: www.mhmjapan.com URL: www.mhmjapan.com

Hiromi Hayashi is a partner at Mori Hamada & Matsumoto, which she Koji Toshima is a partner at Mori Hamada & Matsumoto, which he joined in 2001. Her areas of practice are international and domestic joined in 2000. transactions, corporate restructuring, and regulatory matters, including While he has focused on corporate and securities transactions, regulations on the telecommunications industry and radio frequencies. including M&A and venture investment, he has led the Robotics Hiromi has been a member of the firm’s Robotics Group since 2015 Practice Group in the firm since 2015, focusing on new technologies and a member of the Logistics Subcommittee of the Study Group on such as drones, autonomous cars, and data protection. the Flying of Unmanned Aircraft (Drones) Beyond Visual Line of Sight and Over Third Parties established jointly by the Ministry of Land, Koji was admitted to the Bar in 2000 in Japan and in 2006 in New York. Infrastructure, Transport and Tourism and the Ministry of Economy, He worked at Sullivan & Cromwell in New York from 2005 to 2006, and Trade and Industry (2017). Hiromi was admitted to the Bar in 2001 at the Tokyo Stock Exchange from 2006 to 2007. in Japan and in 2007 in New York. She worked at Mizuho Corporate Bank from 1989 to 1994, and at Davis Polk & Wardwell in New York from 2006 to 2007.

Mori Hamada & Matsumoto is a full-service international law firm based in Tokyo, with offices in Fukuoka, Nagoya, Osaka, Beijing, Shanghai, Singapore, Yangon Bangkok and Ho Chi Minh, and a Jakarta desk. The firm has over 450 attorneys and a support staff of approximately 450, including legal assistants, translators and secretaries. The firm is one of the largest law firms in Japan and is particularly well-known in the areas of mergers and acquisitions, finance, litigation, insolvency, telecommunications, broadcasting and intellectual property, as well as domestic litigation, bankruptcy, restructuring and multi-jurisdictional litigation and arbitration. The firm regularly advises on some of the largest and most prominent cross-border transactions representing both Japanese and foreign clients. In particular, the firm has extensive practice in, exposure to and expertise on, telecommunications, broadcasting, the Internet, information technology and related areas, and provides legal advice and other legal services regarding the corporate, regulatory, financing and transactional requirements of clients in these areas.

24 WWW.ICLG.COM ICLG TO: AVIATION LAW 2019 Chapter 6

WALA: 10 Years of

Growth in the Airport Sector Alan D. Meneghetti

Worldwide Airports Lawyers Association (WALA) Michael Siebold

About WALA WALA and the Industry

The Worldwide Airports Lawyers Association (WALA) was WALA Board Members and industry delegates gather regularly – established in Prague, Czech Republic, in September 2007 at a generally once a year at the AGM and annual conference, this being the seminar held at Prague Airport, as a response to a growing need to main event in WALA’s calendar. Some 1,350 delegates, representing develop airport law as an independent area of aviation, transportation more than 400 different organisations from more than 70 countries and logistics law. Lawyers of airport operators from many countries across five continents, have already attended WALA conferences, and in Europe (Belgium, Croatia, Cyprus, Lithuania, Malta, Poland and this number is set to grow in the coming years as WALA formalises Russia) and Latin America (Argentina and Uruguay) attending the its structure and membership. Now incorporated as a not-for-profit seminar were all in agreement that air/aeronautical law in each of corporation, based in Montréal, Canada, WALA has created a their countries was outdated and ill-equipped to face the new reality community of like-minded individuals, regularly reaching more than of airport service, which required specialised legal knowledge. 5,000 industry delegates in 90 countries through its database. Consequently, the attendees agreed to create and promote a More than 150 topics with extreme relevance to the industry have worldwide platform and meeting place where airport lawyers (as been covered by more than 125 high-profile speakers. well as other interested parties) could develop, share and debate It is fair to say that the high number of professional attendees, relevant issues in the field of air law (and particularly in the law combined with a multitude of business and networking opportunities, relating to the functioning and operation of airports). 2018 saw have made the WALA conference currently the most important WALA’s 10th anniversary conference held in London, organised by airport law event in the industry’s calendar. Abiax Air and hosted by London Gatwick.

WALA 2019 The Conferences The 2018 Worldwide Airports Lawyers Association conference was Seven months later, in 2008, the aim of the founders became a reality. hosted by London’s Gatwick Airport from 15–17 October 2018, and In Spain, at the ‘airport’ of Ciudad Real, the first Worldwide Airport followed 2017’s successful conference in Bologna. A full house Law Conference took place. The following annual conferences took of over 120 delegates from around the world attended, made up of place in: both in-house airport lawyers as well as consultants and lawyers in ■ 2009 Ciudad Real, Spain, hosted by Aeropuerto de Ciudad private practice. Real. Some of the topics included: ■ 2010 Lisbon, Portugal, hosted by ANA Aeroportos de Portugal S.A. ■ Competition between airports and the barriers to airport growth. ■ 2011 Dallas, USA, hosted by Dallas Fort Worth International ■ The relationship between airports, innovation and governments. Airport. ■ The role of the legal counsel to an airport. ■ 2012 Amsterdam, The Netherlands, hosted by the Schiphol ■ Diversity and inclusion in aviation. Group. ■ Responding appropriately and adequately to unforeseen and ■ 2013 Montréal, Québec, Canada, hosted by Aéroports de unexpected events. Montréal. ■ Airports and the increasing security requirements placed ■ 2014 , Argentina, hosted by AA2000. upon them. ■ 2015 Athens, Greece, hosted by Athens . ■ Mobility rights. ■ 2017 Bologna, Italy, hosted by Aeroporto di Bologna. ■ Biometric screening and the issues that arise in relation to ■ 2018 London, United Kingdom, hosted by London Gatwick privacy, race, gender and accuracy. Airport. ■ Airport risk management and insurance and the issues arising in relation to terrorism and cyber threats. ■ Recent airline insolvencies and the impact on airports and the role they can play.

ICLG TO: AVIATION LAW 2019 WWW.ICLG.COM 25 WALA WALA: 10 Years of Growth in the Airport Sector

Since the 2017 conference, WALA’s Board has continued to look 2) Provide training seminars based on the extensive and unique at ways to expand further the scope of WALA and its involvement expertise of WALA’s members, particularly those of its in the industry. The Board has a clear mandate to continue to grow Board, in two formats: WALA and to expand the conference in the future, and continues a. On site at the request of an airport operator, aviation with its work of formalising WALA and providing more facilities authority, or similar organisation. and services to members (such as a regular newsletter, discounted b. Scheduled annual training seminars. academic courses and so on). 3) Designate an entity to operate as WALA’s arm to assist WALA’s Board in the development of the above initiatives. WALA 2019: Growing WALA 4) Growth of the WALA Board. In response to increasing demand, WALA’s Board has initiated the following activities which will continue to be developed in 2019. Acknowledgment WALA’s aim is, in short, to become more involved and more embedded in the airport sector, and it believes that, by implementing the measures The authors would like thank Diego Gonzalez, Elizabeth Albergoni below, it will go a significant way towards achieving this aim: and Brian Day for their contribution to this chapter. Diego is President of the Worldwide Airports Lawyers Association; Brian 1) Introduce membership (with different membership categories) and Elizabeth are Members of WALA’s Executive Board, alongside for individuals and institutions wishing to have a more interactive role in WALA. Alan and Michael.

26 WWW.ICLG.COM ICLG TO: AVIATION LAW 2019 WALA WALA: 10 Years of Growth in the Airport Sector

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

Alan D. Meneghetti is a partner in the Corporate group at Katten Michael Siebold is Vice Chair and Executive Board Member of the Muchin Rosenman UK LLP. He undertakes a full range of privacy, Worldwide Airports Lawyers Association (WALA). His practice has commercial and regulatory work in the general commercial, aviation always been set on an international footing. Michael earned his and manufacturing sectors. His practice ranges from handling primary civil law degree in Germany and his secondary common regulatory issues to the procurement of suppliers and responses law degree in Canada. He is the founding partner of Arnecke Sibeth to tenders, to data protection and privacy, information technology, Dabelstein (www.asd-law.com) – a leading German law firm with more intellectual property, and the drafting and negotiating of various than 150 fee earners in six offices across Germany. commercial agreements, such as outsourcing, supply, service, and Being strongly linked to North America’s business community for research and development. He has worked extensively on matters in many years, Michael is in charge of many national and especially Africa, the Americas, Europe and the United Kingdom. international projects in all sectors, in particular the logistics sector Alan is a regular contributor to publications and speaker at conferences and the sports industry, the innovative building of arenas, and the in these sectors, and his articles and book reviews have been widely international real property market. Furthermore, he specialises in published. legal project management and financing. Michael is active in the German-Canadian community, presently acting as President of DKG Deutsch-Kanadische Gesellschaft, founder and director of the Event and Venue Management Institute (EVMI), a member of the board and former Chair of INTERLAW after six years of service, chairman of the standing arbitration board of the LSBH, as well as being a member of the board of several charitable trusts and organisations.

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

ICLG TO: AVIATION LAW 2019 WWW.ICLG.COM 27 Chapter 7

Liability for Damage in International Civil Aviation from a GNSS Perspective

Leiden University Pablo Mendes de Leon

The Era of GNSS State Sovereignty

Only a few years ago, Global Navigation Satellite System, better While applying any legal regime to GNSS, the principle of complete known as GNSS, did not feature in the common man’s vocabulary and exclusive sovereignty of States over the airspace above their but was privy to a select circle of academics, scientists and territory, an essential rule of customary international air law government officials. Yet today, a cursory glance at Hollywood’s enshrined in the 1919 Paris Convention and the 1944 Chicago blockbusters, the automobile industry and day-to-day conversation Convention, must be taken into account. The Chicago Convention reveals that these complex technical developments have made their establishes the full authority and responsibility of a Member State to way into modern life. provide air navigation services, to control operations of aircraft and GNSS technically constitutes three parts, namely: space segment; to enforce safety and other regulations in its own airspace. control segment; and user segment. Space segment is composed As mentioned, GNSS was incorporated into CNS/ATM systems, but of dozens of satellites that transmit navigation signals from the the legal problem is that most States have to rely on foreign GNSSs outer space; control segment is a ground-based network of stations; which are out of their control. It has been the primary concern and user segment refers to the equipment of terminal receivers that that the implementation of GNSS in civil aviation may involve the compute the location. Currently, the fully operational global systems infringement of State sovereignty on the provision of air navigation are the Global Positioning System (GPS) belonging to the US, and facilities.2 Therefore, the ICAO Council already stated in 1994: Globalnaya navigatsionnaya sputnikovaya Sistema (GLONASS) “that implementation and operation of CNS/ATM systems, belonging to Russia. Meanwhile, the EU is developing its Galileo which States have undertaken to provide in accordance with system and China is also moving quickly towards its BeiDou Article 28 of the Chicago Convention, shall neither infringe Navigation Satellite System (BDS). The accuracy of GNSS signals nor impose restrictions upon State sovereignty, authority, could be improved by augmented systems. or responsibility in the control of air navigation and the and enforcement of safety regulations.”3 As the era of multi-systems is approaching, a widespread utilisation of GNSS within the aviation sector is coming into reality, particularly A Charter on the Rights and Obligations of States Relating to GNSS under the framework of Communications, Navigation and was adopted in 1998 to readdress the above statement made by Surveillance/Air Traffic Management (CNS/ATM) systems.1 This ICAO Council. will enable greater accuracy in determining the real-time position Complying with the principle of State sovereignty over its airspace, of aircraft en route as well as landing, and better management Article 28 of the Chicago Convention allows its Member States to efficiency of a specific airspace through surveillance of aircraft by have the option of whether or not to introduce GNSS as a navigation air traffic controllers, just to mention a few of the applications. aid within their respective airspaces, through the phrase “so far as Although many problems will be simplified through the usage of it may find practicable”. Article 28 only obligates each Member GNSS, new issues will undoubtedly arise. From a legal perspective, State to provide “air navigation facilities”, but it does not specify the main concern is issues related to liability. Who will be liable what kind of air navigation aids should be used. GNSS is only one in the event of damage caused by a failure of GNSS signals? Do form of air navigation aid. GNSS technology is not accessible by existing liability regimes provide a legal recourse or is it necessary the majority of States. Thus, the use of GNSS is not a compulsory to create new legal instruments? obligation for those States which do not own the capability of GNSS technology. This chapter aims to address, amongst others, the above questions for the most part within the parameters of private international Against this background, the lack of legal certainty on the liability of air law. First, a brief explanation is given about an important GNSS – one of the biggest concerns of GNSS-user States – is more underlying issue: that of state sovereignty. Second, the importance or less delaying the implementation of GNSS. The international of international law for the liability of GNSS is addressed. Third, community has the freedom on whether or not to introduce GNSS the existing legal liability regime within the field of aviation before their concerns were responded to positively. is sketched. Fourth, the applicability of that liability regime is analysed. Following that, concluding remarks are made.

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The modernisation of the Warsaw System by ICAO has led to Liability of GNSS the conclusion of the Montreal Convention,9 with the intention to replace the entire Warsaw System. It has now been ratified by 135 Similar to the US government, the Legal Bureau of ICAO expressed States and entered into force on 4 November 2003. The Montreal the view that should an accident occur because of an obstacle to Convention adapts a two-tier civil liability regime. The first tier the dependability of the signals, the relevant rules of liability will lays down a no-fault liability system, where the carrier shall not apply and the signal providers will be held responsible through exclude or limit its liability for damage not exceeding 113,110 SDRs recourse to the laws of the relevant State. Thus, a case involving (Special Drawing Rights);10 the second tier is a fault-based liability the failure or defection of GNSS signals would be settled through system, where the carrier shall not be liable for damage to the extent the courts, and if for some reason an entity cannot bring the case to exceeding 113,110 SDRs if the carrier can argue against the claimant court, the matter can be pursued through the entity’s government. that: “such damage was not due to the or other wrongful Questions pertaining to the relevant rules of liability, reminiscent act or omission of the carrier or its servants or agents”; or that “such of the discussion of the liability of air traffic controllers where the damage was solely due to the negligence or other wrongful act or ICAO Legal Committee decided against concluding a convention omission of a third party”.11 The burden of proof has been placed for regulating the liability of agencies, led the on the carrier. Rapporteur of the Legal Committee to favour resolution by choice of law rules.4 Article 28 of the provides rules for jurisdiction with the enumeration of four competent courts within the territory of However, the principle of State sovereignty from the public air law the parties of this Convention: the court of the carrier’s domicile; his angle is inherently present when addressing complex issues related principal place of business; an establishment by which the contract to the liability of GNSS under private air law. The principle of State has been made; or before the court having jurisdiction at the place of sovereignty releases one State from the jurisdiction and the courts jurisdiction. Article 33(2) of the Montreal Convention incorporates of another. Under the current pattern of the GNSS market, most a so-called “fifth jurisdiction” to supplement these four jurisdictions GNSS signals are not provided by non-governmental entities, but in the original Warsaw Convention. by public authorities, either civil departments or military agencies of governments. Therefore, in most cases concerning the liability of This would make an action possible: GNSS, claimants have to first overcome the sovereign immunity of “In respect of damage resulting from the death or injury of a providers, which is hard to achieve by choice of law rules. passenger, an action may be brought before one of the courts mentioned in paragraph 1 of this Article, or in the territory Furthermore, the global nature of GNSS distinguishes itself from the of a State Party in which at the time of the accident the conventional terrestrial-based ATC system, which has very limited passenger has his or her principal and permanent residence geographical coverage either because of the inherent characteristics and to or from which the carrier operates services for the of the infrastructure, or the topography of the area.5 This determines carriage of passengers by air, either on its own aircraft, the liability of GNSS being inherently labelled by its international or on another carrier’s aircraft pursuant to a commercial characteristics in most situations because of transnational litigant agreement, and in which that carrier conducts its business of parties, cross-border triggers and damage in multiple jurisdictions carriage of passengers by air from premises leased or owned which are generated by the global coverage and worldwide by the carrier itself or by another carrier with which it has a deployment of GNSS. commercial agreement.” In brief, dealing with international liability of GNSS in the regime The European Community’s Council Regulation No. 2027/97, of air law, the domestic law approach based on choice of law rules hereafter also referred to as: the Regulation, on air carrier liability in will cause legal uncertainties. The next two sections check if any the event of accidents came into force in October 1998, which has of the existing private international air law instruments have the been amended by Regulation (EC) No. 889/2002 to bring it into line potential to be applied to the issue of liability for damage caused in with the provisions of the Montreal Convention (1999), by setting 12 civil aviation from a GNSS perspective. up a uniform system of air transport liability. The scope of the Regulation is limited to Community air carriers. Like the Montreal Convention (1999), the Regulation adopts a two-tier liability Existing Liability Regimes of Private system. The first tier refers to a strict carrier liability for damages International Air Law of up to 113,100 SDRs, where the air carrier cannot contest claims for compensation. The second tier is based on the presumed fault Today, liability as an aspect of international private air law has of the carrier for damage in excess of 113,100 SDRs, but the air 13 become a complex issue involving a number of legal instruments carrier may avoid only by proving that it was not at fault. Again, and other stakeholders. Hence, the next paragraphs discuss the air the burden of proof is on the carrier. Community air carriers are law instruments that may be tailored to incorporate GNSS activities. also obliged to make advance payments of at least 16,000 SDR to relatives and passengers in the event of death or injury of passengers, The liability regime in private international air law originated in respectively.14 These provisions also apply to non-Community air 1929 with the drafting of the Warsaw Convention.6 The Convention, carriers in relation to carriage to, from or within the Community. ratified by 152 States, provides uniform international liability rules for passengers and baggage based on a presumption of liability of The Convention on Damage Caused by Foreign Aircraft to Third 15 the carrier as a quid pro quo for a limitation of that liability for the Parties on the Surface, better known, and hereafter referred to as death or injury of passengers which occurred during international the Rome Convention of 1952, is another legal instrument dealing travel. Following the rapid development of the aviation industry, with a specific kind of liability. According to Article 23,the the Warsaw Convention was amended by the of Convention is applicable to damage caused to third parties on the 1955 as modified by the Montreal Additional Protocols No 1, 2 and territory of a contracting State by an aircraft registered in another 4, and supplemented by the Guadalajara Convention, 1969.7 All contracting State. Article 2 of the Rome Convention embodies the those legal instruments form the “Warsaw System” or the “Warsaw principle of absolute liability. The burden of liability is placed on Regime”.8 the operator rather than on the registered owner, if they are not one

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and the same. As of November 2018, only 51 States have ratified framework set up by, respectively, the US, the European Union this Convention. One reason mentioned for the limited application or for that matter any other authority that envisions setting up its was that the liability limits were too low. own system. Throughout the entire process from the generation of An attempt was made in 1978 to modernise the Convention by GNSS signals to air accident caused by the failure of those signals, increasing the limits. But the resulting Protocol of Montreal was parties may be roughly classified into three types, from a private law able to gather only four instruments of ratification since the increase perspective, as follows (see also Figure 1 at the end of the chapter): in limits was not substantial enough. ■ Upstream Actors. These actors are involved in the provision of GNSS signals, ranging from the owner, constructor, and In practice, damages are allocated according to national law. The operator of navigation systems where augmented systems are reason being that, for the most part damages are allocated based on included, and final provider of navigation signals. the principal of “res ipsa loquitur” which states that the fact that ■ Downstream Actors. These actors refer to users of GNSS the plane has crashed in that State requires payment irrespective of signals, including value-added service providers and final fault. Even if the carrier is not at fault but other parties such as users. In the context of aviation, one of the typical value- the Air Traffic Control (ATC) or manufacturer have contributed to added service providers are air navigation service providers the cause of the accident, the carrier, and the claims of the victims (ANSP); final users direct to the air carrier whose aircraft use against the air carrier remain intact under the Rome Convention of GNSS signals in flight. 16 1952. In most cases that concern third party liability, a “genuine ■ Third Parties, which includes the passengers suffering link” can be identified with a specific country since the damage damage caused by the failure of GNSS, and the wrongdoers occurs on its territory and the victims are its inhabitants. As national which lead to the failure of GNSS such as users of spoofing law provides a more suitable legal recourse, the Rome Convention or jamming devices. of 1952 has never been applied. Air Traffic Control agencies in most countries are State-run organisations, although certain States are looking at privatising this activity, and, indeed have already proceeded to privatisation or corporatisation. Traditionally, the State possesses sovereign immunity and, hence, liability of the ATC controllers is determined by applicable national governmental rules that regulate the position of its civil servants. These rules vary per State, and may develop over the course of time. In the US, under the FTCA (Federal Tort Claims Act), to establish liability of the government it is essential that the negligence of the air traffic controller is proven and such negligence must bethe proximate cause of the damage suffered.

In 1971 an Australian court held in a landmark decision, Austrian Considering the complexity of players in the value chain of GNSS, National Airlines v. The Common Wealth of Australia and Canadian the consensus on the solution for the liability of GNSS has never Pacific Airlines (The TAA case), that both airlines involved were been reached. liable for 30% each but that the ATC was liable for 40% because the The European organisation for the safety of air navigation, avoidance of collisions is a primary task of an ATC. Eurocontrol and the European Civil Aviation Conference (ECAC) These examples illustrate that although a general trend exists that a have tabled the idea of establishing a contractual chain to channel government is liable in cases where negligence can be established, the the ultimate liability to the appropriate place, considering that more components that constitute this “negligence” vary per jurisdiction. than one party will be involved in the provision of GNSS services. Given that aviation has a large international component, an attempt This chain includes users, States, an infrastructure organisation and was made to set up international rules for the Liability of Air Traffic the system operator(s). An aircraft with an onboard GNSS receiver Control Agencies. The ICAO Legal Committee studied this issue to assist in navigation is expected to be the end user. The regulation for several decades, during which a Rapporteur presented a report, of safety and air traffic service might be defined as the roles of the comments from States were received and Argentina even proposed State or its designated entity. An infrastructure organisation will a preliminary draft international convention on the liability of air be responsible for an overlay system such as EGNOS and other 17 traffic control agencies. However, basically, States do not see the related facilities which air traffic service providers may rely on. need to change the existing practice and thus have not supported an Space segments and signal-in-space will be provided by the system international solution so many fundamental questions such as if an operator(s). A number of contractual arrangements are envisioned international convention is a feasible solution, remain unanswered. on the one hand to provide performance guarantees, and on the other hand to identify the extent of liability.18 Applicability of Private Air Law to the The three examples given thus far are for the most part long- Liability of GNSS term solutions. In the meantime, the existing legal instruments will continue to be deployed on a case-by-case basis. Even As shown above, a variety of private air law instruments regulate without considering the barrier raised by the doctrine of sovereign liability issues, but can they be applied to GNSS-related issues or immunity, the outcome will vary depending on the jurisdiction in are new legal instruments required for this purpose? In addressing which recourse is sought. this question, a division is made between the short- and long-term Civil liability, not including criminal liability, can be divided into solutions. either contractual or delictual (tort-based liability). The latter But first the different parties involved with GNSS have to be lined category of liability can arise under general legal provisions, such up. This by no means is an easy task as many stakeholders are as or a basic civil code, or under specific legislation, involved. The exact division of parties will depend on the regulatory such as statute or other . Also it might surface under

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the terms of an international treaty or convention in the event it ATC systems, with the purpose to meet an increasing need has a direct effect under applicable domestic law. The question for air traffic services as a result of the dramatic development whether liability is subject to establishing fault or whether liability of civil aviation in recent decades. See ICAO, Report of is absolute, without the need to establish fault, will be determined by the Fourth Meeting of the Special Committee on Future Air the applicable international legal instruments.19 Navigation Systems, Doc. 9524, FANS/4, Rec. 2/1, 1988. 2. See, Michael Milde, Institutional and Legal Problem of the Looking at a contractual relationship, a possible application of the Global Navigation Satellite System (GNSS): Solution in Montreal Convention (1999) can be examined. To begin with, the Search of a Problem?, in Cheng, Chia-Jui, Tu-hwan Kim rules of the Montreal Convention (1999) are applicable exclusively and Doo Hwan Kim, The Utilization of the World’s Air Space to carriage by air so they do not apply to the liability of, for example, and Free Outer Space in the 21st Century (Kluwer Law manufacturers or air traffic controllers. International, 2000), pg. 340. In the first tier of the liability system in the Montreal Convention, 3. See, Jiefang Huang, Development of the Long-term Legal claimants who are entitled to claim for compensation may easily get Framework for the Global Navigation Satellite System, the compensation for damage not exceeding 113,100 SDRs. Based Annals of Air and , Volume XXII-I, 1997, pg. 590; on Article 21, a carrier is not liable for damage exceeding that limit this principle has been reiterated by the Exchanges of Letters in the second tier if “such damage was not due to the negligence and the Legal and Technical Expert Panel (LTEP). or other wrongful act or omission of the carrier or its servants or 4. See ICAO and the Legal Framework of GNSS Planning and agents” or “such damage was solely due to the negligence or other Implementation, Annals of Air and Space Law, Volume XXI- wrongful act or omission of a third party”. The burden of proof II, 1996, pg. 203. is reversed so the onus is on the carrier. In the event of a proven 5. B.D.K. Henaku, The Law on Global Air Navigation by GNSS signal failure, it should not be difficult for the carrier to be Satellite: A Legal Analysis of the ICAO CNS/ATM System (AST Leiden, 1998), at xv. exonerated from liability fully or partially for damage exceeding 113,100 SDRs. 6. The Convention on the Unification of Certain Rules Relating to International Carriage by Air, 137 L.N.T.S 11, ICAO Doc According to Article 2 of the Rome Convention, the principle of 7838. absolute liability applies. Ergo, once again the discussion of the 7. Pablo Mendes de Leon, Introduction to Air Law (Wolters source of damage can be considered foreclosed. The use of this Kluwer, 2017), at 152. instrument for the purpose of GNSS signal failure seems, at best, 8. Ibid. limited. 9. The Convention for the Unification of Certain Rules for An example of tort-based liability can be provided, by using the International Carriage by Air, agreed during Montreal 28 experience rendered with ATC liability. If the negligence of a May 1999. GNSS provider can be established then the carrier has a possible 10. The limit of civil liability has been increased from 100,000 legal recourse using national law. But it is questionable whether the SDRs to 113,100 SDRs since 30 December 2009, which was failure of the GNSS signal can be construed as a negligent act. Case first reviewed to remain the same in 2015. See ICAO, Working law is not yet available for answering this question. Paper C-WP/13478, the 188th session of ICAO Council, 7/10/09; ICAO, Electronic Bulletin EB 2014/035, 15 July 2014. In addition, the limits of liability are counted by SDRs as Conclusion defined by the International Monetary Fund, and those limits have to be reviewed and regularly revised in the context The above paragraphs illustrate that recourse for passengers is not of the Montreal Convention. See Articles 23 & 24 of the an immediate worry since the existing international private air law Montreal Convention. instruments would cover their claims against a carrier. But what 11. Article 21 of the Montreal Convention. happens if the carrier’s liability is caused by the failure of the GNSS 12. Europa, Air carrier liability in the event of accidents, https://eur- signal, an occurrence beyond its control? lex.europa.eu/legal-content/EN/LSU/?uri=celex:31997R2027, In the interim period before a more appropriate legal instrument last accessed 18 November 2018. is drafted, the authors expect a use of the first tier of the absolute 13. Annex to Regulation (EC) No. 2027/97, as amended by liability regime laid down in the Montreal Convention, which Regulation (EC) No. 889/2002. allows compensation for damage not exceeding 113,100 SDRs. 14. Article 5 of Regulation (EC) No. 2027/97, as amended by Yet this may not offer full compensation to passengers or their Regulation (EC) No. 889/2002. relatives for damage above that limit. Another parallel development 15. Convention on Damage Caused by Foreign Aircraft to Third should be the implementation of “contractual chain”, proposed by Parties on the Surface; 310 UNTS 181. Eurocontrol and ECAC, dealing with the various levels of liability 16. Unless one of the following situations arises: “Nevertheless on a contractual basis. This would provide legal recourse for all there shall be no right to compensation if the damage is not a parties involved. direct consequence of the incident giving rise thereto, or if the The long-term solution should be a convention taking into account damage results from the mere fact of passage of the aircraft through the airspace in conformity with existing air traffic the specific nature of GNSS. Rather than a comprehensive regulations.” See Articles 1(2) of the Rome Convention of convention about GNSS liability, the Convention should deal with 1952. GNSS issues as a whole and dedicate, say, a separate chapter to 17. See ICAO, Secretariat Study: Liability of Air Traffic Control liability. Agencies, Doc C-WP/7781, 20/1/84. 18. See ICAO, Development of a contractual framework Endnotes leading towards a long-term legal framework to govern the implementation of GNSS, A35-WP/125, LE/11, 21/9/04, 1. The term “CNS/ATM systems” is a concept based on GNSS, presented by the 41 Contracting States, Members of the which was developed by ICAO in 1988. Since then, CNS/ European Civil Aviation Conference, at 4. ATM systems have been implemented to replace traditional

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19. See Liability of Air Traffic Control Agencies, Regulation of the Global Navigation Satellite System (GNSS): A Pablo Mendes de Leon Conference to examine Legal and Policy Interests Involved Leiden University in the Implementation of GNSS, 1996, pg. 171. International Institute of Air and Space Law P.O. Box 9520 2300 RA Leiden Acknowledgment Netherlands The author of this contribution is very grateful to Dr. Deijan Kong Tel: +31 71 527 7724 Email: p.m.j.mendesdeleon for his helpful comments. @law.leidenuniv.nl URL: www.universiteitleiden.nl

Pablo Mendes de Leon is a Professor of Air and Space Law and Director of the International Institute of Air and Space Law of Leiden University, which is one of the leading international scientific research and teaching institutes in the world, specialised in legal and policy issues regarding aviation and space activities. The Faculty of Law of Leiden University founded the institute in 1986. In addition to his duties as Director of the International Institute of Air and Space Law of Leiden University, Pablo Mendes de Leon maintains a vast range of memberships in organisations that work to combine law and practice of aviation law and policy. For instance, he is President of the European Air Law Association, Visiting Professor at the National University of Singapore and the University of Bordeaux, France, a at the District Court of Haarlem, Membre titulaire de l’académie de l’air et de l’espace, Toulouse, France, Member of the Dutch Aviation Accident Board, a Board Member of the magazines Air and Space Law, Journal of Air Law and Commerce and the Italian ANIA Insurance Newsletter and the Director of the Series of Publications in International Aviation law and Policy with Kluwer Law International. He is the author of a large number of publications on topical issues regarding aviation law and policy.

International Institute of Air and Space Law at Leiden University The International Institute of Air and Space Law is one of the leading international academic research and teaching institutes in the world, specialising in legal and policy issues regarding aviation and space activities in the broadest sense of the word. Its objective is to contribute to the development of aviation and space law and related policy by conducting and promoting research and teaching at graduate and post-graduate level. The relevance and topicality of the work is guaranteed by an extensive exchange of information with the air transport and space industry. The Institute has a modern library and organises numerous courses and conferences on all aspects of aviation and space law and policy.

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Argentina

Freidenberg, Freidenberg & Lifsic Elizabeth Mireya Freidenberg

In Argentina, laws, executive decrees, regulations and resolutions 1 General are constantly issued. Further, Argentina has ratified multilateral conventions on aviation, 1.1 Please list and briefly describe the principal including but not limited to, the 1929 Warsaw Convention, the 1933 legislation and regulatory bodies which apply to and/ and 1952 Rome Convention, the 1944 Chicago Convention, the or regulate aviation in your jurisdiction. 1948 Geneva Convention, the 1963 , the 1970 Hague Convention, and the 1999 Montreal Convention. Argentina’s core aeronautical legislation is the Argentine Aviation regulatory bodies in Argentina are as follows: Aeronautical Code (hereinafter, “AAC”) approved by Law No. ■ ANAC is the authority in charge of regulating and supervising 17,285, as amended by Law No. 22.390, and regulated by Executive Argentine civil aviation, instructing and integrating the No. 326/82. The AAC governs civil and commercial aeronautical community. Furthermore, ANAC guarantees aviation activities, infrastructure, aircraft, personnel, liability and the security and excellence in the integral development of insurance, among other issues. Argentine aviation. Other relevant regulations which apply to aviation are as follows: ■ The Ministry of Transportation is responsible for designing and ■ Law No. 19,030, as amended by Law No. 19,534 on the implementing policies for the development of transportation National Policy on Commercial Air Transportation. across the country and controlling regulations and ■ Executive Decree No. 2145/73 on the provision of ground transportation concessions. The Ministry of Transportation services to aircraft, as amended by Executive Decrees 480/94 has the following duties: elaborating and carrying out and 698/01. the national policy on air transport; dealing with matters related to international air transport; and overseeing air fleet ■ Executive Decree No. 1364/90 on Air Commercial regulations (Law No. 22,520 amended by Executive Decree Transportation, regulated by Air Force Resolution No. No. 13/2015). 444/94. ■ The Accident Investigation Board (Annex 13 to the Chicago ■ The Argentine Civil Aviation Regulations (RAAC) also Convention) is a financially self-sufficient body having regulates the technical aspects of air transport in Argentina its own legal status within the scope of the Ministry of (ANAC Resolution No. 3/2005). Presently, these regulations Transportation, which determines the causes of accidents are being amended to coordinate technical matters with and incidents occurring in the field of civil aviation and Latin-American countries. recommends effective actions to prevent its recurrence. ■ Law No. 26,102 on . ■ Executive Decree No. 239/07, which created the National 1.2 What are the steps which air carriers need to take in Civil Aviation Agency (hereinafter, ANAC) (as amended by order to obtain an operating licence? Executive Decree No. 1770/07). ■ Executive Decree 52/94 (as amended by Executive Decree The requirements for obtaining a licence to operate domestic No. 1012/06) providing clarification on article 99.4 of the commercial air services are: an application containing the AAC. applicant’s name (whether an individual or a corporation); the type ■ Executive Decree 1492/92 (as amended by Executive of air service (scheduled or non scheduled, domestic or international, Decrees No. 2186/92 and 192/01), which regulates air cargo transportation. transportation of passengers, cargo or mail); the applicant must establish a legal domicile in Buenos Aires City. ■ Executive Decree No. 1770/07 (as amended by ANAC Resolution No. 349/15), which established ANAC’s Any air carrier interested in obtaining an international operating functions, scope of action and organisational structure. licence must comply with the following steps: ■ Executive Decree No. 1470/97, which rules charter operations. a) The foreign carrier must obtain a diplomatic designation by ■ Executive Decree No. 375/97, which creates the National the carrier’s flag country, based on the Bilateral Air Services Airport System (ORSNA) and the Executive Decree No. Agreement or Memorandum of Understanding between the 197/00 that establishes its organisation. carrier’s country of origin and Argentina. ■ Resolution No. 1532/98 from the Ministry of Economy, b) The foreign carrier must register with the Argentine Works and Public Services which governs the general Superintendence of Corporations as an Argentine branch of conditions for the contract of carriage. the foreign corporation.

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c) Upon due registration as a branch in Argentina, the foreign carrier must request an authorisation to operate international 1.7 Are airports state or privately owned? scheduled or non-scheduled air services from ANAC and submit: the corporation’s documents; commercial Article 25 Chapter 1 Title III of the AAC states that are and operative permits obtained in its country of origin; either public or private. Public airports are those established for the a description of the aircraft it intends to operate in the public’s use; the rest are private. The owner of the land where the routes; certificates of registration and airworthiness of the airport is built does not qualify the airport as public or private. aircraft; and an insurance certificate that covers the carrier’s operations and its liability regarding its passengers, cargo and Article 26 of the ACC sets forth that public airports are classified as mail, third parties on the ground and crew members. such based on traffic intensity. International airports are those that provide customs, immigration and sanitary services.

Argentina 1.3 What are the principal pieces of legislation in Further, Executive Decree No. 92/1970 classifies aerodromes your jurisdiction which govern air safety, and who and the need to get a certification by the Government to operate administers air safety? according to the rules of Annex 14 to the Chicago Convention. By Executive Decree No. 375/97 the The principal pieces of legislation governing air safety in Argentina called for bids to privatise 33 airports of the National Airport System are: Sections III, VIII, IX, XII and XIII of the AAC; Law No. 24,051 that were then administered and operated by the State (Argentine on Hazardous Waste; Regulation No. 28/2009 establishing the National Air Force). Safety Operational Programme for Civil Aviation 2008–2011 and Furthermore, the requirements and procedures for the licensing of revised by Regulation No. 74/10; and ANAC Resolution No. 754/2016 an airfield are established in Regulations No. 95/2005 and 1/2008, creating the Committee for Prevention of Civil Aviation Accidents. issued by the Traffic Control Authority, dependent on the Argentine The authority in charge of administrating air safety is ANAC by Air Force. establishing rules on safety and checks compliance.

1.8 Do the airports impose requirements on carriers 1.4 Is air safety regulated separately for commercial, flying to and from the airports in your jurisdiction? cargo and private carriers? The airports require airlines to sign lease agreements for the space No, air safety is jointly regulated for commercial, cargo and private they need to use. In order to sign a lease agreement, the airport carriers. demands a money guarantee. The Organismo Regulador del Sistema Nacional de Aeropuertos 1.5 Are air regulated separately for commercial, (hereinafter “ORSNA”) is a regulatory body appointed by the State cargo and private carriers? to approve fares and control private airports as well as those licensed under concession by the State. Air Charters are regulated by National Decree No. 1470/97. Foreign carriers are authorised to perform charter services to Argentina based 1.9 What legislative and/or regulatory regime applies to on reciprocity. An interesting fact regarding charter regulations air accidents? For example, are there any particular in Argentina is that, contrary to general rule, a petition will be rules, regulations, systems and procedures in place considered automatically granted, if the Aviation Authority does which need to be adhered to? not reject it. The following documents are required for requesting the permit: insurance, airworthiness and registration certificates; In Argentina, air accidents are regulated by Annex 13 to the Chicago the contract signed between the tour operator/travel agent and the Convention, articles 185–190 of the AAC and Executive Decree No. carrier; and a copy of the travel agent/tour operator authorisation 934/70, as amended. issued by the Tourism Secretary. All documents proceeding from The Accident Investigation Board is the agency responsible for abroad must comply with the 1960 Apostille Convention or be determining the causes of accidents that have occurred in the field consularised by the nearest Argentine consulate. of civil aviation, recommending effective actions to prevent its recurrence and carrying out investigations. 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ 1.10 Have there been any recent cases of note or other or local operators? By way of example only, notable developments in your jurisdiction involving restrictions and taxes which apply to international but air operators and/or airports? not domestic carriers. A number of domestic carriers have entered the market over the last As per article 97 of AAC, only Argentine carriers with an air two years. Following public hearing No. 218, current administration operator certificate issued by the Aviation Authority are entitled to ended a period of more than a decade without new domestic carriers perform domestic operations. in Argentina. Article 99 states that, for a company to be considered Argentinian, The Government also obtained a repeal of a number of regulations its legal address as well as the address of major shareholders must be that prohibited selling air tickets below an established amount in Argentina. The majority of the shareholders, controlling at least (minimum fare). This has boosted the birth of new market models, 51% of the voting shares, must also be Argentinian. such as low-cost carriers, that although are known in other parts of the world, were completely absent from the Argentine market. In accordance with Executive Decree No. 52/94 (as reinstated by Executive Decree No. 1012/06), Argentine companies with foreign shareholders are considered to be “Argentinian” and must comply with the net of the majority of the shareholders being Argentinian.

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in the resolution in question. In our view, this rule diminishes the 2 Aircraft Trading, Finance and Leasing risk of owners and financiers regarding the property of an individual engine. 2.1 Does registration of ownership in the aircraft register constitute proof of ownership? 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- Ownership of aircraft by lessor – or any other company that is the added tax (VAT) and/or goods and services tax (GST), owner of the aircraft – is proved upon due registration of the lease and b) documentary taxes such as stamp duty; and agreement in the Argentine Aircraft Register. (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of As per Section 45 1), 2), 6) and 8), and Section 50 of the AAC, aircraft and/or particular aircraft types or operations? registration in the Aircraft Registry renders the contract enforceable Argentina to third parties. a) In Argentina, the law on value-added tax (VAT) (Federal Law No. 23.349, as included in Decree No. 280/1997) establishes that the tax applies to aircraft trading only when it involves an 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the aircraft that is destined for private use. operation of this register? Otherwise, if the aircraft is destined to commercial transport of passengers or cargo, aircraft trading is exempt from paying There is no separate Register of Aircraft Mortgages. All Aircraft VAT. Mortgages are registered in the Aircraft Registry. This exemption applies to almost every type of transaction regarding aircraft, as it also includes: leasing; importation; The Argentine Aircraft Register is maintained by the ANAC, and construction. following the transfer of all civil aviation functions from the Air Likewise, this exemption applies to almost every type of Force to the Civil Authority. aircraft, as it generally includes “every aircraft destined to The responsibilities of the Aircraft Register are governed by Section the transport of passengers and cargo”. IV Chapter VI of the AAC as well as National Decree No. 4907/73. Lastly, the exemption does not distinguish whether the purchaser or seller is in Argentina or not. 2.3 Are there any particular regulatory requirements The exemption is stated in Section 7.g) of Federal Law which a lessor or a financier needs to be aware of as No. 23.349 on VAT (text included in National Decree No. regards aircraft operation? 280/1997) and establishes that: “Sales, services mentioned in Section 3 c) and definitive imports that involve movable No. As long as the contract is registered in the Aircraft Registry property included in this section, as well as works and services herein included, shall be exempt from the tax established by and the aircraft, if under the lessee’s operative control, all regulatory this law as hereinbelow indicated: (…) g) Aircraft built for requirements regarding aircraft operation should be fulfilled by the the transport of passengers and/or cargo and destined to such lessee. activities, (…).” Nevertheless, the lessor should be aware of the requirements for b) In Argentina, the Stamp Duty is a Provincial Tax, whereby domestic operations, as previously stated in question 1.6. it is charged by 23 Provinces and the City of Buenos Aires; each one has its own regulations and percentages for Stamp Duty. 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests In general, there are no specific exemptions for aircraft in a single engine are at risk of automatic transfer or trading operations, unless a Bilateral Treaty to avoid double other prejudice when installed ‘on-wing’ on an aircraft taxation provides such an exemption. owned by another party? If so, what are the conditions Provincial regulations also state that any agreements to such title annexation and can owners and financiers concluded outside Argentina are subject to the tax if they of engines take pre-emptive steps to mitigate the risks? “have effects” in the provincial jurisdiction. In this sense, the Fiscal Code of the City of Buenos Aires Chapter IV of the AAC lists the contracts, mortgages, attachments, (Decree No. 59/18, consolidated text), states that: “Acts precautionary measures, privileges, temporary registrations, and performed abroad: Section 429. In all cases, acts performed in general any and all acts relating to the legal status of aircraft, abroad shall be subject to the tax in accordance with the including engines. This Register is public. provisions of this law while having effects in the jurisdiction of the City of Buenos Aires.” The Fiscal Code of the Given that contracts evidencing ownership or a in a Province of Buenos Aires (Law No. 10397) includes a similar single engine are included in the contracts that are registered in the provision: “Section 255. In all cases, acts performed abroad Argentine Aircraft Registry, those contracts establish the capacity shall be subject to the tax in accordance with the requirements of the lessee or acquirer of an aircraft to install a different engine of this Title, while having effects in the jurisdiction of the than the one originally provided with the aircraft. Substitution Province.” of an engine for another one is registered in the Register; owners and financiers thus keep the legal status of the engine originally 2.6 Is your jurisdiction a signatory to the main registered until the original one is replaced. international Conventions (Montreal, Geneva and Chapter IV mentioned above is regulated by Executive Decree No. Cape Town)? 4907/73 which establishes the procedures for obtaining aircraft registration certificates and sets forth the formalities to be fulfilled Argentina is a signatory state to the main international Conventions: in order to register the various acts or contracts in the Register. ■ Decree-Law No. 15110/46 and Law No. 13,891 and 25,622 Resolution No. 2/2005 clarifies that engines may be registered (ratification of the 1944 Chicago Convention). individually, as long as the documents meet the requirements stipulated

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■ Law No. 22028, 23399 and 23519 (ratification of the 1977, ■ Law No. 23911 (New Zealand); 1984 and 1980 Montreal amendments to the Chicago ■ Law No. 17103 (Paraguay); Convention). ■ Law No. 25833 (the United Kingdom); ■ Law No. 14111 (ratification of the 1929 Warsaw Convention). ■ Law No. 26188 (China); ■ Law No. 17386 (ratification of the 1955 Hague Protocol). ■ Law No. 25025 (Singapore); ■ Law No. 23556 (ratification of the 1975 Montreal Protocols ■ Law No. 24237 (Sweden); modifying the Warsaw and the Hague Conventions). ■ Law No. 16748 (Switzerland); ■ Decree-Law No. 12359/57 (ratification of the 1948 Geneva Convention on the International Recognition of Rights in ■ Law No. 26450 (Panama); Aircraft). ■ Law No. 26677 (Ecuador);

Argentina ■ Law No. 17404 (ratification of the 1952 Rome Convention on ■ Law No. 26954 (Qatar); Damage Caused by Foreign Aircraft to Third Parties on the ■ Law No. 26956 (Turkey); Surface). ■ Law No. 26957 (Indonesia); and ■ Decree-Law No. 18730/70 (ratification of the 1963 Tokyo Convention on Offences and Certain Other Acts Committed ■ Law No. 27178 (the United Arab Emirates). on Board Aircraft). ■ Law No. 19793 (ratification of the 1970 Hague Convention 2.7 How are the Conventions applied in your jurisdiction? for the Suppression of Unlawful Seizure of Aircraft). ■ Law No. 20411 (ratification of the 1971 Montreal Convention A Convention enters into force after its approval by the Argentine for the Suppression of Unlawful Acts against the Safety of Congress and the deposit of the instrument in the country appointed Civil Aviation). as depository by the Convention. ■ Law No. 23111 (ratification of the 1933 Rome Convention According to the Argentine Constitution, international treaties for the Unification of Certain Rules on Precautionary Arrest of Aircraft). supersede local laws and regulations. ■ Law No. 23915 (ratification of the 1971 Tokyo Protocol for the Suppression of Unlawful Acts of Violence at Airports 2.8 Does your jurisdiction make use of any taxation Serving International Civil Aviation). benefits which enhance aircraft trading and leasing ■ Law No. 25806 (sub-regional agreement with Bolivia, Brazil, (either in-bound or out-bound leasing), for example Chile, Paraguay, Peru and Uruguay (Fortaleza Agreement) access to an extensive network of Double Tax Treaties for the exchange of traffic rights on routes outside the or similar, or favourable tax treatment on the disposal of aircraft? scope of the bilateral air services agreements between those countries). As regards taxation benefits for the trading of aircraft, it must be ■ Law No. 26451 (the Convention for the Unification of Certain Rules for International Carriage by Air signed at Montreal on first considered whether revenue derived from the transactions 28 May 1999). will be earned by an international transport company or by other ■ Law No. 14457 (ratification of the 1948 Geneva Convention individuals. on the International Recognition of Rights in Aircraft). If it is an international transport company, any potential revenue ■ Law No. 27357 (ratification of the Convention on International derived from the trading of aircraft is exempt from Argentine Taxes Interests in Mobile Equipment and its Protocol signed at when the company belongs to Belgium, Brazil, China, Colombia, Cape Town, South Africa, on November 2001). Cuba, Ecuador, Greece, Iran, Israel, Japan, Luxembourg, Malaysia, ■ Law No. 19865 (ratification of the Vienna Convention on the the Netherlands, Norway, Panama, Paraguay, Peru, Poland, Portugal, Law of Treaties). Spain, United Kingdom, United States, Uruguay and Venezuela. Argentina has also signed bilateral agreements on air transport This is because Argentina has signed treaties with those countries services with different countries: to avoid double taxation on international transport transactions and, as such, the country has recognised the exemption of Argentine ■ Law No. 23339 (Germany); Taxes for revenue that may be earned by an international transport ■ Law No. 17988 (Bolivia); company as a result of transactions carried out in Argentina. ■ Law No. 13920 (Brazil); If the operation generates revenue for a foreign individual that is not ■ Law No. 23453 (Canada); an international transport company, application of Argentine taxes ■ Law No. 25834 (Korea); to such revenue will depend on whether it is covered by the general ■ Law No. 25836 (the Netherlands); treaties to avoid the double taxation which Argentina has signed ■ Law No. 23970 (Denmark); with: Australia; Belgium; Bolivia; Brazil; Canada; Chile; Denmark; Finland; France; Germany; Italy; Mexico; the Netherlands; Norway; ■ Law No. 23426 (United States); Russia; Spain; Sweden; Switzerland; United Kingdom; United ■ Decree-Law No. 35544 (Spain); States; and Uruguay. ■ Decree-Law No. 431/63 (Switzerland); ■ Law No. 23558 (France); ■ Law No. 25805 (Russia); 3 Litigation and Dispute Resolution ■ Law No. 13913 (Italy); ■ Law No. 25397 (Malaysia); 3.1 What rights of detention are available in relation to ■ Law No. 22912 (Mexico); aircraft and unpaid debts? ■ Law No. 25621 (Mexico); Argentina is a Party to the 1933 Rome Convention for the Unification ■ Law No. 23969 (Norway); of Certain Rules on Precautionary Arrest of Aircraft, and its provisions,

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as with all international treaties signed by Argentina, supersede local laws and regulations according to the Constitution. 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For Further, Section 71 of the AAC sets forth that all aircraft are subject example, is there a distinction in your jurisdiction to attachment except for public aircraft. Section 37 of the AAC regarding the courts in which civil and criminal cases establishes that public aircraft are those that are at the service of are brought? public authorities (such as aircraft used by public authorities for military, police and customs activities). Section 198 of the AAC sets forth that Federal Courts, including the In order to attach an aircraft, the court order must be registered in the Supreme Court of Argentina, have jurisdiction to hear and decide Argentine Aircraft Register and may be implemented on the basis in cases relating to air navigation or commercial aviation in general of the dates on which the attachment was registered (Section 72 of and any offences occurring therein. the AAC). Further, Section 199 of the AAC establishes that any events or acts Argentina Section 73 of the AAC lists the cases in which the attachment or offences taking place in Argentine territory or its jurisdictional produces the immobilisation of the aircraft, as follows: waters have to be decided by Argentine Federal courts and in the 1. when the attachment is ordered by a court decision; legal framework of Argentine laws and regulations. Section 200 establishes the same jurisdiction and applicability of the Argentine 2. when the attachment is based on an unpaid loan obtained to perform the flight even if the aircraft is ready to take off; or legal system if the events, acts or offences have been committed against an Argentine legitimate interest, either of the Argentine 3. when the attachment originates in an unpaid loan of the seller State or of individuals domiciled in Argentina or on board of an of the aircraft for breach of any provisions of the sales contract, or for non-compliance of any instalments of a lease contract Argentine registered aircraft, even if those events, acts or offences registered in the Aircraft Register with provisional registration have occurred over foreign territory or in the event that the first in accordance with Sections 42 and 43 of the AAC. landing took place in Argentina. Section 200 of the AAC sets forth that when an event, act or offence 3.2 Is there a regime of self-help available to a lessor is committed on board a private foreign aircraft, jurisdiction of or a financier of an aircraft if it needs to reacquire Argentine courts and application of shall correspond possession of the aircraft or enforce any of its rights if such event, act or offence: under the lease/finance agreement? A) violates Argentine security or military or tax regulations; B) violates air navigation regulations; Based on the fact that Argentina is ruled by Continental Law, it does C) jeopardises safety or public order, or affects the interests of not provide a self-help regime for a lessor or financier to reacquire the State or of the persons domiciled in Argentina; or possession of an aircraft or enforce any of their rights under the D) the first landing took place in Argentine territory. lease/finance agreement. In other words, all the cases to which the Warsaw Convention If the lessee does not voluntarily return the aircraft to the lessor upon System is applicable are tried by Federal Courts. non-compliance with the terms of the lease/finance agreement, the lessor must request repossession of the aircraft to the courts in the Jurisdiction stipulated in the agreement. If the agreed jurisdiction to 3.4 What service requirements apply for the service of request repossession of an aircraft is a country other than Argentina, court proceedings, and do these differ for domestic once the court decision is obtained, the lessor/financier must request airlines/parties and non-domestic airlines/parties? the execution of the foreign country decision to an Argentine court, which will request the plaintiff to firstly comply with certain The service of documents relating to court proceedings is regulated formalities such as: the foreign decision must be apostilled under by the Argentine Procedural Code. The general regime is that the the Rules of the 1960 Hague Convention; or consularised by the parties to a trial must establish a legal domicile for the service of nearest Argentine Consulate in the jurisdiction of the court that has process within the area of jurisdiction of the court (Section 40), taken the decision. regardless of the “real” domicile of the company/individual. For that reason, the service of documents is effected in the legal domicile The court procedure to enforce a foreign judgment in Argentina is where lawyers are domiciled. Nevertheless, it should be noted that regulated by the Procedural Code, which states that the Argentine the general rule is that court orders are considered to be served on State must recognise a foreign sentence if the movable goods certain days (Tuesday and Friday), and the service of documents to involved were located in that foreign country at the beginning of the the legal domicile is only effected in cases which the law considers corresponding trial (Section 517). In such cases, the Argentine court relevant (Article 133). will require that the foreign sentence does not affect the public order principle and that the defendant is able to exercise his/her rights; the In addition, it must be said that in the last few years the Supreme Argentine court may also require a guarantee for the compliance of Court has implemented the electronic notification system (Judicial its decision. Decree No. 38/2013) that nowadays has partly replaced the service of documents to the legal domicile registered with the court by the Notwithstanding this, both Customs regulations and the Argentine lawyers of each party. Aircraft Register require the approval of the lessee to allow Customs and the Aircraft Register to re-export and deregister the aircraft so that The preceding considerations apply to both domestic and non- the lessor may repossess the aircraft. Otherwise, the lessor must file domestic airlines. In fact, as the regulations state that non-domestic a request with a court to provide the evidence of breach of the terms airlines must establish a local branch of the foreign company, they of the agreement by lessee to obtain the repossession of the aircraft. also have a valid address in the country for legal purposes.

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3.5 What types of remedy are available from the courts 4.2 How do the competition authorities in your or arbitral tribunals in your jurisdiction, both on i) an jurisdiction determine the ‘relevant market’ for the interim basis, and ii) a final basis? purposes of mergers and acquisitions?

The remedies available from Argentine courts are as follows: The authority that determines the “relevant market” for the purposes i) On an interim basis and in the context of a judicial process, of mergers and acquisitions is the National Antitrust Commission. precautionary measures may be applied for in order to prevent Mergers and acquisitions must be notified to this Commission. Law further damages. The requirements for their granting by the No. 25,156 introduces a preventive control that aims at avoiding courts are that: 1) there is a high probability that the petitioner the abnormal operation of the market. A commercial operation is has reason in his/her claim; 2) there is a high risk of damages considered to be detrimental to the general public when a bidder Argentina if the measures required are not taken; and 3) a guarantee has gains control of the market. Law No. 25,156 aims to prevent the to be offered in the case that the claim is eventually rejected. irreversible effects that an economic concentration of corporations ii) On a final basis, a legal process must be initiated and obtain might have on competition and the results that such a concentration a judicial decision for the case. The type of process depends might produce. on whether the claims are brought against the State or other private citizens. If claims are brought against the State, the process may begin 4.3 Does your jurisdiction have a notification system with an administrative dispute against the corresponding whereby parties to an agreement can obtain administrative authority and, once it is finished, it may be regulatory clearance/anti-trust immunity from subject to judicial revision. regulatory agencies? If the claim is brought against a private citizen, the legal process is basically a law suit against the individual, and it develops Yes, Argentine laws and regulations provide for a system by which before the judicial courts in its entirety. It must be noted that, the Fair Trading Authority can issue a permission to the parties before a law suit is commenced, it is mandatory to comply with for making certain agreements that can have harmful effects on a previous process according to Law No. 26.589. commercial competence (Section 29, Law No. 27442). As regards mergers, the system provides for mandatory notification 3.6 Are there any rights of appeal to the courts from the to the Fair Trading Authority when the whole business volume decision of a court or arbitral tribunal and, if so, in of the companies involved is higher than AR$ 2,000,000,000 what circumstances do these rights arise? (approximately, US$ 50,000,000); then the authority must decide whether or not the merger will have harmful effects on commercial The Argentine Legal System provides for the right to appeal a first competence (Sections 9 and 14, Law No. 27442). decision and get a revision from a judicial tribunal. In respect of civil proceedings, the second hearing principle applies, 4.4 How does your jurisdiction approach mergers, whereby every judgment entered by a court can be reviewed by a acquisition mergers and full-function joint ventures? higher court. In the case of administrative proceedings, the Argentine legal Argentine laws and regulations classify mergers as follows: 1) system applies the specific principle that every decision taken by merger of companies; 2) transfer of the pool of assets of a company; an administrative authority can be reviewed by a judicial tribunal. 3) acquisition of shares or any other type of interest granting the It must be noted that, in the case of fines, this review sometimes is right to vote; and 4) any other agreement that implies the transfer conditioned to prior payment. of the pool of assets or the granting of a decisive influence of one company over another (Section 7, Law No. 27442). Please see also question 4.1. 4 Commercial and Regulatory

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

Although there is no specific reference to joint ventures in the As regards mergers, the procedure that begins with the notice to the Argentine aeronautical legislation, we understand that the following Fair Trading Authority should not take more than two months. If section is applicable to this kind of agreement. the authority finds that the merger can be harmful to commercial competence, the parties shall be summoned to a special hearing to Section 110 of the AAC sets forth that any agreements for the evaluate any measures that could mitigate the negative impact of the pooling, connection, consolidation or merger of services or business merger, in which case the procedure may be extended to at least six transactions must be submitted to the Aeronautical Authority for more months (Section 14, Law No. 27442). approval. If the Aeronautical Authority does not object to the agreements within 90 days, the agreement is considered approved. Regarding uncompetitive agreements between companies, in these cases the Fair Trading Authority starts an investigation stage which Code share agreements were afterwards included in this section by length depends on the amount of informative measures taken by the means of Executive Decree No. 1401/98. authority. In any case, the regulations establish a maximum of nine In other words, if a joint venture agreement is signed between months for the authority to end this investigation stage and begin airlines, it is our understanding that the petition for approval must the accusatory stage, during which the parties assume their . be filed with ANAC. This stage might take another seven months until the authority If ANAC considers that the file should be reviewed by the Fair delivers its resolution imposing a fine (Sections 34 to 43, Law No. Trading Authority (Agencia de Defensa de la Competencia), it will 27442). Please see also question 4.1. submit it to this agency for review.

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4.6 Are there any sector-specific rules which govern the 4.10 What are the mechanisms available for the protection aviation sector in relation to financial support for air of intellectual property (e.g. trademarks) and other operators and airports, including (without limitation) assets and data of a proprietary nature? state aid? Law No. 11723 on Intellectual Property establishes different aspects Yes. There are sector-specific rules that govern financial support to related to the protection of intellectual property: individual companies by the Government, namely Section 138 of ■ There is no need to register a creation because intellectual the AAC and Section 6 of Law No. 19030. There are also several property is protected since the moment of its creation. State aid regulations that support the aviation sector in fuel and fare- ■ The use of works without the author’s permit is punishable by related matters. law with imprisonment. Argentina In the case of trademarks rights, these are acquired through 4.7 Are state subsidies available in respect of particular registration with the Industrial Property Office. Unregistered routes? What criteria apply to obtaining these trademarks are protected exceptionally in cases of bad faith subsidies? (from a third party who knowingly registered or used someone else’s trademark). Trademarks are granted for 10 years from the Yes. According to Section 138 of the AAC and Section 44 of Law registration date and can be indefinite, subject to use. Registrations No. 19030, the Argentine government can subsidise air transport can be cancelled on the grounds of non-use for more than five years. services or determine special fares for routes that are of general interest for Argentina. The Argentine government will determine the requirements that should be accomplished to obtain these subsidies. 4.11 Is there any legislation governing the denial of boarding rights and/or cancelled flights?

4.8 What are the main regulatory instruments governing Yes. Law No. 1532/98 by the Ministry of Economy, Public Works the acquisition, retention and use of passenger data, and Services establishes passenger protection rules regarding the and what rights do passengers have in respect of denial of boarding, cancellations and delays. their data which is held by airlines and airports? In effect, Section 12 of Appendix I establishes that a passenger has the In Argentina, the comprehensive protection of personal data contained right: 1) to board the next flight to the original destination; 2) to obtain in files, registries or databases are regulated by Laws No. 25326 and an endorsement of his contract; or 3) to board any other flight by way 27275. These pieces of legislation establish the following items: of rerouting. It is established that if the passenger accepts one of these options, on the one hand, the carrier must provide him with all the ■ the treatment of personal data is considered legal when its holder has given its consent for such treatment; services until the flight ends (telephone calls, snacks and beverages, hotel accommodation, transportation) and, on the other hand, the ■ the creation of databases is deemed legal when its holder passenger will not be entitled to make further claims to the carrier. has been duly registered in the Agency of Access to Public Information. In this sense, air carriers must comply with this The preceding considerations may be summed up in the proper registration; definition of “incidental services”, which the mentioned decree ■ the personal data is saved in such a manner that its holder defines as follows: “refers to any service rendered by carrier on could eventually exercise the right to access, rectification, account of unforeseen contingencies or force majeure, which derive update and suppression; and in passenger’s rerouting, changes in route or schedule or any other ■ the persons involved in the treatment of personal data must circumstances whose cost must be borne by the carrier.” comply with the duty of professional secrecy. The Agency of Access to Public Information considers that an air 4.12 What powers do the relevant authorities have in carrier which complies with the General Data Protection Regulation relation to the late arrival and departure of flights? of the European Union ensures the standards accepted by the Argentine laws on personal data. According to Article 24, subparagraph 8 of Executive Decree No. 326/82 the authorities can apply fines to the infringer company. 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the 4.13 Are the airport authorities governed by particular data and are there any applicable sanctions? legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? Law No. 25326 establishes the obligations to be complied with by the holder of the data bank. Section 9 states that the responsible According to the AAC, a manager must be appointed in all public person or the user of the database must take all necessary technical airports, who will be the highest authority regarding airport and organisational measures to avoid the loss of personal data. coordination, directives and internal regime, and who must be Additionally, it is also forbidden to register personal data in files, elected by the Aeronautical Authority. The requirements to be an registers or data banks that do not satisfy the technical conditions of airport will be established by further rules (Section 88 of the AAC). integrity and security. The Aeronautical Authority will establish the rights and obligations The Agency of Access to Public Information is the agency of the airport manager (Section 89 of the AAC). The authority that responsible for overseeing compliance with Law No. 25326. controls the Argentine Airport National System is ORSNA. This As regards penalties, Section 31 establishes that in case of non- agency issued Resolution No. 96 that establishes the General Rules of compliance, the aforementioned Agency is able to apply different the Use and Operation of the National Airport System (Reglamento penalties such as warning, suspension or a fine varying from AR$ General de Uso y Funcionamiento de los Aeropuertos del Sistema 1,000 to AR$ 100,000. Criminal penalties could also be applied.

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Nacional de Aeropuertos). Broadly speaking, the obligations of the that, in this hypothetical case, the Fair Trading Authority must airport authorities are the following: request the opinion of ANAC and eventually resort to the ORSNA, ■ Non-discrimination in the use of the airport. even though its opinion is not binding (Section 17 of Law 27,442). ■ Environmental protection. ■ Coordinate the operation of the airport and make it compatible 4.18 Are there any nationality requirements for entities with the surrounding community. applying for an Air Operator’s Certificate in your ■ Take the necessary measures to adapt the airport for complying jurisdiction or operators of aircraft generally into and out of your jurisdiction? with the laws applicable to individuals with reduced mobility. ■ Issue, execute and constantly update the Emergency Plan. Please see question 1.2. ■ Take the necessary measures and ensure the safety of air Argentina operations. ■ Comply with International signage regulations pertaining to 5 In Future the information to users. ■ Take the necessary measures for the safety of individuals and property at the airport. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments ■ Provide medical services. affecting the aviation industry more generally in Concessionaires must appoint a manager and the your jurisdiction, are likely to feature or be worthy of appoints another one. attention in the next two years or so?

The AAC that rules the aviation industry was issued on 23 May 4.14 To what extent does general consumer protection 1967 by means of Law No. 17285, and afterwards amended by legislation apply to the relationship between the airport operator and the passenger? Law No. 22390. In 1982, the Code was implemented by Executive Decree No. 326. Even when the AAC regulates airports and airfields, users may invoke In view of the changes that took place in the industry, it is clear that a consumer relationship between users and airport operators. Users many modifications have to be made. It is important to mention base this concept on Law 24,240 on Consumer Rights’ Protection. that the Code is a piece of art since it was able to cover the changes, particularly as regards Section 2 which establishes that if a matter is not ruled by the Code it should be solved with regard to the general 4.15 What global distribution suppliers (GDSs) operate in principles of aviation law or custom and usage in the aviation your jurisdiction? industry; if the matter cannot still be solved, then similar laws or the general principles of the law should be applied, taking into account Only Amadeus and Sabre operate in Argentina. the circumstances of the case. Nevertheless, the Code should be modernised along with Executive 4.16 Are there any ownership requirements pertaining to Decree No. 326/82 that interprets it. A good number of sections of GDSs operating in your jurisdiction? Decree No. 326/82 have already been deleted. It is necessary to consolidate aviation laws and regulations. There are no specific regulations in Argentina applicable to GDS ownership requirements. Amadeus operates as an Argentine Another matter that must be taken into account is that in order corporation named Amadeus Argentina SA and Sabre is an Argentine to implement the “open skies” in Argentina, it is of paramount branch of Sabre International LLC. importance to provide adequate infrastructure, not only with airports but also to install radars and new equipment in the country. The fact that Argentina has ratified the Cape Town Convention and 4.17 Is vertical integration permitted between air operators its Protocol by means of Law No. 27357 issued on 5 May 2017 and airports (and, if so, under what conditions)? and in force since 1 August 2018, has forced the Argentine Aircraft Register to adapt its rules to the new environment. There are no specific regulations in relation to vertical integration between air operators and airports. Nonetheless, it must be noted

40 WWW.ICLG.COM ICLG TO: AVIATION LAW 2019 Freidenberg, Freidenberg & Lifsic Argentina

Elizabeth Mireya Freidenberg Freidenberg, Freidenberg & Lifsic 25 de Mayo 611, 3rd Floor, Office 3 Block II (1002ABM) Buenos Aires Argentina

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

Elizabeth Mireya Freidenberg is a graduate of the School of Law and Argentina Social Sciences of the University of Buenos Aires and a Masters in Air Law of I.N.D.A.E. She has concentrated her practice in aviation law as a managing partner of Freidenberg, Freidenberg & Lifsic Law Firm. Ms. Freidenberg provides comprehensive advice on commercial aviation for Argentina in regulatory, contentious, insurance, tax finance, labour, immigration, customs, aircraft, airport and interline contracts. She was selected as an expert in aviation law by Euromoney Legal Media Group’s Guide to the World’s Leading Aviation Lawyers, and expert in aeronautic law by the Guide American Lawyer Med and The International Who’s Who of Business Lawyers. She was appointed as one of the 50 “Leading Women Entrepreneurs of the World” by the Star Group (US). IATA has nominated her as arbitrator in several arbitrages started by travel agents. She worked as a scholar of the Instituto de Cultura Hispánica in the Law Department in Madrid. She has lectured on aviation law at the University of Buenos Aires Law School and is a regular speaker at international conferences on aviation such as those organised by: Lloyd’s of London Press; Embry Riddle University; IATA Legal Symposium; Aviation Law Association of Australia and New Zealand; Copa Legal Symposium; ALA (Asociación Líneas Aéreas de Costa Rica); Bar Association of , Uruguay; Sociedad Brasilera de Direito Aeronáutico, Brazil; Southern Methodist University, USA; and LUISS University Rome, Italy. The International Aviation Women Association granted Mrs. Freidenberg “The Woman of Excellence Award”. The Argentine Institute of Air and Space Law granted Mrs. Freidenberg the Professor of Excellence Award. She is “Member of the Honorary Board” of the International Aviation Women Association. She is a Judge at the Leyden University / Sarin Foundation Air Law International and a member of the International Academy of Trial Lawyers.

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

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Austria Dr. David Kubes

Kubes Passeyrer Attorneys at Law Mag. Tina Vollmann

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

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

2.1 Does registration of ownership in the aircraft register In general, airports do not impose specific requirements on carriers. constitute proof of ownership? Requirements for specific Austrian airports are imposed by federal law and concern the impact of noise emissions on the environment. No, the Austrian aircraft register is only a federal register and does In addition, some airports, such as Innsbruck (INN) in Tyrol, require not constitute proof of ownership. special crew training of the pilots due to the location of the airport in the Alps and a difficult landing procedure. Austria Airports mostly grant a reduction of their fares and handling 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the tariffs to new operators commencing operations at the airport. operation of this register? Such “welcome packages” depend on the type of aircraft and the frequency of the intended new service. An aircraft mortgage register does not exist under Austrian law. The aircraft register is only a federal register where the operator and all 1.9 What legislative and/or regulatory regime applies to relevant operational issues are registered. It is not possible to register air accidents? For example, are there any particular mortgages, unpaid charges or other legal interest in respect of aircraft. rules, regulations, systems and procedures in place which need to be adhered to? 2.3 Are there any particular regulatory requirements Austria has established the Federal Accident Investigation Agency, which a lessor or a financier needs to be aware of as regards aircraft operation? an agency reporting to the Ministry of Transport. Air accidents are handled pursuant to the Austrian Accident Investigation Act Lessors and financiers need to be aware that no mortgage register (Unfalluntersuchungsgesetz – UUG) and EU Regulations No. 56/9 exists in Austria and that neither the lessor nor the owner or financier and No. 996/2010. The duty of the Federal Accident Investigation of an aircraft can be registered in the aircraft register. Agency is to find out the cause of the accident and to publish such cause in its final investigation report. Such report shall be published no later than one year after the accident. 2.4 As a matter of local law, is there any concept of title In addition, an accident causing personal damage or the death of annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer a person will always be investigated by the Austrian prosecution or other prejudice when installed ‘on-wing’ on an department in accordance with the Austrian Criminal Act. aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to 1.10 Have there been any recent cases of note or other mitigate the risks? notable developments in your jurisdiction involving air operators and/or airports? Under Austrian law, an “automatic” annexation of a moveable property Yes, there have been two decisions by the Austrian due to “installation” on another item can only occur if such item recently that will have an impact on air operators. cannot be detached or removed without destroying it. An engine can easily be attached and detached without being damaged or destroyed. 1. Compensation for delays: an Austrian court was the initiator of the decision of the European Court of Justice (04.09.2014 Therefore, the installation does not lead to a title annexation. – C-452/13) regarding the decisive moment of a delayed flight in respect of the time of a delay. According tothe 2.5 What (if any) are the tax implications in your court, a flight does not end on its “touch-down” or “block- jurisdiction for aircraft trading as regards a) value- on” time; the time when the doors are opened for de-boarding added tax (VAT) and/or goods and services tax (GST), is the relevant moment. This decision will now bring quite and b) documentary taxes such as stamp duty; and a lot of confusion to airlines in respect of EC Regulation (to the extent applicable) do exemptions exist as No. 261/2004, and in respect of compensation payments: regards non-domestic purchasers and sellers of pursuant to the EC Regulation, passengers are entitled to aircraft and/or particular aircraft types or operations? cash compensation in the amount of €250.00 to €600.00 if a flight is delayed by more than two or three hours. This delay In Austria all traded goods and services are subject to 20% VAT. has always been based on the published “block-off” and “block-on” times; if the “block-on” time is 1:58 hours after Aircraft bought by or imported by airlines are exempt from VAT. “block-off”, the determination of the time when the doors Therefore, a purchase of an aircraft by an airline who provides were opened will decide on the payment of compensation to international air transport, is not subject to VAT. According to passengers, but will be difficult to evidence. section 9 of the Austrian Value Added Tax Act (UStG), not only 2. Sale of round-trip tickets: in February 2013, the Austrian the purchase but also the reconstruction, repairs, maintenance, Supreme Court decided that both legs of a round-trip ticket chartering and the lease of an aircraft, which is used by such airline, can be used without any additional payments, even if one leg is exempt from VAT. was not used. All round-trip tickets include the rule that the In the case of a non-airline purchasing an aircraft, the VAT can legs must be flown as shown and that the return leg will be cancelled if the outbound flight was not used. This clause be refunded if the purchaser is a VAT-registered business. It is was declared null and void by the Austrian Supreme Court. normally refunded within three months or VAT-free in case of an This will now have an impact on standard air carriers selling inter-European sale if the seller has a valid VAT registration number special round-trip fares much cheaper than one-way tickets. within the European Community.

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The purchase of an aircraft is not subject to a stamp duty. Only In respect of fees in connection with the operation of the aircraft aircraft lease agreements are. The stamp duty amounts to 1% of the Basically, the party liable to pay all relevant operational charges is total of the accumulated three-year rent (if the lease is unlimited) or the operator of the aircraft, therefore the airline. Only in the event to 1% of the total accumulated rent if the lease has a limited term. where the identity of the aircraft’s operator is unknown and the owner fails to prove that another party is the operator of the aircraft 2.6 Is your jurisdiction a signatory to the main will the owner of the aircraft be deemed to be the operator and liable international Conventions (Montreal, Geneva and to pay these charges. In the case of non-payment, Austro Control or Cape Town)? the Austrian airports would have to file an action against the operator with the competent courts. A judgment could be enforced against

Austria The Montreal Convention was ratified by Austria in 2004. Austria all properties of the operator and a lien will be attached to all assets. has also ratified the Geneva Conventions. Austria has not yet ratified Please note that such lien may only be created with respect to assets the Cape Town Convention or the Rome Convention. owned by the debtor against whom the judgment has been rendered, and that any contractual lien which was created prior to such court order will rank ahead. Since a leased aircraft is not owned by the 2.7 How are the Conventions applied in your jurisdiction? airline, it cannot be subjected to such liens deriving out of unpaid airport or air traffic charges. In any event, it is not possible to detain The Montreal Convention is directly applied without any additional an aircraft for unpaid air navigation charges. The laws of Austria national act. It has the same status as an Austrian act and priority do not provide for any liability of the aircraft for the crew’s wages over the Austrian Aviation Act. or for salvage.

2.8 Does your jurisdiction make use of any taxation 3.2 Is there a regime of self-help available to a lessor benefits which enhance aircraft trading and leasing or a financier of an aircraft if it needs to reacquire (either in-bound or out-bound leasing), for example possession of the aircraft or enforce any of its rights access to an extensive network of Double Tax Treaties under the lease/finance agreement? or similar, or favourable tax treatment on the disposal of aircraft? Under Austrian law, the owner of an aircraft can obtain access to his property in case of a default under the mutual agreements entered The only tax benefit for aircraft leasing is an exemption of VAT if into. the lessee is an operating airline with a valid Air Operator Certificate issued by the Austro Control GmbH. Austro Control GmbH does not require the consent of the operator in order to deregister an aircraft from the aircraft register. Therefore, a deregistration is possible upon the owner’s request, without the 3 Litigation and Dispute Resolution operator’s consent. In the case of the realisation of a pledge granted over an aircraft, 3.1 What rights of detention are available in relation to the standard court proceedings need to be observed; it is possible aircraft and unpaid debts? to agree on a free sale in the pledge agreement under certain circumstances and provisions. Rights of detention in an aircraft may exist with respect to claims In the case of insolvency, special rules apply pursuant to which an for compensation arising out of work carried out on, expenses made airline being bankrupt may be granted a 90-day period in order to with respect to, or damages caused by, an aircraft (section 471 of determine whether to return a leased aircraft or continue the lease. the Civil Code (ABGB) or section 369 of the Commercial Code During these 90 days, return of the aircraft is blocked. (UGB)). Such a right of detention only exists between the creditor and the debtor; however, generally not between the creditor and 3.3 Which courts are appropriate for aviation disputes? third parties. With respect to the aircraft, this means the following: Does this depend on the value of the dispute? For The aircraft is owned by the owner but operated by the airline. example, is there a distinction in your jurisdiction Therefore, the creditor will not acquire a right of detention against regarding the courts in which civil and criminal cases the owner or the lessor or a security agent, if the debt is incurred by are brought? the airline. In general, only the operator is party to the maintenance contract. However, the Austrian Supreme Court had stated in a In Austria, civil matters and criminal matters are handled by different decision in 1996 that a creditor may acquire a right of detention courts. For civil matters, the competent court for disputes depends against the owner of a leased asset if he has agreed and the lessee on (i) the value of the claim, (ii) whether the content of the claim is has undertaken to carry out the respective repair work in the lease “private” or “commercial”, and (iii) the principal place of business contract. The Supreme Court stated that the lessee’s responsibility of the defendant. In general, an aviation dispute is a commercial to carry out the maintenance could be deemed as an authorisation to dispute and therefore the following courts would be competent: conclude such contracts on his behalf and that, therefore, the owner ■ In 2015: a district court for claims of a value up to a total would become liable to pay the costs. The Austrian Supreme Court amount of €20,000.00; or the competent regional court for further stated that by repairing the aircraft, the owner is also released claims of a higher value. from a duty and the value of the aircraft increases. Therefore, such ■ In 2016: a district court for claims of a value up to a total claim against the owners may be justified. However, such claim amount of €25,000.00; or the competent regional court for is only possible if the main contract partner of the maintenance claims of a higher value. agreement is in default under the maintenance contract. A direct claim against the owner of an aircraft is not possible, since contractual agreements have priority.

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3.4 What service requirements apply for the service of 4 Commercial and Regulatory court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties? 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? Interim remedies: under Austrian law, the instrument of injunction exists for interim remedies. When filing an injunction, an immediate In Austria, joint ventures between airline competitors are subject direct damage, and the fact that standard court procedures would fail to the general principles and regulations in respect of unfair to avoid such damage or its enforcement, must be proven in order to competition and merger control. Such joint ventures will therefore be successful. Injunctions are released for a specific period of time be qualified according to EU Regulation No. 411/2004 and the and must be followed by a standard claim where the entire matter Austria Austrian Act Against Unfair Competition (UWG). will be looked at in detail. Injunctions have very short terms, both for the court to react and for the defendant to submit a reply (in Applications must be filed with the Austrian Independent Federal general, 14 days). Injunctions do not comprise a detailed procedure Competition Agency (Bundeswettbewerbsbehörde – “Antitrust of proof; this is based on the attestation of a possible damage that Agency”). requires immediate action. Standard legal proceedings require the filing of a claim, and the 4.2 How do the competition authorities in your payment of an initial court fee which will depend on the value of jurisdiction determine the ‘relevant market’ for the the claim and will amount to around 1.5% of the claim. Before purposes of mergers and acquisitions? starting legal proceedings, the written claim is sent to the defendant, who is given a four-week period to file a statement of reply. After In respect of air carriers, the “relevant market” is determined by: having received such statement, the court arranges a first hearing. In ■ the relevant routes flown; general, such first hearing takes place three to four months after the ■ the type of aircraft used; and filing of the claim. The average time taken within legal proceedings ■ the frequency with which such routes are flown. to obtain the first judgment is 15 months. In addition, the geographical radius of the departure and landing Furthermore, the parties in a lawsuit are entitled to reimbursement airport is taken into consideration: for regional airports the radius of their legal fees by the defeated party. The legal fees that must be is about 100 kilometres; for international airports, 300 kilometres. reimbursed are limited by the official tariffs of the Austrian Act on Lawyer’s Fees (RATG), and also depend on the value of the claim. 4.3 Does your jurisdiction have a notification system For arbitral proceedings, Austrian law also provides for special whereby parties to an agreement can obtain interim remedies in order to secure the enforcement of a claim. regulatory clearance/anti-trust immunity from regulatory agencies? 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an Pursuant to the antitrust regulations under Austrian law, the parties interim basis, and ii) a final basis? to an agreement have to determine whether its content is subject to approval by the antitrust authorities. A specific system pursuant Under Austrian law, an appeal can be filed against any kind of to which an agency decides or declares whether an agreement is judgment. For “small claims” (of a value lower than €2,700.00), subject to approval or not, does not exist. certain restrictions apply. However, the Austrian antitrust authorities offer to discuss merger The respective court of appeal will render its decision based on the projects prior to their implementation in order to share the view of facts determined by the court of first instance. Under Austrian law, the authority with the parties. the submission of additional evidence is prohibited. A further appeal to the Austrian Supreme Court can be filed against 4.4 How does your jurisdiction approach mergers, the decision of the court of appeal, if the matter has not yet been acquisition mergers and full-function joint ventures? decided by the Austrian Supreme Court or if the matter decided may have general legal consequences and contains legal matters going Under Austrian law, mergers, acquisition mergers and full function beyond the specific case being decided. joint ventures are subject to Austrian antitrust law, specifically the Cartel Act 2013. 3.6 Are there any rights of appeal to the courts from the In general, an acquisition of more than 25% of a competitor, or the decision of a court or arbitral tribunal and, if so, in takeover of its control, is subject to the merger control provisions what circumstances do these rights arise? if the involved parties have more than a 10% market control of the relevant market. This means that the intended merger or acquisition A standard appeal against arbitral awards is not possible under must be registered with the Antitrust Agency. Austrian law. The only exceptions are if the matter decided was a In addition, certain key turnover figures must be met in order to fall matter which was not arbitrable, or if the arbitral award is against under the Austrian antitrust regulations: ordre public. 1. The worldwide turnover of all involved parties is higher than €300 million. 2. The combined Austrian turnover of all involved parties is higher than €30 million. 3. The worldwide turnover of at least two involved parties is higher than €5 million each.

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the personal data are or will be processed by airlines or airports. It is 4.5 Please provide details of the procedure, including obliged to respond to passenger’s requests without undue delay and time frames for clearance and any costs of at the latest within one month. notifications. The same provisions apply to airports. The intended merger must be registered with the Antitrust Agency. Within four weeks of the date of registration, the Antitrust Agency 4.9 In the event of a data loss by a carrier, what itself or the federal antitrust has the right to request a obligations are there on the airline which has lost the detailed audit of the merger. If no audit is requested, a clearance data and are there any applicable sanctions? notification is rendered. This four-week period may be shortened if

Austria both the Antitrust Agency and the federal antitrust prosecutor waive The Austrian DSG does not provide for a particular sanction in case their right to request an audit. of data loss by an air carrier. The general Austrian principles on If an audit is requested, the merger will be published and every indemnification of damages caused apply. Such damages could be the competitor may submit its concerns regarding the intended merger. re-booking fees and hotel costs if, due to loss of data, the immigration authorities delay the immigration, resulting in the loss of a connecting The Antitrust Agency must render a decision within five months of flight. According to the DSG as soon as the airline/airport becomes the date of registration. The decision of the Antitrust Agency can be aware that a passenger’s data loss has occurred, the data loss has to appealed. The decision of the court of appeal is final. be notified to the Austrian supervisory authority without undue delay For the filing of a merger registration, a lump sum in the amount of and, where feasible, not later than 72 hours after having become aware €1,500.00 must be paid. In case of an audit, the Antitrust Agency of it, unless the airline/airport is able to demonstrate, in accordance may impose a fee of up to €34,000.00 depending on the complexity with the accountability principle, that the data loss is unlikely to and expenditure of each case. result in a risk to the rights and freedoms of passengers. Where such notification cannot be achieved within 72 hours, the reasons for the 4.6 Are there any sector-specific rules which govern the delay should accompany the notification and information may be aviation sector in relation to financial support for air provided in phases without undue further delay. The airline/airport operators and airports, including (without limitation) should communicate to the passenger a data loss, without undue state aid? delay, where that data loss is likely to result in a high risk to the rights and freedoms of the passenger in order to allow him or her to take Under Austrian law, no sector-specific rules for the aviation sector the necessary precautions. The communication should describe the exist. Financial support by the state is, in general, not allowed and nature of the data loss as well as recommendations for the passenger. is subject to approval by the European Community. Punitive damages in general, and in particular those imposed on air In respect of start-up carriers and regional airports, specific exemptions carriers for losing data, do not exist under Austrian law. apply. 4.10 What are the mechanisms available for the protection 4.7 Are state subsidies available in respect of particular of intellectual property (e.g. trademarks) and other routes? What criteria apply to obtaining these assets and data of a proprietary nature? subsidies? Trademarks can be registered in the Austrian trademark register. In Austria, no specific route is under state subsidy. State subsidies The competent authority is the Austrian Patent Agency, which is would only be available if such route has a certain need for a public also competent for the registration of patents and designs. The service obligation to be performed by the air service due to its registration can be filed online using a smartcard from the European geographical exposure. Patent Office (www.epo.org). An Austrian registration can be used as the date for international intellectual property rights to be registered with the World Intellectual Property Organization 4.8 What are the main regulatory instruments governing (WIPO) (www.wipo.int). the acquisition, retention and use of passenger data, and what rights do passengers have in respect of The costs for the registration of a trademark in Austria are between their data which is held by airlines and airports? €250.00 and €5,000.00 depending on the term of the requested protection. Under Austrian law, any and all passenger data is protected by the Austrian Federal Act concerning the Protection of Personal Data 4.11 Is there any legislation governing the denial of (DSG). In 2018, the DSG was extensively modified and the older boarding rights and/or cancelled flights? version, the Austrian Data Privacy Act of 2000, is no longer valid. The DSG supplements the European Data Protection Regulation In Austria, EU Regulation No. 261/2004 establishing common rules (GDPR – EU Regulation No. 2016/679). In addition, certain on compensation and assistance to passengers in the event of denied bilateral or EU agreements with the United States or Canada provide boarding and of cancellation or long delay of flights, is the relevant for the disclosure of certain information on the passengers and for legislation for denial of boarding. such information to be kept by the airline. If boarding is denied to passengers against their will, the operating Pursuant to the Austrian DSG, an airline must not disclose any of air carrier must compensate them as follows: the passenger’s information or the fact of whether a passenger is on board of a flight or not, to third parties. Passengers have the (a) €250.00 for all flights of 1,500 kilometres or less; right to be informed which passenger data concerning them are (b) €400.00 for all intra-Community flights of more than 1,500 collected, used, consulted or otherwise processed and to what extent kilometres, and for all other flights of between 1,500 and 3,500 kilometres; and (c) €600.00 for all flights not falling under (a) or (b).

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In addition, they are entitled to assistance and reimbursement of any must therefore be claimed with the passenger’s contracting party and all expenses caused by the denied boarding, in accordance with and they, if applicable, may take recourse internally. Articles 8 and 9 of EU Regulation No. 261/2004.

4.15 What global distribution suppliers (GDSs) operate in 4.12 What powers do the relevant authorities have in your jurisdiction? relation to the late arrival and departure of flights? The three key players are Amadeus, Galileo and Sabre. In general, an authority has no direct power in relation to the late arrival and departure of flights. Austria is obligated to ensure 4.16 Are there any ownership requirements pertaining to general compliance with all applicable laws on the part of their GDSs operating in your jurisdiction? Austria air carriers, and this includes EU Regulation No. 261/2004 and the payment of the compensation referred to therein. Austria has No, there are no specific ownership requirements pertaining to GDSs therefore established an independent arbitration court at the Ministry in Austria. of Transport in order to assist passengers claiming compensation under EU Regulation No. 261/2004. If an air carrier constantly fails to comply with its obligation, a 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? penalty pursuant to § 169 of the Austrian Aviation Act could be imposed. Such penalty could reach a maximum of €22,000.00. Vertical integration is permitted and subject to the general rules and regulations of any business that requires the disclosure of such structure. 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? 4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your jurisdiction or operators of aircraft generally into and Based on the Austrian Aviation Act, every airport is obliged to out of your jurisdiction? publish general conditions of use to guarantee that an operation is in line with all applicable laws, including airport charges according to The Austria Luftverkehrsbetreiberzeugnis- und Flugbetriebs- EU Regulation No. 2009/12. Such general conditions of use must Verordnung 2008 (AOCV 2008) provides no specific nationality be approved by the Ministry of Transport. requirements for applying for an Air Operations’ certificate. However, For ground handling services, the Austrian Airport Ground Handling in order to operate a commercial airline, the slots for routes are based Act is applicable. This was implemented to ensure the liberalisation on bilateral agreements between the Republic of Austria and the of ground handling services in Austria, and guarantees free access to country of destination; in order to be subject to these agreements, the this market for private ground handling companies. majority of the shareholders of the operating airline must be Austrian.

4.14 To what extent does general consumer protection legislation apply to the relationship between the 5 In Future airport operator and the passenger? 5.1 In your opinion, which pending legislative or The Austrian Consumer Protection Act does not deal directly with regulatory changes (if any), or potential developments the relationship between the airport operator and the passenger. affecting the aviation industry more generally in In general, the only contractual relationships protected are those your jurisdiction, are likely to feature or be worthy of between passengers and their direct contracting partners, namely: attention in the next two years or so? 1. the airline; Currently, there are no pending legislative or regulatory changes in 2. the ; or Austria. A pledge register is discussed once every four to five years 3. the agency where the respective service was bought. but has never been established. We do not expect any changes in Any claim based on a damage caused by the airport operator (loss of the immediate future. baggage, delays of flight due to lack of ground handling staff, etc.)

ICLG TO: AVIATION LAW 2019 WWW.ICLG.COM 47 Kubes Passeyrer Attorneys at Law Austria

Dr. David Kubes Mag. Tina Vollmann Kubes Passeyrer Attorneys at Law Kubes Passeyrer Attorneys at Law Gutenberggasse 1/10 Gutenberggasse 1/10 1070 Vienna 1070 Vienna Austria Austria

Tel: +43 1 526 5000 Tel: +43 1 526 5000 Fax: +43 1 526 5000 50 Fax: +43 1 526 5000 50 Email: [email protected] Email: [email protected] URL: www.kpnet.at URL: www.kpnet.at Austria Dr. David Kubes started specialising in aviation matters in 1995, Mag. Tina Vollmann holds a law degree (Mag. Iur.) from the University directly after graduating from high school. During his university years, of Graz. During her studies she specialised in Corporate & M&A and he was able to get to know the airline business from the ground up, Real Estate Law. In this time she worked in the field of establishing his passion for the field in his thesis on the Montreal and gained valuable practical experience by completing numerous Convention in 2001. The following years were dedicated to aircraft internships in Austria and abroad. She also spent several months in financing projects, major claim management for aviation insurance Turkey and Australia. companies and leasing contracts for local airlines, lenders, financiers Tina speaks German, English and Italian. and banks. To date, the variety of clients has been as broad as the aviation business itself. In 2010, Dr. David Kubes was the leading lawyer in Austria’s first Shari’ah-compliant financing project, advising an investor from the Middle East on establishing a private ad hoc charter airline with an A340-300 aircraft. Currently, Dr. Kubes is working for global acting leasing companies on aircraft and engines, as well as equipment leasing structures.

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

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Belgium Birgitta Van Itterbeek

Monard Law Tine Bogaerts

in the context of the Single European Sky by the Royal Decree of 14 1 General February 2006 for the creation of the national supervising authority for air navigation services (OG 28 February 2006). 1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ 1.2 What are the steps which air carriers need to take in or regulate aviation in your jurisdiction. order to obtain an operating licence?

A distinction should be made between international conventions EC Regulation No. 1008/2008 of 24 September 2008 is directly and treaties that are directly applicable and their implementation applicable in Belgium. A Ministerial Decree of 3 August 1994 (OG instruments, EU regulations and directives, and Belgian law. 1 October 1994) further sets out the licence requirements for the The Chicago Convention was ratified in Belgium on 30 April commercial operation of aircraft. 1947 (Belgian Official Journal (OG) 2 December 1948) and was The licence and the air operator’s certificate (AOC) are issued by the implemented by the Royal Decree of 15 March 1954, which has Civil Aviation Authority. been amended several times. The Law of 30 April 1947 has been further implemented by another 25 royal and ministerial decrees. In The applicants must have their principal place of business and, if effect, that law, together with the Law of 27 June 1937 and the Royal any, their registered office in Belgium. Decree of 15 March 1954, are the basic regulations for aviation Applicants must have at least one aircraft registered in Belgium, operations in Belgium. adequate insurance and evidence that the company is and will At a national level, the basic regulations with respect to technical continue to be owned directly or through a majority shareholding operations are laid down in the Royal Decree of 9 January 2005 by a company established and controlled by a company or person regulating the conditions for technical operations of aircraft belonging established in the EEA. to general aviation (OG 7 February 2005) and, with respect to flight The application must be accompanied by the documents that identify operation licences, in the Royal Decree of 10 January 2000 (OG the applicant and its shareholding structure and the routes it wishes 7 March 2000). The Ministerial Decree of 13 February 1970, as to operate together with all the documents required pursuant to EC amended (see especially Ministerial Decree of 20 October 2003), Regulation No. 1008/2008. sets out further technical requirements for the operation of aircraft of Except for certain exceptions set out in the royal decree, an 5,700kg or more, as well as organisational requirements for the airline operating licence may not be granted if the operator has not and the maintenance of aircraft (OG 4 April 1970). previously obtained a certificate affirming that the operator has the As a result of EC Regulation No. 3922/91, the JAR rules also apply ability and resources to ensure the safe operation of the aircraft for in Belgium and have been further implemented by the Royal Decree the activities set out in the certificate. The AOC is also issued by the of 25 June 2001 (OG 15 August 2001) and of 9 January 2005 (OG Civil Aviation Authority. 7 February 2005). With the creation of the European Aviation The financial fitness criteria are those laid down in EC Regulation Safety Agency, many safety issues are now further regulated and No. 1008/2008. harmonised at EU level namely by Regulation (EC) 216/2008 E.P and Council 20 February 2008 as recently replaced by Regulation (EC) E.P. and Council 2018/1139 (OJ L 212, 22 August 2018). 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who There are three regulatory bodies in Belgium: general authority lies administers air safety? with the Civil Aviation Authority of the Federal Public Service of Mobility and Transport (BCAA), which was created by the Law of 27 A distinction should be made between international conventions June 1937 amending the law of 16 November 1919 with respect to air and treaties that are directly applicable and their implementation navigation (as amended) ((OG) 26 July 1937) and its Royal Decree instruments, EU regulations and directives, and Belgian law. of 15 March 1954 with respect to air navigation (as amended) (OG 26 The Chicago Convention was ratified in Belgium on 30 April 1947 March 1954); Belgocontrol is responsible for air traffic control and (OG 2 December 1948) and was implemented by the Royal Decree civil air navigation services for Luxembourg and Belgium and was of 15 March 1954, which has been amended several times. The Law created by the Law of 19 December 1997; for the rationalisation of of 30 April 1947 has been further implemented by another 25 royal Brussels National Airport (OG 30 December 1997) and the Belgian and ministerial decrees. In effect that law, together with the Law of Supervising Authority for Air Navigation Service, which was created

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27 June 1937 and the Royal Decree of 15 March 1954, are the basic As to flight and operating restrictions, a distinction has to be made regulations for aviation operations in Belgium. between an EU air carrier and any other air carriers and flight The basic regulations with respect to technical operations are laid within the EU and to a non-EU Member State. In accordance down in the Royal Decree of 9 January 2005 regulating the conditions with EC Regulation No. 1008/2008, article 15, any EU air carrier for technical operations of aircraft belonging to general aviation duly licensed by its home country in accordance with the above- (OG 7 February 2005) and, with respect to flight operation licences, mentioned EC regulation can freely operate intra-European routes. in the Royal Decree of 10 January 2000 (OG 7 March 2000). The No Member States can submit the Community air carrier to any Ministerial Decree of 13 February 1970, as amended (see especially further formalities or conditions. This is the essence of the Single Ministerial Decree of 20 October 2003), sets out further technical European Sky. requirements for the operation of aircraft of 5,700kg or more as well The Royal Decree dated 18 August 2010 regulates the allocation of Belgium as organisational requirements for the airline and the maintenance of traffic rights to non-EU countries. Only EU air carriers established aircraft (OG 4 April 1970). in Belgium are entitled to traffic rights to non-EU Member States. As a result of EC Regulation No. 3922/91, the JAR rules also apply These airlines must submit a formal application to the BCAA together in Belgium and have been further implemented by the Royal Decree with a copy of their AOC, insurance certificate, evidence that the of 25 June 2001 (OG 15 August 2001). With the creation of the airline is established in Belgium in accordance with Community European Aviation Safety Agency, many safety issues are now law, information on the operational and financial sustainability and further regulated and harmonised at EU level. information on the planned flights and the possible acceptance of the applicant to cover in exceptional circumstances any required capacity to fulfil the national or international requirements of 1.4 Is air safety regulated separately for commercial, Belgium. The allocation of traffic rights and the possible limits cargo and private carriers? on the number of flights will be determined by the terms and conditions of the applicable bilateral treaty. A non-Community The air safety regulations depend first of all on the weight. carrier is not allowed to operate regular air transport services unless Aircraft above 5,700kg are regulated by the Royal Decree of 9 it has received prior authorisation from the minister of transport January 2005 and the Ministerial Decree of 13 February 1970 as either through bilateral agreements or specific authorisation. Such amended from time to time (see above). Aircraft weighing less than bilateral treaties or authorisation will set out specific conditions with 5,700kg are regulated by Ministerial Decree of 12 September 1991 which the airline has to comply. Moreover, such airline may not be (OG 8 November 1991) and ultra-light aircraft are regulated by blacklisted by the European Commission pursuant to EC Regulation Royal Decree 25 May 1999 (OG 26 August 1999). Both the Royal No. 2111/2005 as an unsafe airline. Decrees of 9 January 2005 with respect to technical operations and Any carrier that has a trading activity in Belgium must also be of 10 January 2000 with respect to flight operation licences make a registered in the commercial register and obtain a value added tax clear distinction between the different types of aircraft. number. If such air carrier opens a branch office in Belgium it The Royal Decree of 15 March 1954 applies to all civil aircraft must also fulfil the formalities for the opening of a branch office in whether or not they are used for commercial or cargo transport. Belgium as stipulated in the Belgian Company Code. However, with respect to the licence requirements for commercial transport, a distinction is drawn between taxi services and other 1.7 Are airports state or privately owned? commercial operations. A taxi service is defined as aircraft with no more than 10 seats and in respect of which the destination is fixed A distinction has to be made between the ownership of the airports by the users without any seat going to other commercial passengers. themselves and the exploitation thereof. The airports themselves The licence requirements for taxi services are less stringent than are state property and belong to the public domain. for other commercial operations. If an aircraft is not used for commercial transport, the licence requirements for commercial The infrastructure at Brussels Airport, which is the main airport operations do not apply. in Belgium, is owned by Brussels International Airport Company (BIAC, which is stated owned). The exploitation of the Brussels Airport is granted to the Brussels Airport Company which is a 1.5 Are air charters regulated separately for commercial, private limited company. Although the state still owns 25 per cent cargo and private carriers? of the shares, the other 75 per cent are privately owned.

EU Regulation N° 1008/2008 makes no distinction between regular Belgocontrol manages the safety and the policing at the airport and services or chartered services. The Royal Decree of 15 March 1954 the air traffic control and civil air navigation services. provides, in article 47, specific licence requirements for charter The other airports in Belgium are Liège Airport at Bierset, close to services and specifies that non-scheduled flights or a series of non- Liège, the Brussels South Charleroi Airport in Charleroi, the Ostend- scheduled flights are subject to the specific authorisation ofthe Bruges International Airport and Antwerp Airport in Deurne. minister. Non-scheduled air services are considered on a case-by- The infrastructure at both Ostend-Bruges International Airport and case basis within the framework of the bilateral treaties. Antwerp Airport are owned by the Flemish Region, respectively, by LOM Oostende-Brugge and LOM Antwerpen, but the management 1.6 As regards international air carriers operating in your of both airports has been granted to a privately held company named jurisdiction, are there any particular limitations to be LEM Oostende-Brugge and LEM Antwerpen which are privately aware of, in particular when compared with ‘domestic’ held companies controlled by EGIS Projects. or local operators? By way of example only, The infrastructure of Liège Airport is state owned, but the exploitation restrictions and taxes which apply to international but is granted to Liège Airport SA which is 50 per cent owned by the not domestic carriers. Leasing and Financing Company, 25 per cent by the Walloon Region (Walloon Airport Society, established in 2001 by Decree of 6 May There are no specific taxes other than those applicable to all 1999) and 25 per cent by Paris Airport Management. companies.

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The infrastructure of Brussels South Charleroi Airport is owned upheld arguments by US-UK communications company Viasat, by Walloon Region and the exploitation thereof is granted to which claimed that the Belgian Institute for Postal Services and Sambrinvest – a private investment vehicle of the Walloon Region. Telecommunications (BIPT) failed to conduct a proper analysis of the ground-based stations used in Inmarsat’s European Aviation Network (EAN) under Belgian or EU law before granting it the right to operate. 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? In Sint Truiden Droneport has been completed with a formal opening taking place on 21 December 2018. At the Droneport, companies The operating licence of the airport operators set out which type of active in the drone industry can open their offices, and there is a aircraft may land at the airport and when and how landing fees can dedicated area for drone operations and courses. be charged. The landing fees are calculated based on parameters of Belgium weight, noise and the time of landing. Every airport operator has its 2 Aircraft Trading, Finance and Leasing own specific rules with respect to the landing fees. There are specific noise restrictions relating to the type of aircraft, its weight and the time of landing. These restrictions are different 2.1 Does registration of ownership in the aircraft register for each airport. constitute proof of ownership? Further noise restrictions for aircraft are laid down in the Royal Decree of 25 September 2003 (OG 26 September 2003) setting Rights in rem are regulated by the Belgian Civil Code. According to out operating restrictions at Brussels Airport and by the Ministerial article 89 International Private Law Code, the rights of aircraft are Decree of 3 May 2004 (OG 11 June 2004). The Brussels Region has determined by the law of the country where the aircraft is registered. issued strict noise restrictions which are very much debated (Decree The Royal Decree of 15 March 1954 provides that the following of 17 July 1997, decision 27 May 1999 and 19 May 2016). See aircraft can be registered in the Belgian aviation register: also restrictions for chapter 2 aircraft laid down in Council Directive ■ civil aircraft that are fully owned by nationals of an EU 92/14/EC. More restrictions are contained in the Royal Decree of Member State or nationals of an EEA country who are 16 December 2005 (implementing EC Directive 2004/36) with domiciled in Belgium; or respect to the safety of aircraft of third countries wishing to land at ■ civil aircraft wholly owned by legal entities incorporated a Belgian airport (OG 23 January 2006). under Belgian law and whose main shareholders, managing shareholders, directors or agents are nationals of an EU Member State or an EEA country. 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular In case of an ownership registration, proof of ownership has to rules, regulations, systems and procedures in place be filed at the BCAA. But the registration of an aircraft does not which need to be adhered to? constitute proof of ownership.

Pursuant to the Royal Decree of 9 December 1998 (OG 29 December 2.2 Is there a register of aircraft mortgages and charges? 1998), an independent unit has been created within the Ministry of Broadly speaking, what are the rules around the Transport, namely the accidents and incidents investigation unit. operation of this register? The unit is responsible for the independent investigation of any accident or incident and is especially independent from the Civil Belgium ratified the Geneva Convention on the International Aviation Authority, which is responsible among other things for the Recognition of Rights in Aircraft on 22 October 1993, but failed, control on the airworthiness of the aircraft. until recently, to implement a law recording of security interests on The accident and incident investigation unit will, following any aircraft in a public register. A law dated 11 July 2013 as amended accident or incident, carry out a full investigation and draft a report from time to time on security interest on mobile goods introduced a within 12 months to be available on a database for those responsible national register for all security interests on mobile goods, including for safety in aerospace. Such report is furthermore communicated to aircraft pledges which records any security interest created over the companies involved, the Civil Aviation Authority, the European such mobile good (Pledge Law). It entered into force on 1 January Commission and the international civil aviation organisations. The 2018. The cost of registering a pledge over an aircraft or engine investigators have free access to all data relating to the aircraft and depends on the value thereof, but the maximum is EUR 500. The accident or incident. registered pledge functions as a mortgage. The perfection of the Following an accident, no repair can be carried out without prior pledge towards third parties is achieved through the registration in approval of the Civil Aviation Authority, unless such repair is the national register. The date of registration will determine the carried out in accordance with the manufacturer’s manuals and ranking. The register is a public register and will relate to all mobile maintenance programme. goods and not only aircraft. Belgocontrol is also responsible for safety in the air and on the A registered aircraft pledge creates a security right in rem over ground. an aircraft, which gives the pledgee rights similar to those of a mortgagee, namely a right, in the event of default by the debtor, to sell or lease the aircraft and a preferential right to the sale and/or 1.10 Have there been any recent cases of note or other lease proceeds. notable developments in your jurisdiction involving air operators and/or airports? 2.3 Are there any particular regulatory requirements The Brussels Court of Appeal annulled by its judgment (dated which a lessor or a financier needs to be aware of as regards aircraft operation? 14 March 2018) a decision by the Belgian telecoms regulator allowing UK satellite company Inmarsat to operate its in-flight high- speed broadband service in the country. The annulment decision In case of unpaid airport charges or flight charges, the airport is permitted to prevent the aircraft from taking off until those charges

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are paid. Maintenance providers have a retention right with respect to work performed on aircraft or a fleet of aircraft and such retention 2.7 How are the Conventions applied in your jurisdiction? right gives the maintenance providers a similar right as a pledge except that no enforcement measures can be taken. All of the conventions are ratified by law and have to be applied by court.

2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests 2.8 Does your jurisdiction make use of any taxation in a single engine are at risk of automatic transfer benefits which enhance aircraft trading and leasing or other prejudice when installed ‘on-wing’ on an (either in-bound or out-bound leasing), for example aircraft owned by another party? If so, what are the access to an extensive network of Double Tax Treaties

Belgium conditions to such title annexation and can owners or similar, or favourable tax treatment on the disposal and financiers of engines take pre-emptive steps to of aircraft? mitigate the risks? Belgium has a very extensive network of treaties for the avoidance Pursuant to article 551 the Belgian Civil Code, the owner of the of double taxation, but has no specific taxation benefits which main asset is presumed to be the owner of the ancillary assets or enhance aircraft trading and leasing. parts. However, in case the part which is owned by a third party is united with the main asset but can be separated therefrom, the owner of the main asset can acquire ownership of the part by paying a fair 3 Litigation and Dispute Resolution price. In case the united asset is worth considerably more following annexation and such annexation has taken place without consent 3.1 What rights of detention are available in relation to of the owner of such part, he can request the separation thereof. aircraft and unpaid debts? Furthermore, the owner of the main asset has to act in good faith. It is therefore advisable to attach ownership plates to the parts and There are three types of liens under Belgian law: liens such as obtain a recognition of title by the owner. repairmen’s liens, statutory liens or liens with respect to salvage and conservation costs (see Geneva Convention); temporary seizure; 2.5 What (if any) are the tax implications in your and forced sale. jurisdiction for aircraft trading as regards a) value- Temporary seizures are regulated by article 1,413 et seq. of the added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and Judicial Code and are limited by the Convention of Rome on (to the extent applicable) do exemptions exist as Precautionary Arrest. The exercise of this right is conditional on regards non-domestic purchasers and sellers of there being urgency and a manifest undisputed claim that is certain, aircraft and/or particular aircraft types or operations? due and liquid. The seizure for forced sale is regulated by article 1,494 et seq. of the Pursuant to article 42§2 (1) of the Belgian VAT Code, a supply of Judicial Code and by the Geneva Convention. A forced sale requires aircraft destined for use by an airline which chiefly operates on an enforceable title (such as a judgment) and a manifest undisputed international routes for reward, is exempt from VAT. Circular Letter claim that is certain, due and liquid. No self-help is possible under n° 6/1983 (referred to in Circular Letter n° 3/2010 commenting the Belgian law. newly adopted VAT package, spec. n° 125) contains an administrative Pledgees of a registered pledge can proceed to the sale and favour in case the aircraft is actually bought by a company which enforcement of their title without prior court decision. is not a qualifying airline, provided the sale is realised for the sole purpose of leasing the aircraft to a qualified carrier. This is provided Pursuant to the law of 27 June 1937, article 37, aircraft which do the following conditions are fulfilled: not comply with airworthiness standards or in respect of which the charges, fees or other duties are not paid in accordance with the 1. The sale agreement has to refer explicitly to (i) the immediate leasing of the Aircraft to an airline operating for reward applicable regulations, can be prevented from taking off until the chiefly on international routes, (ii) to the Aircraft, model full payment or compliance thereof. No specific measures have been make and registration, (iii) the VAT Certificate, and (iv) the implemented in Belgium with respect to the rights of Eurocontrol exemption of the sale of the Aircraft pursuant to article 42§2 pursuant to Annex 4 of the protocol to the Eurocontrol Convention (1) of the Belgian VAT Code. of 27 June 1997. 2. The seller has to issue an invoice containing the same references. 3.2 Is there a regime of self-help available to a lessor There are no stamp duties or documentary taxes. or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement? 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)? Self-help is forbidden for lessors, and judicial authorisation is always necessary for a lessor to take possession of an aircraft or engine. For financiers who are pledgees pursuant to a registered pledge, no prior Belgium is a signatory to (i) the Geneva Convention (Law 6 August judicial authorisation is required for the enforcement of the pledge, 1993, OG 18 December 1993), (ii) the Chicago Convention (Law but no possession can be acquired without judicial authorisation. 30 April 1947 O.G. 2 December 1978), the Warschau Convention (Law 7 April 1936 O.G. 24 September 1936), and the Montreal Convention (Law 13 May 2003 O.G. 18 May 2004). Belgium is not a signatory to the Cape Town Convention.

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fall under the arbitration clause or agreement, that the arbitration 3.3 Which courts are appropriate for aviation disputes? award is not duly motivated, that the award is not yet binding or that Does this depend on the value of the dispute? For the arbitration tribunal has exceeded its competence. example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases The executory seizure and repossession is only possible following are brought? an enforceable title, such as a judgment or notarial .

Belgium makes a distinction between commercial and civil claims. 3.6 Are there any rights of appeal to the courts from the In case the operator is an airline, or the owner of a private jet is a decision of a court or arbitral tribunal and, if so, in company, the commercial court will be competent for any commercial what circumstances do these rights arise? disputes between the parties. The criminal courts are exclusively Belgium competent for criminal offences. The judge of seizure is competent Any judgment obtained in first instance before the civil, commercial for any conservatory or executory seizure or any disputes with respect or criminal courts can be appealed against. to enforcement of security interests. Administrative proceedings have Arbitral awards are only subject to appeal in case the parties have to be brought before the competent administrative courts. explicitly agreed upon the possibilities of appeal in their arbitration agreement or clause. An arbitration award can otherwise be nullified 3.4 What service requirements apply for the service of before the commercial or civil courts in the limited circumstances as court proceedings, and do these differ for domestic set out in the Judicial Code. airlines/parties and non-domestic airlines/parties?

The service requirements are regulated by the judicial code with 4 Commercial and Regulatory respect to civil and commercial proceedings and by the code of criminal procedures for criminal procedures and in case of 4.1 How does your jurisdiction approach and regulate by the administrative procedural laws. joint ventures between airline competitors? Within the EU the rules of service are furthermore set out in regulation (EC) 1393/2007. Joint ventures on the basis of a joint venture company are subject to Belgian merger control if the turnover thresholds are met. Joint 3.5 What types of remedy are available from the courts ventures based solely on a cooperation agreement may be subject or arbitral tribunals in your jurisdiction, both on i) an to the rules on the prohibition of cartels, which are similar to EU interim basis, and ii) a final basis? antitrust law.

1. Interim basis 4.2 How do the competition authorities in your In case of urgency and an undisputed claim which is certain, due jurisdiction determine the ‘relevant market’ for the and liquid, a conservatory seizure can be obtained before the court purposes of mergers and acquisitions? of seizure on unilateral request. Together with the conservatory seizure the creditor can also ask the appointment of a sequester of The Belgian Competition Authority (BCA) follows the EU approach the aircraft (subject to the Rome Convention as set out in question a.k.a “point of departure and point of destination approach” which 3.1 above). The conservatory seizure requires ownership by the means that every single route is seen as a separate product market. debtor of the aircraft.

In case the aircraft is owned by the lessor, he can request to the court 4.3 Does your jurisdiction have a notification system of seizure as an interim measure a possessory seizure together with whereby parties to an agreement can obtain the appointment of a sequester. regulatory clearance/anti-trust immunity from The courts in summary proceedings can order, in case of urgency regulatory agencies? interim measures, such as storage or maintenance of the aircraft or payment of undisputed claims and even repossession. Yes, parties can obtain regulatory clearance for mergers from the Belgian Competition Authority under the terms of article IV.9 Code Such interim measures can also be asked to the normal courts of Economic Law (CEL). It is only necessary to notify the BCA of provided they are pure interim measures. mergers that meet the following turnover thresholds as laid out in 2. Final judgment article IV.7 CEL: First of all, judgments, unless otherwise stated, are enforceable ■ undertakings with a total turnover in Belgium of more than notwithstanding appeal. The creditor in case of enforcement then EUR 100 million; and has to pay damages in case the debtor wins in appeal. ■ at least two of the undertakings each generate a turnover in The creditor can then request the judge of seizures an executory Belgium of at least EUR 40 million. seizure which needs to be enforced by the bailiff. There is no system of clearances for cartels. Pledgees of a registered pledge do not need prior court approval for the enforcement of the registered pledge, but can only take 4.4 How does your jurisdiction approach mergers, possession upon judgment by the judge of seizures who is also acquisition mergers and full-function joint ventures? competent for any appeal against the unilateral enforcement. An arbitral award can only be enforced in Belgium following a A “merger” within the meaning of the CEL refers to an operation judgment of the court of first instance. that results in a lasting change of control of an undertaking, in The court of first instance has only a marginal appreciation right, other words, the possibility of exercising decisive influence over its such as incapacity or illegality of the arbitration agreement or clause, activity. A merger can in particular occur when two independent in case of breaches of the right to defence, the actual case does not undertakings decide to integrate, when one undertaking or one person

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having control of an undertaking purchases another undertaking or personal data addresses the areas where the GDPR leaves room for part of its activities (acquisition), or when two undertakings create a EU Member States to adopt country-specific rules. The GDPR also lasting common undertaking between them (joint venture). applies to airports. The Belgian approach is very similar to the EU approach. Passengers have the following rights under the GDPR in relation to their personal data:

4.5 Please provide details of the procedure, including 1. the right to be informed about the collection and use of their time frames for clearance and any costs of personal data; notifications. 2. the right to access their personal data; 3. the right to rectification to have inaccurate personal data

Belgium In view of their nature or of the small market shares of the rectified, or completed if it is incomplete; undertakings concerned, certain mergers are unlikely to raise 4. the right to have personal data erased; competition problems. The notifying parties can then request the 5. the right to request the restriction or suppression of the application of the simplified procedure (article IV. 63 § 1 CEL). processing of their personal data; When the conditions for the application of the simplified procedure 6. the right to data portability which allows individuals to obtain are not satisfied, the first phase (Phase I) begins. The Competition and reuse their personal data for their own purposes across College adopts a decision within 40 business days after acceptance different services; of the notification. 7. the right to object to the processing of their personal data in When there are serious doubts as to the merger’s eligibility, the certain circumstances; and Competition College can decide to launch the so-called second 8. specific rights in relation to automated decision-making and phase (Phase II) procedure. The Competition College issues its profiling (e.g. information obligation, request for human decision within a time limit of 60 business days after its decision to intervention). launch a second phase. Costs for Phase I range between EUR 2,000 and 8,000 while Phase 4.9 In the event of a data loss by a carrier, what II proceedings are much more expensive. obligations are there on the airline which has lost the data and are there any applicable sanctions?

4.6 Are there any sector-specific rules which govern the Data controllers (i.e. the airline) must report personal data breaches aviation sector in relation to financial support for air (e.g. data loss of its passengers by a carrier) to the competent Data operators and airports, including (without limitation) state aid? Protection Authority, unless the data breach is unlikely to result in a risk to the rights and freedoms of individuals. Such notification The (EU) Guidelines on State aid to airports and airlines were must be done within 72 hours of becoming aware of the breach, adopted on February 2014, replacing the older 2005 guidelines and where feasible. the 1994 aviation sector guidelines. If the breach is likely to result in a high risk of adversely affecting individuals’ rights and freedoms, the data controller must also inform those individuals without undue delay. Notification of the 4.7 Are state subsidies available in respect of particular affected individuals is, however, not required if the data controller routes? What criteria apply to obtaining these subsidies? has implemented technical safety measures (e.g. data encryption) and/or organisational measures (e.g. robust breach detection, investigation and internal reporting procedures) limiting the privacy EU rules and criteria apply. Airport infrastructure projects of a risk of individuals or where notifying the affected individuals would certain size do not have to be notified to the European Commission, involve disproportionate effort. since they have been included in the general block exemption regulation. (Regulation No. 651/2014 of 17 June 2014 declaring The data controller must also keep a record of any personal data certain categories of aid compatible with the internal market in breaches, regardless of whether it is required to notify. application of articles 107 and 108 of the Treaty.) In Belgium, the Data Protection Authority (DPA) monitors data protection compliance. Data breaches can be notified to the DPA via an online form available at https://www.dataprotectionauthority. 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, be/data-breach-notification-form. and what rights do passengers have in respect of Depending on the nature of the personal data breach, the DPA their data which is held by airlines and airports? may impose administrative penalties up to EUR 20 million or 4% of a company’s global annual turnover of the preceding financial The passenger Data Processing Act of 25 December 2016 (OG 25 year. Personal data breaches may also lead to criminal penalties January 2017) transposes the EU Passenger Record Directive into ranging from EUR 800–240,000. Individuals also have a right Belgian law. The Passenger Data Processing Act came into force to compensation in respect of proven material and non-material on 25 January 2017. A Royal Decree containing the obligations damage (no punitive damages). imposed on air carriers was adopted on 18 July 2017 (OG 28 July 2017) and entered into force on 7 August 2017. 4.10 What are the mechanisms available for the protection The EU General Data Protection Regulation (GDPR) governs the of intellectual property (e.g. trademarks) and other collection and use of an individual’s personal data. The GDPR assets and data of a proprietary nature? applies to all entities based in an EU country that process personal data, as well as all entities worldwide that process personal data Trademarks – any sign or combination of signs used to identify your belonging to EU residents. The Belgian Act of 30 July 2018 on products from products manufactured or sold by others – can be the protection of natural persons with regard to the processing of protected via the Benelux Office for Intellectual Property (BOIP)

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at The Hague. Trademark protection that is sought in Belgium Further noise restrictions for aircraft are laid down in the Royal applies to the Netherlands, Belgium, and The Grand Duchy of Decree of 25 September 2003 (OG 26 September 2003) setting Luxembourg (Benelux trademark). There is also the option of out operating restrictions at Brussels Airport and by the Ministerial obtaining trademark protection throughout all EU Member States Decree of 3 May 2004 (OG 11 June 2004). The Brussels Region has (EU trademark). The application must be done at the European issued strict noise restrictions which are very much debated (Decree Union Intellectual Property Office (EUIPO) in Alicante, Spain. of 17 July 1997, decision 27 May 1999 and 19 May 2016). See Copyrights protect artistic or literary works from the moment the also restrictions for chapter 2 aircraft laid down in Council Directive original expression is created, without registration. In Belgium, 92/14/EC. More restrictions are contained in the Royal Decree of copyright is valid for up to 70 years after the death of the author, or 16 December 2005 (implementing EC Directive 2004/36) with the last surviving author. It includes among others: respect to the safety of aircraft of third countries wishing to land at a Belgian airport (OG 23 January 2006). Belgium ■ the right to control the method of reproduction and communication of the work; Ground handling is regulated by the Royal Decree of 6 November ■ the right to have authorship known; 2010 (OG 17 November 2010) with respect to Brussels Airport and by Ministerial Decree of 9 June 2010 (OG 24 June 2011) with ■ the right to decide when the work will be disclosed; and respect to the Walloon airport and by the Flemish decision of 17 ■ the right to oppose modification of the work. December 1999 (OG 7 March 2000) with respect to the Flemish Patent protection covers inventions that are new, involve an airports. inventive step, and that are useful to industry – even if they contain biological material or a process that involves or uses biological material. Patents are governed by the Belgian Patent Act. Patent 4.14 To what extent does general consumer protection legislation apply to the relationship between the holders have the right to exploit, grant licences to or assign the airport operator and the passenger? patent, with some exceptions. Patent protection lasts for 20 years, the holder must pay annual taxes. There is no specific Belgian consumer protection legislation that Additionally, one can obtain protection in Belgium for software applies to the relationship between the airport operator and the (copyright), designs and models, databases and trade secrets. passenger. Nonetheless, airport operators must comply with EU Regulation 4.11 Is there any legislation governing the denial of 1107/2006/EC to provide assistance to disabled persons and those boarding rights and/or cancelled flights? with reduced mobility. Said regulation places obligations on airport operators to provide This is regulated by Regulation (EC) No. 261/2004 of the European access to air travel for persons with reduced mobility, subject Parliament and of the Council of 11 February 2004 establishing to some safety and security issues. These include obligations on common rules on compensation and assistance to passengers in airport operators to provide assistance throughout the passenger the event of denied boarding and of cancellation or long delay journey at the airport, to set, publish and monitor “quality standards” of flights, and repealing Regulation (EEC) No. 295/91, which on service performance, to customer facing staff, to charge grants passengers a right to fixed-rate compensation, a right to airlines for provision of the service. reimbursement or re-routing, as well as a right to care in case of denied boarding and cancellation. 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? Radixx, Amadeus, Sabre and Galileo.

The enforcement body of the Regulation is SPF Mobilité & Transport, Direction Générale Transport Aérien, Cellule Stratégique, Droits 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? des passagers, City Atrium, Rue du Progrès 56, 1210 Brussels – [email protected]. No. However, it should be noted that a system vendor, pursuant to SPF Mobilité & Transport – Direction Générale Transport Aérien is Regulation (EC) No. 80/2009 of the European Parliament and of the competent for the implementation of Regulation (EC) No. 261/2004. Council of 14 January 2009 on a Code of Conduct for computerised Apart from the implementation of the regulation, it has no specific reservation systems and repealing Council Regulation (EEC) No. powers in relation to the late arrival and departure of flights. 2299/89 (“Regulation (EC) No. 80/2009”), shall publicly disclose, unless this is otherwise made public, the existence and extent of a 4.13 Are the airport authorities governed by particular direct or indirect capital holding of an air carrier or rail-transport legislation? If so, what obligations, broadly speaking, operator. A system vendor within the meaning of Regulation (EC) No. are imposed on the airport authorities? 80/2009 means any entity and its affiliates which is or are responsible for the operation or marketing of a computerised reservation system. Brussels Airport is regulated by the Law of 19 December 1997 and by the Royal Decree of 27 May 2004 (OG 24 June 2004) and Royal Decree of 21 June 2004 (OG 15 July 2004). The Walloon airports are 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? regulated by the Decree of 23 June 1994 (OG 15 July 1994) and the Flemish airport by the decree of 10 July 2008 (OG 22 October 2008). The Royal Decree allows only two ground handlers for each of The slots are regulated by regulation (EEC) n° 95/93 of the Council the following activities: baggage handling; cargo handling; fuel dated 18 January 1993 (OJ L 14, 22 January 1993), with respect to supply; and platform handling at Brussels Airport. None of them Brussels Airport by Royal Decree of 23 June 2003.

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may be directly or indirectly owned by more than 25 per cent by the The implementing regulation creates three categories: open; specific; airport or any of its users. The selection must be based on objective, and certified. The Implementing regulation only relates at present transparent and non-discriminatory criteria. to the open and specific categories. The open categories are in principle low risk drones. They do not 4.18 Are there any nationality requirements for entities require prior authorisation by the competent authorities; nor a applying for an Air Operator’s Certificate in your declaration by the drone operator before the operation takes place. jurisdiction or operators of aircraft generally into and But if they weigh more than 250g, they will need to be registered. out of your jurisdiction? The requirements refer to the line of sight operations, maximum platform weight of 25kg, maximum altitude of 120 m a.g.l. (except The applicants must have their principal place of business and, if

Belgium where flying over a fixed obstacle over 70m), limited flight over any, their registered office in Belgium. The applicant is and will uninvolved people and must meet the criteria of classes C0-C4. The continue to be owned directly or through a majority shareholding remote pilot must have the ability to take control. So autonomous by a company established and controlled by a company or person operations are excluded. established in the EEA. The specific category means a category of drone operations that considering the risk involved require an authorisation by the 5 In Future competent authority before the operation takes place, except for standard scenarios for which a declaration by the drone operator is sufficient or when the operator holds a light drone operator 5.1 In your opinion, which pending legislative or certificate with privileges. regulatory changes (if any), or potential developments affecting the aviation industry more generally in A certified category means a category of drone operation which your jurisdiction, are likely to feature or be worthy of requires the certification of the drone and its operator as well as attention in the next two years or so? licensing of the flight crew. The delegated regulation sets out the product requirements for the Since 25 April 2016, the use of private drones weighing less than open category drones. It divides them into five classes: classes C0- 150kg are regulated in Belgium. Since that date, commercial use is C4; and provides an electronic identification system. allowed in Belgium. These type of drones fall, namely, up to now, outside of the competence of the EU. Only Drones which weigh Registration more than 1kg are regulated. All small drones for recreational use All operators must register the drones weighing more than 250g. At are therefore not regulated. A difference is made between drones with present only drones weighing more than 1kg must be registered in a low risk profile (weighing less than 5kg) (class 2) and drones with Belgium. Registration marks must be displayed. The registration a high- or medium-risk profile (class 1). Class 2 drones can fly up must occur by reference to the class of the drones. This applies to to 150ft and class 1 drones up to 300ft. All such drones must be both open and specific operations. registered with the BCAA. The pilot must, at all times, have visual Implementation contact. No transport of goods or passengers is allowed. There is a Entry into force estimated early 2019 for the delegated and mandatory insurance obligation and specific rules apply for each class implementing regulations. The implementing regulation annex is with respect to minimum age and training of the pilot depending on expected three months thereafter. There will be a two-year transition the class. Class one drones must be certified by the BCAA. regime, extending the validity of existing authorisations and Member On 11 September 2018 the new Basic Regulation on aviation safety States’ options to suspend certain open category requirements. rules came into force including, for the first time, a new section Issues for drones (Unmanned aircraft or UAS). Until recently all UAS weighing less than 150kg were regulated at national level, creating Member States remain competent to create no/restricted drone zones. disparate rules throughout the EU Member States. Now competence There will be a high volume of drones which will need to be registered. for all drones, including small drones (less than 150kg) has been Many of the small drones are now not registered. transferred to the EU. The European Commission is now preparing The main challenge is still the U-space and the unmanned traffic implementing and delegated regulations. It is foreseen that those management systems. will enter into force early 2019 with a two-year transition regime. Other regulatory authorities will need to work together on safety issues. Two further Regulations are planned: the delegated regulation regarding the technical requirements on consumer drones and an implementing regulation setting out the requirements concerning all Acknowledgment drones and drone operations that are risk-based and proportionate The authors would like to thank Willem De Vos for his invaluable and taking into account the principles of proportionality as well assistance in the writing of this chapter. Willem specialises in as measures to mitigate the risks of drones operations in open and Commercial Law, Competition Law, Internet Law and Intellectual specific categories. Property Law. Changes to Basic Regulation He obtained a Master of Law degree in 2009 (Catholic University The basic regulation confers powers on the Commission to adopt of Leuven) as well as a degree in European Competition Law and implementing regulations and delegated regulations (Chapter III, intellectual property rights in 2010 (University of Liège, cum laude). Section VII). In its annex IX the Basic regulation contains essential He was also the winner of the 2010 Lamy Moot Court competition requirements for drones – the starting point for design, production, organised by the French Competition Authority. maintenance and operation, generic requirements for all drones and more Willem De Vos has been a member of the Bar of Brussels since detailed requirements for classes subject to certification or declaration. 2010. He joined Monard Law in 2014. Draft Drone Regulations Tel: +32 2 234 67 10 / Email: [email protected]. The two draft regulations are still subject to formal consultation.

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Birgitta Van Itterbeek Tine Bogaerts Monard Law Monard Law Tervurenlaan 270 Tervurenlaan 270 1150 Brussels 1150 Brussels Belgium Belgium

Tel: +32 2 234 67 10 Tel: +32 2 234 67 10 Email: [email protected] Fax: +32 2 280 47 79 URL: www.monardlaw.be/uk Email: [email protected] URL: www.monardlaw.be/uk Belgium Birgitta Van Itterbeek (1965, Leuven) advises and litigates in the following Tine Bogaerts (1982) specialises in Commercial Law. areas: She has a Master of Law degree (Catholic University of Leuven, 2005) ■■ , particularly Aviation Law, with a specific focus on and a Master’s degree in Criminology (University of Leuven-la-Neuve). aircraft finance and leasing, regulatory and insurance matters. Tine Bogaerts is a member of the Brussels Bar. ■■ including secured and unsecured financing, project, Recently she enrolled in the LL.M. programme ‘European Competition asset and structured finance, leasing and acquisition finance. Law & Economics’ at the Brussels School of Competition, where she ■■ Insurance Law, with a specific focus on directors’ liability and errors and is attending high-level lectures on the most factual competition topics. omissions insurance, reinsurance and retrocessions and regulatory issues. She regularly advises airlines, charter companies and lessors. She has also counselled Belgian and foreign companies, venture capital funds and banks on matters of acquisition finance and secured and unsecured lending and leasing. Birgitta regularly assists reinsurance and insurance companies. Birgitta regularly publishes papers on selected topics in the field of Aviation Law and financing and is frequently invited to speak at seminars. She was selected by Who’s Who Legal of Aviation Lawyers and Business Lawyers, The Legal 500, IFLR and The Expert Guide as a world-leading aviation lawyer. She is a member of Women on Board. She is a member of the Brussels Bar.

Monard law is a full-service independent Belgian law firm with around 90 lawyers, of which there are 30 partners (including associate partners). It is established in four different cities, namely Brussels, Antwerp, Ghent and Hasselt. Monard Law offers a comprehensive range of legal services to both local and foreign corporations as well as governments, financial institutions and private individuals. It has a leading aviation practice which is primarily focused on aircraft finance, but also deals with regulatory issues and litigation. Birgitta Van Itterbeek is widely recognised as a leading practitioner and her aviation practice is ranked tier 3 by The Legal 500 and individually as a leading individual by Who’s Who Legal, The Legal 500, IFLR and The Expert Guide. The firm has a very strong Corporate and M&A practice consisting of about six partners with a strong focus on medium size companies and is ranked by The Legal 500 as a tier 3 law firm. It is further recognised for its healthcare and life science, real estate, banking & finance, litigation, tax and white-collar crime expertise.

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Brazil Guilherme Amaral

ASBZ Advogados Beatriz Giacomini

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

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

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The document that supports the installation of the engine on such 1.9 What legislative and/or regulatory regime applies to aircraft must be registered with ANAC and in such condition that air accidents? For example, are there any particular there is no exposure to title annexation. In order to mitigate risks, rules, regulations, systems and procedures in place owners and financiers of engines must request the registration of which need to be adhered to? any deal involving the engine in the Brazilian Aeronautical Registry.

Investigations of air accidents are conducted by the Aeronautical Accidents Investigation and Prevention Centre (CENIPA), the 2.5 What (if any) are the tax implications in your investigations being conducted in accordance with Annex 13 of the jurisdiction for aircraft trading as regards a) value- Chicago Convention. added tax (VAT) and/or goods and services tax (GST),

and b) documentary taxes such as stamp duty; and Brazil (to the extent applicable) do exemptions exist as 1.10 Have there been any recent cases of note or other regards non-domestic purchasers and sellers of notable developments in your jurisdiction involving aircraft and/or particular aircraft types or operations? air operators and/or airports? The tax implications of aircraft trading depends on several aspects The main recent development is the concession of airports for private such as whether the trade is local or overseas; the type (fare code groups, leading to relevant investments and the modernisation of the classification) and finality/usage of the aircraft; if the owner is main terminals in the country, as well as a relevant increase on the located in Brazil or abroad; if there is leasing or not, etc. cost to rent areas on such airports. After major events such as the As a general rule, VAT and GST are levied; however, depending on FIFA World Cup and the Olympic Games, when Brazil started going the intended transaction, tax benefits may apply (e.g. tax exemptions, through a major crisis triggered by both an enormous corruption lower tax rates); special customs regimes may also be an alternative scandal and several economic issues, some of the airports that to make the transaction more efficient from a tax perspective. went through concession processes faced financial challenges and Please note that VAT and GST are composed of different taxes, currently some of the concessions are at risk. charged at Federal, State, and Municipal levels. Accordingly, the context of each case must be considered in order to appraise the 2 Aircraft Trading, Finance and Leasing impacts in the legislation of each tax. Brazil does not have a documentary tax per se; however, licences and formal registers may be necessary; in this case, fees can be 2.1 Does registration of ownership in the aircraft register charged. constitute proof of ownership?

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

Yes, among several other international Conventions regulating 2.2 Is there a register of aircraft mortgages and charges? multiple aspects of aviation, Brazil is a signatory to the main ones Broadly speaking, what are the rules around the such as Montreal, Geneva, and Cape Town. operation of this register? Moreover, the Brazilian Supreme Court recently determined the prevalence of the Montreal Convention in light of the Consumer Every change in aircraft ownership, including any register of Protection Code, in cases involving air transportation contracts. mortgages and charges, must be made through the Brazilian Aeronautical Registry and must be reported to ANAC for the purposes of article 72 of the Brazilian Aeronautical Code. 2.7 How are the Conventions applied in your jurisdiction?

2.3 Are there any particular regulatory requirements The international conventions are signed by the President and which a lessor or a financier needs to be aware of as then must be ratified by the Brazilian Parliament and through the regards aircraft operation? publication of a decree, they become part of the local legal system, applicable in the country. Historically, Courts challenged several For operations based on dry lease or wet lease contracts, a copy of aspects of the International Conventions applying local law in case the contract must be presented to ANAC for an evaluation of the of a conflict. The recent decision from the Supreme Court regarding conditions of the contract and its parties to carry out the operation the prevalence of the Montreal Convention was a major change to of the aircraft. this and brought relevant safety in terms of the application of the Conventions in Brazil.

2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests 2.8 Does your jurisdiction make use of any taxation in a single engine are at risk of automatic transfer or benefits which enhance aircraft trading and leasing other prejudice when installed ‘on-wing’ on an aircraft (either in-bound or out-bound leasing), for example owned by another party? If so, what are the conditions access to an extensive network of Double Tax Treaties to such title annexation and can owners and financiers or similar, or favourable tax treatment on the disposal of engines take pre-emptive steps to mitigate the risks? of aircraft?

Every aircraft’s change, such as the exchange of engines and other For the leasing and trading of aircraft, there is a specific regime for parts, must be registered with ANAC, under the terms of local each type of air transportation that will be carried out and specific regulation. provisions must be observed at the time of acquisition.

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Brazil has double tax treaties with 34 countries. Besides that, the on the evidence presented, and the possibility to reverse the effects VAT is only levied in case of aircraft trading, however when it of the provisional remedy are among the points to be evaluated to comes to aircraft leasing, such tax is not applied. grant such decision, which may include payments, orders to do or not to do something, and to anticipate the production of evidence that could be at risk if left for future stages of litigation. 3 Litigation and Dispute Resolution The same diversity of decisions is possible during the final stages of litigation, before courts or arbitral tribunals. 3.1 What rights of detention are available in relation to aircraft and unpaid debts? 3.6 Are there any rights of appeal to the courts from the Brazil decision of a court or arbitral tribunal and, if so, in According to the Brazilian Aeronautical Code, a creditor may seize what circumstances do these rights arise? the aircraft in compliance with a judicial order in case of contractual default. Thereby, the seizure of an aircraft can be sought before The decision of a first-level court may be subject to appeal, even Court on the basis of documents evidencing the debt. if the appeal is based exclusively on the disagreement of one of the parties with the contents of the decision. Even intermediate 3.2 Is there a regime of self-help available to a lessor decisions are subject to interlocutory appeals. From second degree or a financier of an aircraft if it needs to reacquire decisions, the right to appeal to superior courts is more limited and it possession of the aircraft or enforce any of its rights will only be possible under two circumstances: violation of Federal under the lease/finance agreement? Law (STJ); and violation of the Federal Constitution (STF). The Special Courts cannot analyse facts and proofs. Apart from the regular judicial procedures that could lead In arbitration, the arbitral decision is not subject to appeal to the to repossession, Brazil is also a signatory to the Cape Town Arbitral Tribunal and a review depends on the existence of material Convention which provides that in case of a breach of an agreement, error, obscurity, doubt, contradiction or omission. Furthermore, an a lessor or financier is entitled to request withdrawal of registration arbitration decision can only be reviewed by the in very of the aircraft and promote its due exportation. specific cases.

3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For 4 Commercial and Regulatory example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases are brought? 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors?

In Brazil, there is no court specialising in aviation disputes. Generally, The joint ventures between airline competitors in Brazil are subject aviation cases would be filed before the Civil Courts, but the value to approval by ANAC, the National Civil Aviation Agency, and of the dispute will influence the exact Civil Court. If the amount CADE, the antitrust agency. claimed does not exceed 40 times the Brazilian minimum wage, the lawsuit can be filed before the Small Claims Court. However, if the value of the case exceeds that amount, the claim must be filed before 4.2 How do the competition authorities in your a Civil Court. Criminal cases are always brought before a specific jurisdiction determine the ‘relevant market’ for the Criminal Court, separated from the Civil Courts. purposes of mergers and acquisitions?

There are two main aspects for the definition of the relevant market 3.4 What service requirements apply for the service of in Brazil for the purposes of mergers and acquisitions: the product; court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties? and the geography. ■ The first one is the evaluation of which product canbe To file a lawsuit in Brazil, some requirements must be met such as considered a competitor or a substitute (non-stop flights or adding connecting flights in case of intercontinental flights, complete information on the parties: mainly address and taxpayer’s for instance). ID; the factual and legal grounds of the claim; the amount requested; and the description of the evidence by which the plaintiff intends to ■ The geographical aspect is the evaluation of where the market power can be relevant (which routes are affected, for prove the truth of the alleged facts. Payment of court fees is usually instance). mandatory. These rules apply to all airlines, regardless of whether they are domestic or foreign carriers. 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from 3.5 What types of remedy are available from the courts regulatory agencies? or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis? In accordance with Federal Law 12,529/2011 (Brazilian Competition Law), in any transaction, for both Brazilian and foreign investors, an In Brazil, a jurisdiction known for a huge volume of litigation and approval by Brazil’s Administrative Council for Economic Defence for long-lasting judicial proceedings, there are provisional remedies, (CADE) is necessary prior to the closing of the transaction if certain basically to protect the effects of the final decision to be granted in thresholds are met. In such cases, CADE will grant regulatory the longer term. Urgency, likelihood of a positive outcome based clearance before closing.

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airports are: access to their data; correction of incomplete, inaccurate 4.4 How does your jurisdiction approach mergers, or outdated data; portability of the data to other service providers; acquisition mergers and full-function joint ventures? and elimination of their personal data.

Any concentration act submitted to CADE and to ANAC will be evaluated considering the definition of the relevant market, but 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the considering the competition effects. The approach for mergers, data and are there any applicable sanctions? acquisitions and full-function joint ventures is really similar. Historically, Brazil is a friendly jurisdiction for mergers and Based on the provision that consumer data is confidential, in case acquisitions in the airline business, but joint ventures, even though of data loss, sanctions may be applied based on provisions of the Brazil there is no relevant regulatory limitation, are not a very common Consumer Protection Code, and carriers could be liable on a case- business model. by-case basis for damages caused to each particular passenger. Once the new Brazilian General Data Protection Law comes into 4.5 Please provide details of the procedure, including time force in 2020, airlines will have to notify the supervisory authority frames for clearance and any costs of notifications. and the data subject of the occurrence of a data loss that may result in any relevant risk or damage to the data subjects. The airlines will be The concentration acts to be presented to CADE in Brazil that are subject to administrative sanctions varying from a simple warning subject to the ordinary procedure should be decided within 240 to fines of up to 2% of the sales revenue of the legal entity of private days, but that deadline may be extended for another 90 days through law, group or conglomerate in Brazil in its last fiscal year, limited, in a justified decision. the aggregate, to 50 million Brazilian Reais per infraction. Other acts, that are considered less complex and are qualified for summary approval, will be analysed within 30 days. 4.10 What are the mechanisms available for the protection In both cases, the companies must provide detailed information of intellectual property (e.g. trademarks) and other about the parties, the timing, the exact kind of deal, the amounts assets and data of a proprietary nature? involved and the relevant market share information. This filing currently has a cost of roughly GBP 20,000.00. The regulatory agency responsible for the regulation and supervision of intellectual property in Brazil is INPI (National Institute of Intellectual Property). A company wishing to register a new trademark 4.6 Are there any sector-specific rules which govern the aviation sector in relation to financial support for air should verify with this agency (INPI) if there is a similar trademark operators and airports, including (without limitation) and file a formal request for the new trademark registration. state aid? After the approval, the trademark is registered with INPI, and the protection is effective before third parties. There are no relevant provisions on financial support for private air operators or airports, and Brazil has a significant track record on 4.11 Is there any legislation governing the denial of bankruptcy of airlines. boarding rights and/or cancelled flights?

4.7 Are state subsidies available in respect of particular The Brazilian Civil Code in articles 730 and 756 brings general routes? What criteria apply to obtaining these aspects about the transportation contract. Since March 2017, ANAC subsidies? resolution No. 400 brings the general terms and conditions of air transportation contracts that apply to flight delays, cancellations and Since 2015, the Brazilian Government has worked on measures to denied boarding (Chapter II, Section II of the Resolution). stimulate regional aviation, and some forms of subsidy on prices The usual protection includes, in case of a denied boarding, for fares on such routes, as well as exemption from airport taxes at the payment of an immediate compensation directly to the specific airports, are currently in place. passenger, reallocation for the next flight, and assistance including The main criteria for obtaining such subsidies is the operation of communications, food and lodging when applicable due to the routes in the regional market. period of time between the original and the new flight. The regulation also encourages the airline to seek to avoid such 4.8 What are the main regulatory instruments governing sanctions voluntarily. the acquisition, retention and use of passenger data, For cancelled flights, even though there is no punitive compensation and what rights do passengers have in respect of their data which is held by airlines and airports? to be paid immediately to the passengers, the assistance is basically the same. In Brazil, the protection of personal data of consumers, including passengers, is mainly based on the Federal Constitution, the Consumer 4.12 What powers do the relevant authorities have in Protection Code and the Civil Rights Framework for the Internet – relation to the late arrival and departure of flights? Federal Law n. 13,709/2018 (the latter, for data collected via the Internet). ANAC, the National Civil Aviation Agency, is the agency that In February 2020, the new Brazilian General Data Protection Law can penalise and impose fines on the air carriers. Such fines are will come into force and will become the main instrument governing mentioned in article 302, from the Brazilian Aeronautical Code, and the acquisition, retention and use of passenger data. The main rights also in ANAC Resolution No. 400. passengers will have in respect of their data held by airlines and Apart from such regulations, the volume of delays and cancellations is currently a relevant criterion for slot allocation.

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Passengers are also used to seeking indemnifications for such events from the Courts. 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

4.13 Are the airport authorities governed by particular There is no piece of law regulating such vertical integration but, legislation? If so, what obligations, broadly speaking, since the concession of airports is recent in Brazil, until now there are imposed on the airport authorities? was no case to be evaluated. Up to this point it would be hard to imagine such integration, due to the conditions on the auction of There is a specific piece of legislation governing the airport authorities airports and the requirements for a company to participate. But that (Federal Decree No. 7,554/2011), and most obligations are connected could be a scenario to be evaluated in the future in new rounds of Brazil to monitoring performance, participating in the development of new airport concession. plans for the airports, and administering compliance by the airports with all proper regulation. 4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your 4.14 To what extent does general consumer protection jurisdiction or operators of aircraft generally into and legislation apply to the relationship between the out of your jurisdiction? airport operator and the passenger? There is no requirement in our legislation regarding the nationality In Brazil, the Consumer Protection Code (Federal Law 8,078/1990) of the operator of aircraft or for the issuance of the Air Operator’s regulates any consumer relationship, whether regarding passenger/ Certificate. The absence of such a requirement can be seen in the air carrier or passenger/airport operator. Brazilian Aeronautical Code (Law 7,565/1986) and Crew Law (Law Additionally, in accordance with this code, liability for service 13,475/2017). These two laws only require that the operator of the failure, whether caused by the carrier or by the airport operator, will aircraft have the certificate issued by the Brazilian Civil Aviation be strict, and that does not eliminate the right of recourse one could authority, which is ANAC in amendment nº 7 of the Brazilian use against the other. Regulation of Civil Aviation nº 61. This agency reports which are Airports used to be administered by the government through Infraero, the requirements and necessary documents for the issuance of the and due to the consequences of such fact for the development of a certificate. lawsuit, most passengers would not include the airport in a claim. With the concession of the airports to private operators, that is changing and against airports are becoming more common. 5 In Future Lastly, concerning passenger protection, in February 2020, new Brazilian General Data Protection Law will aim to protect the 5.1 In your opinion, which pending legislative or fundamental rights of freedom, privacy and consumer protection. regulatory changes (if any), or potential developments Accordingly, the personal information of the passenger to the affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of airlines and the airport itself cannot become public. attention in the next two years or so?

4.15 What global distribution suppliers (GDSs) operate in The new president, taking office on January 2019, is a liberal and your jurisdiction? stated most of his actions are likely to be reducing the State’s role on the economy, which may ease some of the expected changes for The main GDSs that operate in Brazil are Amadeus, Sabre, aviation. The new Aeronautical Code is still the main change likely TravelSpan, CMNet and Mysky. to happen during the next year that may have a significant impact on operations for the entire industry. The foreign ownership limitation 4.16 Are there any ownership requirements pertaining to is a topic that is also close to a significant change, and should be part GDSs operating in your jurisdiction? of the new code or could be addressed separately. The arrival of international low cost carriers and the liberal approach There are no specific requirements regarding GDS operation. of the new government suggest Brazil will keep, or even increase the speed on the process of reducing regulation and opening the market for new business models.

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

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

Guilherme is the head of the firm’s aviation practice and is recognised Beatriz has more than three years of experience in the firm’s litigation by Latin America and The Legal 500 Latin America. He is and consumer law practice. She has worked with a wide range of also recognised as a distinguished lawyer in the aviation sector by the matters and has developed an excellent rapport with legal departments Brazilian legal publication Anuário Análise Advocacia 500. He actively of large companies. She has successfully handled litigation and participates in discussions regarding this sector in governmental and administrative issues for the civil aviation industry representing private forums in Brazil and abroad. He graduated with a Bachelor of national and international companies. Laws from Pontifícia Universidade Católica de São Paulo (PUC-SP) and has been assisting Brazilian and international clients on regulatory and litigation matters for more than 15 years.

We build genuine and long-lasting partnerships with our clients. We are straightforward and direct, working closely with them to cater to their every need. Our services are focused on achieving the best results. We strive to be the change the market needs and clients are looking for. We are open and flexible. Following ethical standards, we provide whatever is required to find the best possible solutions to a wide range of challenges. Our responsible performance offers focused, secure and assertive opinions: our business focus is exactly where our client’s goals are. Practice Areas: Antitrust; Arbitration and Mediation; Commercial Contracts; Consumer Law; Corporate; Insolvency, Restructuring and Debt Recovery; Investment Funds; Labour; Litigation, Prevention and Dispute Resolution; Mergers and Acquisitions; Project Finance; Real Estate and Litigation; Social Security and Executive Compensation; Tax; and Wealth Management. Sectors: Aviation; Banking; the Credit and Debit Card Industry; Energy; Logistic and Cargo Transportation; Pharmaceuticals; Retail and Consumer Products; and Sports and Entertainment.

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British Virgin Islands Michael Gagie

The Maples Group Rebecca Lee

thereof, as a commercial undertaking, in a manner which 1 General recognises its role as an international airport and for the benefit of the economy of the BVI; 1.1 Please list and briefly describe the principal ■ to acquire, own, operate, control, manage, develop, administer legislation and regulatory bodies which apply to and/ and maintain any designated airport in the BVI as a commercial or regulate aviation in your jurisdiction. undertaking and for the benefit of the economy of the BVI; ■ to provide and maintain on a commercial basis, facilities and The principal aviation legislation applicable in the British Virgin services for air transport and such other facilities and services Islands (“BVI”) is as follows: as are necessary or desirable for, or in connection with, the international airport or any designated airport; 1. the Air Navigation (Overseas Territories) Order 2013, as amended (“ANOTO”); ■ to collect such dues and charges as the BVIAA may be authorised (by an enactment) to collect; 2. the Overseas Territories Aviation Requirements (“OTAR”); ■ to use, develop and manage on a commercial basis, all lands 3. the Airports Act 2003 (“AA”); vested in, transferred or leased to, the BVIAA; 4. the Mortgaging of Aircraft and Aircraft Engine Act, 2011; ■ generally to carry out the provisions of the AA; and and ■ to do anything that is incidental to or connected with the 5. the Mortgaging of Aircraft and Aircraft Engines Regulations, objectives of the BVIAA. 2012. The ANOTO is the highest level of civil aviation regulation applicable in the United Kingdom (“UK”) overseas territories, 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? including the BVI. It is administered by the Air Safety Support International (“ASSI”), a not-for-profit, wholly-owned, subsidiary company of the UK Civil Aviation Authority (“CAA”). An air carrier must have its principal place of business in the BVI in order to apply for an air operator certificate (“AOC”) and be Historically, airports in the BVI were run by a government involved in commercial air transport. An AOC indicates that its department (the Department of Civil Aviation in the Ministry of holder is competent to secure the safe operation of aircraft (of the Communication), which handled both the operation and regulation types specified thereunder) on flights (of the description and for the of airports in the BVI. After the passing of the AA and incorporation purposes specified thereunder). of the BVI Airports Authority (“BVIAA”), a limited liability company, both functions are now separated with the BVIAA owning The air carrier must complete its application for an AOC to the and operating all airports within the BVI, while the ASSI handles Governor (as defined below) not less than 90 days before the date the regulation of airports in the BVI. of intended operation, unless a shorter period is acceptable to the Governor. In order to qualify for an AOC, the air carrier must ASSI satisfy all of the conditions under the ANOTO and requirements The key functions performed by the ASSI are: under the OTAR; that is, an AOC will be issued to an air carrier if: ■ overseeing the UK overseas territories in relation to aviation 1. its principal place of business is located within the BVI; matters; 2. it meets the applicable requirements of Subpart B under the ■ providing a cohesive system of civil aviation safety regulation OTAR; in the UK overseas territories; and 3. the accountable manager for the operation is a person ■ supporting existing authorities in the UK overseas territories competent to take overall responsibility for the operation and through processes by which aircraft operators, aviation safety of each flight operated; personnel and providers of related services gain approvals, 4. its nominated postholders required by the OTAR (paragraph licences and certificates, including air traffic control (as 119.53(a)(1) and (2)) are fit and proper persons; and described in the OTAR under the ANOTO). 5. the granting of such AOC is not contrary to the interests of BVIAA aviation safety. The objectives of the BVIAA are (as described in s5 of the AA): “Governor” means the person for the time being administering the ■ to acquire, own, operate, control, manage, develop, administer government of the BVI and includes any person as being designated and maintain the international airport and any extension to such functions under the ANOTO.

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1.3 What are the principal pieces of legislation in 1.10 Have there been any recent cases of note or other your jurisdiction which govern air safety, and who notable developments in your jurisdiction involving administers air safety? air operators and/or airports?

The ASSI is the main air safety regulator responsible for overseeing No, there have not been any recent cases of note regarding notable the BVI’s international aviation safety obligations and agreements, developments in the BVI. including the conduct of quality control activities, in accordance with the OTAR under the ANOTO. 2 Aircraft Trading, Finance and Leasing

1.4 Is air safety regulated separately for commercial, cargo and private carriers? 2.1 Does registration of ownership in the aircraft register constitute proof of ownership?

No, these fall under the ASSI. British Virgin Islands The BVI has a US Federal Aviation Authority Category One aircraft register status under the International Safety Assessment programme 1.5 Are air charters regulated separately for commercial, and aircraft may be registered in the BVI bearing aircraft registration cargo and private carriers? prefix “VP-L” (namely, the Virgin Islands Aircraft Register). Part 2 of the ANOTO describes the relevant registration and marking No, these fall under the ASSI. requirements, with guidance from Part 47 of the OTAR. Upon successful application to the Governor, a certificate of 1.6 As regards international air carriers operating in your registration will be issued relating to an aircraft including details jurisdiction, are there any particular limitations to be such as the relevant aircraft type, the manufacturer’s serial number aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, and registration mark, etc. Issuance of such certificate indicates restrictions and taxes which apply to international but that its holder is considered to be qualified for registration and may not domestic carriers. therefore be considered evidence of ownership.

There are restrictions on foreign aircraft operations as described 2.2 Is there a register of aircraft mortgages and charges? under Part 15 of the ANOTO. Restrictions with respect to carriage Broadly speaking, what are the rules around the for valuable consideration in aircraft registered outside of the BVI and operation of this register? the applicable filing and approval of tariffs are detailed under s135 and s136, while s137 deals with restrictions on aerial photography, Following the implementation of the Mortgaging of Aircraft and aerial survey and aerial work in aircraft registered outside of the BVI. Aircraft Engine Act, 2011 and the Mortgaging of Aircraft and Aircraft Engines Regulations, 2012, aircraft and engines (owned by 1.7 Are airports state or privately owned? or otherwise in the lawful possession of a BVI business company) may also be made the subject of a mortgage for the purposes of registration in the Register of Aircraft Mortgages and the Register Airports in the British Virgin Islands are State owned. The BVIAA of Aircraft Engine Mortgages, respectively. Note that a mortgagee owns and operates all airports in the BVI (Terrance B. Lettsome in such circumstances shall not be deemed to be the owner of the International Airport, Taddy Bay Airport and Auguste George relevant aircraft or aircraft engine. Airport), North Sound Water and various helipads. The Mortgaging of Aircraft and Aircraft Engines Regulations, 2012 also provide for filing of priority notices (such priority notices are 1.8 Do the airports impose requirements on carriers to be entered into the Register of Aircraft Mortgages and/or the flying to and from the airports in your jurisdiction? Register of Aircraft Engine Mortgages, as the case may be) which reserves and protects a particular priority position for a prospective This is not applicable. mortgage for 14 days – i.e. this priority will be valid over any mortgages of that aircraft or aircraft engine made on or after the date 1.9 What legislative and/or regulatory regime applies to of the priority notices. These are maintained by the registrar who is air accidents? For example, are there any particular a public officer designated by the minister under the Mortgaging of rules, regulations, systems and procedures in place Aircraft and Aircraft Engine Act, 2011. which need to be adhered to? In addition to the Register of Aircraft Mortgages and the Register of Aircraft Engine Mortgages, it is possible to further protect a Provisions under the ANOTO (including use of flight recording lender in an aircraft transaction involving security created either by systems and preservation of records in the event of air accidents, BVI holding companies owning aircraft (“BVI AC Holdco(s)”), or as well as implementation of flight data monitoring programme in respect of issued shares in a BVI AC Holdco, notwithstanding and mandatory occurrence reporting) will apply together with the absence of statutory perfection requirements to recognise the regulations under the OTAR, in line with the requirements of ICAO validity or enforceability of such security. Annex 13 (please see question 2.7 on the Chicago Convention). The following filings and notations will ensure that a lender is Aircraft accident and incident investigations are required to conferred with priority against unsecured creditors and subsequent be carried out by the ASSI in the BVI, supported by the UK Air secured creditors: Accidents Investigation Branch (“UK AAIB”). The objective of the ■ where a BVI AC Holdco creates a relevant charge under UK AAIB is to determine circumstances and causes of an accident section 163 of the BVI Business Companies Act (as or incident in order to make safety recommendations for prevention amended) (the “BVI Act”), for example, an aircraft mortgage purposes within the UK and its overseas territories.

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– particulars of the charge may be filed with the Registry of Civil Aviation Organisation on developing frameworks within Corporate Affairs (the “Registry”) for a fee of US$200. The international air transport (i.e. ICAO’s Standards and recommended particulars of the charge will then be placed on the BVI AC Practices or SARPS) and such provisions extend to the UK overseas Holdco’s corporate records at the Registry to put third parties territories (including the BVI) and are reflected in the ANOTO. on constructive notice of the existence of such security. The filing also acts as a priority determinant vis-à-vis subsequent The OTAR are vehicles for the application of relevant SARPS filed security in respect of the same secured asset andthe within the BVI legal system. An example would be the State Safety claims of unsecured creditors; and Programme for the UK Overseas Territories of Anguilla, BVI, ■ where a lender has taken security over the issued shares of Montserrat and St. Helena published by the ASSI. a BVI AC Holdco then it is advisable for a notation to be Another notable convention would be the New York Convention on placed on the BVI AC Holdco’s register of members which the Recognition and Enforcement of Foreign Arbitral Awards 1958 evidences the existence of the share security. Again, this acts to which the BVI is, by order-in-council from the UK, a party. The as a method of giving notice to third parties of the existence BVI courts are required by law to enforce, without re-examination of such share security if they review the register of members. of the merits of the case or re-litigation of the matters arbitrated British Virgin Islands It is also possible, where the commercial parties agree, for the annotated register of members of the BVI AC Holdco to be upon, such award. However, enforcement of such award may be filed publicly with the Registry and thereby recorded on the refused if the person against whom it is invoked proves: BVI AC Holdco’s corporate records at the Registry. ■ that a party to the arbitration agreement was, under the law applicable to that party, under some incapacity; ■ that the arbitration agreement was not valid under the law to 2.3 Are there any particular regulatory requirements which the parties subjected it or, if there was no indication of which a lessor or a financier needs to be aware of as regards aircraft operation? the law to which the arbitration agreement was subject, under the law of the country where the award was made;

There are no regulatory requirements in the BVI outside of those ■ that the person was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise described above. unable to present his case; ■ that the award deals with a difference not contemplated by or 2.4 As a matter of local law, is there any concept of title not falling within the terms of the submission to arbitration annexation, whereby ownership or security interests or contains decisions on matters beyond the scope of the in a single engine are at risk of automatic transfer submission to arbitration; or other prejudice when installed ‘on-wing’ on an ■ that the composition of the arbitral authority or the arbitral aircraft owned by another party? If so, what are the procedure was not in accordance with the agreement of the conditions to such title annexation and can owners parties or if there was no such agreement, with the law of the and financiers of engines take pre-emptive steps to mitigate the risks? country where the arbitration took place; or ■ that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of There is no local law covering this issue. the country in which, or under the law of which, it was made.

2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- 2.8 Does your jurisdiction make use of any taxation added tax (VAT) and/or goods and services tax (GST), benefits which enhance aircraft trading and leasing and b) documentary taxes such as stamp duty; and (either in-bound or out-bound leasing), for example (to the extent applicable) do exemptions exist as access to an extensive network of Double Tax Treaties regards non-domestic purchasers and sellers of or similar, or favourable tax treatment on the disposal aircraft and/or particular aircraft types or operations? of aircraft?

Under BVI law, VAT, GST and stamp duty are not applicable in the No. Please see question 2.5. BVI for aircraft trading, finance and leasing. Further, companies incorporated or registered under the BVI Act are 3 Litigation and Dispute Resolution currently exempt from income and corporate tax; in addition, the BVI does not levy capital gains tax on those companies. 3.1 What rights of detention are available in relation to aircraft and unpaid debts? 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and The rights of detention exercisable over aircraft in the BVI include Cape Town)? aircraft liens and the right to detain, sell, or cause to be forfeited, under the ANOTO and Proceeds of Criminal Conduct Act, 1997. The BVI is neither signatory nor party by extension from the UK to the main international Conventions listed above. 3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire 2.7 How are the Conventions applied in your jurisdiction? possession of the aircraft or enforce any of its rights under the lease/finance agreement? Though not listed under question 2.6, the Chicago Convention places responsibility on all contracting States (including the This is not applicable. UK) to implement programmes as identified by the International

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Civil proceedings are commenced by filing originating documents 3.3 Which courts are appropriate for aviation disputes? with the ECSC (including a claim form or originating application in Does this depend on the value of the dispute? For the case of insolvency proceedings). A claimant has six months to example, is there a distinction in your jurisdiction serve the filed claim form in the BVI, or 12 months in the case of regarding the courts in which civil and criminal cases are brought? service outside the BVI.

Commercially significant civil litigation is tried by a Judge sitting 3.5 What types of remedy are available from the courts without a in the High Court of the Eastern Caribbean Supreme or arbitral tribunals in your jurisdiction, both on i) an Court (the “ECSC”). The ECSC is the superior court of record for the interim basis, and ii) a final basis? BVI and eight other English common-law Caribbean jurisdictions. Aviation disputes would be heard in the ECSC and most likely within The BVI court has jurisdiction to grant interim remedies which the Commercial Division of the Eastern Caribbean Supreme Court include: sitting in the BVI, which deals with commercial claims with a value a) an interim declaration; British Virgin Islands of at least US$500,000 or claims which the Commercial Division b) an interim injunction; Judge considers to be of a commercial nature even if the monetary c) an interim freezing order; value requirement has not been satisfied. Commercial claims include d) an order directing a party to provide information about the claims relating to business contracts, companies, partnerships, location of property which is the subject of a claim (“relevant insolvency, trusts, insurance and reinsurance, mercantile agency and property”) or assets or to provide information about relevant usages, the carriage of goods by sea, air or pipeline, banking and property or assets which are or may be the subject of an financial services and arbitration. Court proceedings are conducted application for a freezing order; in accordance with the Eastern Caribbean Rules e) an order for a specified fund to be paid into court or otherwise 2000, as amended (“CPR”), and the Commercial Division has its secured where there is a dispute over a party’s right to the own set of rules and practice directions which supplement the CPR fund; for the effective resolution of commercial disputes. f) an order directing a party to prepare and file accounts relating For criminal cases, the ’ Court in the BVI has jurisdiction to the dispute; to try summary offences only, i.e. offences that are triable either g) an order for interim costs; way and that have not been committed up to the ECSC for trial. h) an order for the: The ECSC, which usually sits to hear criminal matters three times a ■ carrying out of an experiment on or with relevant property; year, is the superior court of record for indictable offences where the defendant has been committed up for trial. There are no specialised ■ detention, custody or preservation of relevant property; criminal courts for particular crimes. ■ inspection of relevant property; In November 2016, the BVI International Arbitration Centre opened ■ payment of income from relevant property until a claim is for the purpose of facilitating commercial arbitration in the BVI. decided; ■ sale of relevant property (including land) which is of a perishable nature or which for any other good reason it is 3.4 What service requirements apply for the service of desirable to sell quickly; and court proceedings, and do these differ for domestic ■ taking of a sample of relevant property; airlines/parties and non-domestic airlines/parties? i) an order authorising a person to enter any land or building in the possession of a party to the proceedings for the purpose For domestic airlines/parties, being a company incorporated in of carrying out an order listed at (h) above; the BVI (“BVIco”), service of a document may be effected on the BVIco by addressing the document to the BVIco and leaving it at, j) an order permitting a party seeking to recover personal property to pay a specified sum of money into court pending or sending it by a prescribed method to (a) the BVIco’s registered the outcome of the proceedings and directing that, if the party office, or (b) the office of the BVIco’s registered agent. The does so, the property must be given up to the party; prescribed methods are: k) an order restraining a party from: a) by properly addressing, preparing and posting an envelope containing the document to the address for service; ■ dealing with any asset whether located within the jurisdiction or not; and b) by personal service; ■ removing from the jurisdiction assets located there; c) by direct delivery to the secretary or clerk of the BVIco’s registered agent; and l) an order to deliver up goods; d) by email attaching the document provided that: (a) the m) an order requiring a party to admit another party to premises original of the document shall be sent by post; and (b) it shall for the purpose of preserving evidence, etc.; not matter whether the document was served in a scanned n) the appointment of a receiver where it is just or convenient to or other form so long as it is legible and in the form of the do so; and original document. o) an order for payment by a defendant on account of any For foreign airlines/parties, being a company incorporated out of damages, debt or other sum which the court may find the the BVI “Non-BVIco”, service of a claim form may be done out defendant liable to pay. of the BVI with the permission of the ECSC. Once permission The BVI court can also grant free-standing injunctive relief in is obtained, the service process must comply with the laws and support of foreign court proceedings and foreign arbitrations regulations of the Non-BVIco’s jurisdiction of incorporation or without the need for substantive proceedings in the BVI. the country in which the Non-BVIco is to be served, which service As to final remedies, the BVI court can grant a wide variety of legal may require the involvement of foreign government, judicial and and equitable remedies including damages, injunctions, specific consular authorities. performance, rescission, rectification and declaratory relief.

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Section 33 of the BVI Arbitration Act 2013 makes interim remedies in a foreign jurisdiction. BVI Companies are frequently parties to available in arbitrations heard in the BVI unless the parties agree joint venture arrangements. otherwise. Section 43 of the BVI Arbitration Act 2013 permits the ECSC to grant interim measures in relation to any arbitral 4.5 Please provide details of the procedure, including proceeding which have need or are to be commenced in or outside time frames for clearance and any costs of the BVI and such interim measures are not subject to appeal. notifications.

3.6 Are there any rights of appeal to the courts from the This is not applicable. decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? 4.6 Are there any sector-specific rules which govern the aviation sector in relation to financial support for air Civil and criminal appeals from the ECSC are made to the Court of operators and airports, including (without limitation) Appeal of the ECSC and then, ultimately, to the Judicial Committee of state aid? British Virgin Islands the Privy Council in England. Such appeals to the Privy Council are either as of right following a substantive appeal or require permission The BVI does not have such rules. of the Court of Appeal of the ECSC. For the Court of Appeal of ECSC to grant such leave, the applicant needs to show that the question involved in the appeal is one of great general or public importance or 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these otherwise ought to be submitted to the Privy Council for determination. subsidies? It is possible to apply for special leave of Her Majesty in Counsel if permission from the Court of Appeal of the ECSC is not granted. This is not applicable. Appeals to the Court of Appeal of the ECSC are either as of right following a substantive decision that is determinative of the proceedings (e.g. following a trial) or require permission from 4.8 What are the main regulatory instruments governing the ECSC or the Court of Appeal of the ECSC in the case of the acquisition, retention and use of passenger data, and what rights do passengers have in respect of interlocutory decisions. their data which is held by airlines and airports? Pursuant to the BVI Arbitration Act 2013, parties to an arbitration agreement can agree to include a provision on the right to appeal There is currently no data protection legislation in the BVI though the final award to the ECSC on a . However, such the BVI courts will observe English common law principles (e.g. a an appeal is only possible with the agreement of all the other parties duty on confidentiality and privacy) which are highly persuasive, to the arbitral proceedings or with leave of the ECSC and where the though not binding. arbitral tribunal has given reasons for its award. The ASSI follows the information security policies and procedures of the CAA including measures to safeguard against unauthorised 4 Commercial and Regulatory or unlawful processing of personal data, and against accidental loss or destruction of, or damage to, personal data. In particular, these policies cover the secure management and controlled access 4.1 How does your jurisdiction approach and regulate to information, business continuity, information rights, management joint ventures between airline competitors? and privacy, and cyber security – for example, policy statement 51 deals with safety date/information protection sharing and exchange There is no relevant competition or other regulatory law legislation consistent with ICAO Annex 19. in the BVI. A user of the ASSI can request for information or make an enquiry about how the ASSI has processed his/her personal information 4.2 How do the competition authorities in your under the General Data Protection Regulation (GDPR) and expect a jurisdiction determine the ‘relevant market’ for the response within a month following the date of receipt by the ASSI of purposes of mergers and acquisitions? all the information necessary to deal with such request.

The BVI does not have a competition authority. 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the 4.3 Does your jurisdiction have a notification system data and are there any applicable sanctions? whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from The ANOTO provisions for safety management system and flight regulatory agencies? data monitoring, including mandatory occurrence reporting, detail the obligations on airlines for proper data maintenance. These are There is no such regime under the BVI law. supported by guidelines under the OTAR.

4.4 How does your jurisdiction approach mergers, 4.10 What are the mechanisms available for the protection acquisition mergers and full-function joint ventures? of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? Subject to the provisions of its memorandum of association and articles of association and the BVI Act, a BVI business company The BVI has a local patents and trade marks registry. can merge with one or more BVI business companies, or foreign The Patents Act 1906, together with the Patent Regulations 1906 companies, and the surviving entity may be domiciled in the BVI or set out the procedure and requirements for the registration of

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patents and the rights and powers that those who register them hold, including those who may apply to register a patent and the form by 4.17 Is vertical integration permitted between air operators which an application must be made. Patents accepted by the BVI and airports (and, if so, under what conditions)? Registrar of Trade Marks, Patents and Copyright will be advertised in the BVI Gazette. This is not applicable. The Trade Marks Act, 2013, together with the Trade Marks Rules, 2015 provide for the registration and protection of trade marks in 4.18 Are there any nationality requirements for entities the BVI, and related matters including the assignment and charge applying for an Air Operator’s Certificate in your of trade marks. Trade Marks accepted by the BVI Registrar of jurisdiction or operators of aircraft generally into and Trade Marks, Patents and Copyright will be advertised in the BVI out of your jurisdiction? Gazette, and a certificate of registration will be issued to the relevant applicant which is prima facie evidence of such person’s right to the Please see question 1.2 in relation to requirements for application exclusive use of the trade mark. of an AOC. British Virgin Islands

4.11 Is there any legislation governing the denial of 5 In Future boarding rights and/or cancelled flights?

This is not applicable. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in 4.12 What powers do the relevant authorities have in your jurisdiction, are likely to feature or be worthy of relation to the late arrival and departure of flights? attention in the next two years or so?

This is not applicable. The BVI remains well placed to meet demand via its role as the vehicle (i.e. a BVI AC Holdco) in the financing, acquisition and leasing of aircraft. In addition to the use of a BVI business company 4.13 Are the airport authorities governed by particular in aircraft trading, finance and leasing structures, recent amendments legislation? If so, what obligations, broadly speaking, to the BVI Act have expanded the use of segregated portfolio are imposed on the airport authorities? companies (“SPC”) beyond licensed insurers and professional, private or public funds. The SPC can now, among other operations, Please see question 1.1 in relation to the BVIAA. engage in property development and management of an aircraft. This provides more options and flexibility for the aviation industry. 4.14 To what extent does general consumer protection Brexit implications should be followed closely given the BVI’s legislation apply to the relationship between the current commitments and obligations under its status as a European airport operator and the passenger? Union overseas country and territory via its UK overseas territory status. This is not applicable.

4.15 What global distribution suppliers (GDSs) operate in Acknowledgment your jurisdiction? The authors are grateful to Aisling Dwyer for her contribution to this chapter. Aisling is a partner in the Maples Group’s Dispute VI Airlink, also known as Virgin Islands Airlink, is a BVI airline with Resolution & Insolvency team and works in the Hong Kong office. a fleet of three aircraft registered in the BVI which uses GCS (global She specialises in complex, high-value, international cross-border consolidation services) under an agreement with Hahn Air Systems. litigation involving BVI and Cayman entities and/or assets, and Effectively, this allows VI Airlink which has no GDS presence of acts in some of Asia’s largest offshore corporate, insolvency/ its own to be distributed in all GDSs under the reservation code H1 restructuring and shareholder disputes. i.e. all VI Airlink flights marketed via H1 are therefore available on Tel: +852 3690 7449 / Email: [email protected]. major GDSs including Amadeus, Apollo, Sabre and Travelsky.

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

This is not applicable.

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Michael Gagie Rebecca Lee The Maples Group The Maples Group 1 Raffles Place 1 Raffles Place #36-01 One Raffles Place Tower One #36-01 One Raffles Place Tower One Singapore 048616 Singapore 048616

Tel: +65 6922 8402 Tel: +65 6922 8405 Fax: +65 6222 2236 Fax: +65 6222 2236 Email: [email protected] Email: [email protected] URL: www.maples.com URL: www.maples.com

Michael Gagie is the Managing Partner of The Maples Group’s legal Rebecca Lee is a member of The Maples Group’s legal services services team in Singapore and Global Head of the British Virgin Corporate and Finance groups in Singapore with a particular focus Islands law practice. Michael practises both British Virgin Islands and on the aviation industry. She has represented various financiers,

British Virgin Islands Cayman Islands law and his experience and areas of practice cover borrowers and lessors on a wide range of asset financing and leasing corporate, downstream private work, commercial, banking and transactions. structured finance. Rebecca joined The Maples Group in 2017. Prior to that, she was with Michael joined the Maples Group in 2010. He was previously head Clifford Chance in Tokyo, Hong Kong and Bangkok. of the Hong Kong office of an offshore firm having relocated to Hong Kong from the British Virgin Islands in 2006. Prior to moving offshore, Michael worked for Weil, Gotshal & Manges and Simmons & Simmons in London. He also spent time on secondment at the London Stock Exchange and as in-house counsel with Shell International Limited. Michael has been ranked as a leader in his field in Chambers Global, IFLR1000 and Who’s Who Legal.

Established in 1968, the leading international legal services team of The Maples Group advises global financial, institutional, business and private clients on the laws of the British Virgin Islands, the Cayman Islands, Ireland, Jersey and Luxembourg. With offices in key jurisdictions around the world, the Maples Group has specific strengths in areas of corporate commercial, finance, investment funds, litigation and trusts. Maintaining relationships with leading legal counsel in each business centre, the Group leverages this local expertise to deliver an integrated service offering for global business initiatives. For more information, please visit: maples.com.

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Canada Robert Quon

Dentons Canada LLP Stacy Shields

of such a government, or a corporation or entity that is 1 General incorporated or formed under the laws of Canada or a province, that is controlled in fact by Canadians and of which at least 51% of the voting interests are owned and 1.1 Please list and briefly describe the principal controlled by Canadians and where (i) no more than 25% legislation and regulatory bodies which apply to and/ of the voting interests are owned directly or indirectly or regulate aviation in your jurisdiction. by any single non-Canadian, either individually or in affiliation with another person, and (ii) no more than 25% The Federal Minister of Transport (the “Minister”) is responsible of the voting interests are owned directly or indirectly for all matters pertaining to aviation in Canada. There are two by one or more non-Canadians authorised to provide an principal pieces of legislation through which the Minister governs air service in any jurisdiction, either individually or in aviation: the Aeronautics Act; and the Canada Transportation Act affiliation with another person”; and (the “CTA”). The Aeronautics Act and its associated regulations, ■ the Transportation Modernization Act amended the the Canadian Aviation Regulations (the “CARs”) and the definition of “Canadian” for corporations such that for Canadian Aviation Security Regulation, 2012 (the “Canadian passenger and cargo air transportation the threshold of Aviation Security Regulation”) governs all civil aviation. The possible foreign ownership is increased from 25% to CARs regulate areas such as the certification of air carriers and 49%, with certain safeguards; airports with respect to operational standards, the accreditation and ■ holds a Canadian aviation document in respect of the service licensing of aviation personnel, and the application in Canada of the to be provided under the licence; Convention on International Civil Aviation. The Canadian Aviation ■ has the prescribed liability insurance depending on which Security Regulation regulates the screening of passengers and safety service the carrier is providing; and requirements for airports and aircraft. ■ meets the prescribed financial requirements. The Minister is responsible for overseeing the Canadian Non-Canadian carriers may be eligible to hold a domestic licence if, Transportation Agency (the “Agency”), which is the regulator of in the opinion of the Minister, it is in the public interest to permit federally regulated modes of transportation (air, rail, and marine), an them to hold a licence. For scheduled or non-scheduled international aeronautical authority and a quasi-judicial tribunal with the powers licences, a non-Canadian carrier may be eligible to hold a licence if it: of a superior court. The Agency is responsible for: developing rules ■ for scheduled international services, has been designated by a to regulate transportation service providers and users and facilitate foreign government to operate an air service under the terms accessible transportation; resolving disputes by facilitation, of a bilateral agreement; mediation, arbitration and ; and providing information ■ holds, in respect of the air service to be provided, a document on the transportation system. issued by a foreign government that is equivalent to a scheduled or non-scheduled international service licence; 1.2 What are the steps which air carriers need to take in ■ holds a Canadian Foreign Air Operator Certificate; and order to obtain an operating licence? ■ has the prescribed liability insurance.

Section 57 of the CTA requires, inter alia, that no person shall 1.3 What are the principal pieces of legislation in operate an air service unless, in respect of that service, the person your jurisdiction which govern air safety, and who holds a licence. Section 59 of the CTA prohibits any person from administers air safety? marketing or selling in Canada an air service without a licence. The Agency issues operating licences in Canada for: domestic; The Minister is responsible under the Aeronautics Act to administer scheduled; and non-scheduled international service. air safety through Transport Canada (“TC”) and the CARs. The In order to obtain a domestic, scheduled or non-scheduled Canadian Transportation Accident Investigation and Safety Board international service operating licence, a carrier is required to Act (the “CTAISB”) establishes the Canadian Transportation submit an application and establish that it: Accident Investigation and Safety Board (the “CTSB”). The CTSB is ■ is a Canadian, which is defined in section 55 of the CTA as: independent of TC and is responsible for conducting investigations, ■ “a Canadian citizen or a permanent resident as defined in identifying safety deficiencies, and making recommendations to TC subsection 2(1) of the Immigration and Refugee Protection designed to eliminate or reduce safety deficiencies. The CTSB does Act, a government in Canada or an agent or mandatary not have the authority to implement safety measures.

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The Canadian Criminal Code, which was last amended on September 19, 2018, contains several offences prohibiting the unsafe operation 1.8 Do the airports impose requirements on carriers of an aircraft. Depending on the legislation, air safety offences flying to and from the airports in your jurisdiction? could lead to fines and possibly imprisonment. The requirements imposed on carriers flying to and from airports in Canada will vary according to the airport; however, the general 1.4 Is air safety regulated separately for commercial, requirements include: cargo and private carriers? ■ payment of landing and parking fees (such tariff of fees and charges will vary with the airport authority); No. Air safety is not regulated separately for commercial, cargo and ■ payment of pre-security fees;

Canada private carriers in Canada. ■ provision of financial security through a security deposit, letter of credit, or pre-payment for aeronautical charges; 1.5 Are air charters regulated separately for commercial, ■ execution of an airport improvement fee agreement that cargo and private carriers? requires the carrier to collect from passengers and remit the fee; and Yes. A carrier that is offering international charter services must ■ execution of agreements, leases and/or licences for the use of obtain a licence from the Agency for non-scheduled international airport facilities. service. All carriers must obtain a permit from the Agency to As an incentive, carriers introducing a new service/destination may operate a charter. The Air Transportation Regulations (the “ATR”) qualify for a reduction on the tariff of fees and charges from the of the CTA regulate the terms and conditions of charter contracts for airport authority. both international (Non-US) charters and charters between Canada and the US (Transborder). 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular 1.6 As regards international air carriers operating in your rules, regulations, systems and procedures in place jurisdiction, are there any particular limitations to be which need to be adhered to? aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, restrictions and taxes which apply to international but The governing legislation for air accidents in Canada is the CTAISB. not domestic carriers. CTAISB regulations require a carrier to report as soon as possible all accidents in which: The transportation of goods and passengers between two points ■ a person sustains injury or death as a result of being on within Canada is generally reserved for domestic carriers. Certain the aircraft, coming into direct contact with any part of the bilateral agreements and Canada-US Open Skies permit international aircraft, being directly exposed to a jet blast, rotor down wash carriers to serve points in third countries with fifth freedom rights or propeller wash; or and the carriage of own stopover traffic (passengers) between points ■ where the aircraft sustains significant damage or is missing or in the territory of the other party. Canada-US Open Skies permits inaccessible. cargo services to be operated between any point in either Canada Section 705.07(2)(l) of the CARs also requires every carrier to have or the US. an air operator emergency response plan that includes, inter alia, Generally, international carriers deriving income from the operation information on: of aircraft in international traffic on agreed services will not be ■ air operator mobilisation and agencies notification; subject to Canadian income tax on that income provided the ■ passenger and crew welfare; home jurisdiction of that carrier grants substantially similar relief ■ accident investigation on behalf of the air operator; to Canadian carriers. Such reciprocity can also apply to customs ■ air operator team’s response to the accident site; duties, taxes, and inspection fees for (i) baggage cargo and mail, (ii) ■ preservation of evidence; aircraft, its regular equipment, spare parts (including engines), fuels, oil, and lubricants, (iii) aircraft stores on board such aircraft if such ■ claims and insurance procedures; and equipment and items remain on board the aircraft, are carried into ■ emergency response training. Canada and intended to be used on part of the journey performed over Canada, and (iv) spare parts (including engines) introduced 1.10 Have there been any recent cases of note or other into Canada for maintenance or repair. notable developments in your jurisdiction involving air operators and/or airports? 1.7 Are airports state or privately owned? The Transportation Modernization Act, which received royal assent Airports in Canada were originally owned and operated by the on May 23, 2018, amended several sections of the CTA and changed Government of Canada prior to 1994. The National Airport Policy the definition of “Canadian” by lowering the requirement of voting was introduced to privatise the operation of Canada’s airports. interests required to be owned and controlled by Canadians from After 1994 all airports in national, provincial, territorial capitals and 75% to 51% for passenger and cargo air transportation, with certain those with more than 200,000 passengers a year were deemed to be safeguards. No single foreign investor may hold more than 25% National Airport System (“NAS”) airports. By 2003, the operation voting interest of a Canadian air carrier; no combination of foreign of nearly all NAS airports was transferred to local authorities under air carriers can own more than 25% of a Canadian air carrier. lease from TC. Non-NAS airports are owned and operated by The Transportation Modernization Act will introduce a new locally-based airport authorities, local municipalities or provincial passenger bill of rights, which will require the Agency to make and territorial governments. regulations requiring air carriers to compensate passengers for flight

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delays, cancellations and boarding denials. In October 2018, the territories. Generally, to register in each, the make, model, year Agency released a report summarising the input it received from and serial number of the aircraft’s airframe, engines, propellers and Canadians over the course of its national consultations on new air other major components will be required. passenger protection regulations. The three-month consultation process gave interested parties a variety of channels for providing 2.4 As a matter of local law, is there any concept of title information, ideas and suggestions. The Agency is now developing annexation, whereby ownership or security interests regulations based on the input received and has stated that in a single engine are at risk of automatic transfer finalisation of the regulations is a key priority, and it is expected that or other prejudice when installed ‘on-wing’ on an this will happen in a matter of months. The regulations will require aircraft owned by another party? If so, what are the approval from both the Agency and the Governor in Council. conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to Canada Bombardier succeeded in its panel review of the Final Affirmative mitigate the risks? Countervailing Duty Determination made by the US Department of Commerce, International Trade Administration, respecting 100 to Personal property security legislation is generally uniform across 150-Seat Large Civil Aircraft from Canada. The US Department Canada, but some differences exist across provinces and territories of Commerce had imposed duties of 292.21% in December 2017. with respect to the rules on validity and enforcement of secured However, the US International Trade Commission ruled in January transactions. In addition, each province and territory has its own 2018 that Boeing was not materially injured or threatened by the sale regime. References in this question 2.4 to the PPSA of 75 CSeries (now renamed A220) to Delta Airlines and reversed are to the Personal Property Security Act (British Columbia). the duties issued by the US Department of Commerce. An aircraft engine installed on the wing of an aircraft would be an “accession” under the PPSA. A person with a security interest in 2 Aircraft Trading, Finance and Leasing an engine, arising before or after the engine is so installed, may in certain circumstances maintain the priority of its security interest in the engine after it has become an accession. There is a risk that 2.1 Does registration of ownership in the aircraft register the security interest will be subordinated to the interest, security or constitute proof of ownership? otherwise, of a person in the aircraft as a whole (each an “Other Party”), including a purchaser for value without notice. Registration of ownership in the Canadian Civil Aircraft Registry Because of the detailed provisions of the PPSA relating to accessions, of TC does not constitute proof of ownership. Sections 202.13(2) there are several ways in which this risk can materialise. However, and 202.35 of the CARs requires that every individual or entity that the risk can generally be mitigated by ensuring that a security interest has legal custody and control of an aircraft be registered in Canada. in the engine has been attached prior to the engine being installed on However, the Canadian Civil Aircraft Register only constitutes proof the aircraft, and in any event is perfected concurrently with attachment of legal custody and control of the aircraft; it does not constitute (note that a financing statement may be filed in advance of a security proof of legal ownership. agreement being signed). In addition, there are other prudent steps that can be taken to notify Other Parties of the security interest in the 2.2 Is there a register of aircraft mortgages and charges? engine owned by a party other than the aircraft owner. Broadly speaking, what are the rules around the operation of this register? 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- There is no national registry for recording security interests in aircraft added tax (VAT) and/or goods and services tax (GST), or aircraft components. For the registration of security interests in and b) documentary taxes such as stamp duty; and personal property, nine provinces and three territories have enacted (to the extent applicable) do exemptions exist as a Personal Property Security Act (“PPSA”) and Quebec has its regards non-domestic purchasers and sellers of Register of Personal and Movable Real Rights under the Civil Code aircraft and/or particular aircraft types or operations? of Quebec. It is important to note that a security interest registered in one province will not necessarily supersede a security interest The tax consequences associated with the acquisition or disposition registered later in another province. It is, therefore, important to of an aircraft will vary depending on the intended use for the aircraft register a security interest in the relevant provinces/territories, at the time it is acquired and whether the aircraft owner is an especially if the aircraft will be operated interprovincially. individual or corporation. Canada is a “Contracting State” for purposes of the Cape Town Generally, where an aircraft is acquired for the purpose of resale Convention and Protocol and has enacted the International Interests (e.g. purchased by a dealer) it will be characterised as inventory and in Mobile Equipment (Aircraft Equipment) Act, as amended by the any profit or loss realised on a subsequent sale will be treated as Jobs and Growth Act, 2012, in order to implement the Cape Town ordinary business income or loss and subject to income taxes at the Convention and Protocol, in conjunction with legislation adopted dealer’s tax rate. The tax rate will vary depending on whether the in all Canadian provinces and territories. All security interests taxpayer is a corporation or an individual. that qualify as international interests (as defined by the Cape Town If the aircraft is purchased with the intent of using it in business Convention) should also be registered at the International Registry. activities carried on by the person acquiring it (e.g. purchased by a business that flies its employees to remote locations), then it will be 2.3 Are there any particular regulatory requirements considered to be a capital asset used in a business and the business which a lessor or a financier needs to be aware of as owner may deduct a portion of the purchase price as capital cost regards aircraft operation? allowance (“CCA”) (depreciation for tax purposes) each year along with the costs of operating the aircraft. A subsequent sale of the Without a national registry in Canada, it is important to register a aircraft will produce either a loss or a gain depending on the selling security interest in an aircraft in each of the relevant provinces and price and the undepreciated capital cost (“UCC”) of the aircraft.

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In most cases, a loss will be treated as an ordinary business loss gains arising from the disposal of aircraft operated principally in deductible for tax purposes in determining the profit or loss from a international traffic. business. The portion of the selling price above the UCC that does not exceed the original purchase price of the aircraft, is considered to be recaptured CCA which is treated as ordinary business income. 3 Litigation and Dispute Resolution If the selling price exceeds the original purchase price of the aircraft, then the difference between the original purchase price and the 3.1 What rights of detention are available in relation to selling price is calculated as a capital gain. Half of the capital gain aircraft and unpaid debts? is included in the business owner’s income as a taxable capital gain, and in addition to any recaptured CCA, will be subject to taxation at

Canada In addition to the normal remedies available to creditors under the vendor’s tax rates. Canadian law, airport authorities and Nav Canada have the statutory Goods and services tax (“GST”), harmonised sales tax (“HST”), right to apply to the superior court of the province in which the Quebec sales tax (“QST”) and provincial sales taxes (“PST”) must aircraft is owned or operated to obtain an order of the court also be considered. In general, on acquisition of the aircraft, either authorising seizure and detention of the aircraft under section 9(1) GST and PST, HST, QST or GST only will be charged by a vendor (if of the Airport Transfer (Miscellaneous Matters) Act and section registered for GST/HST or QST purposes) to the purchaser depending 56(1) of the Civil Air Navigation Services Commercialization Act. on the province or territory the aircraft is supplied in (subject to certain narrow exceptions such as when the aircraft is sold to a non-resident 3.2 Is there a regime of self-help available to a lessor of Canada or supplied as part of a business and the parties file a joint or a financier of an aircraft if it needs to reacquire election). A business owner may be able to recover the GST/HST or possession of the aircraft or enforce any of its rights QST paid as an input tax credit (and input tax refund, in Quebec) if under the lease/finance agreement? the purchaser is registered for GST/HST or QST purposes with the Canada Revenue Agency (or “Revenu Québec”). There is a regime of self-help available to a lessor or financier of an aircraft; however, this regime will vary by province and territory. 2.6 Is your jurisdiction a signatory to the main Most provincial regimes provide for a lessor who has a “true lease”, international Conventions (Montreal, Geneva and that is, a lease not subject to a PPSA, to retain the services of a Cape Town)? bailiff to seize the aircraft in accordance with the terms of the lease. If the lease is not a “true lease” and falls under the PPSA, the ability Canada has ratified both theConvention Unification of Certain Rules of the lessor to enforce its rights under the lease agreement will Relating to International Carriage by Air (Montreal Convention depend on its priority position relative to other secured creditors. 1999) and the Cape Town Convention. Canada is not a signatory to the Convention on International Recognition of Rights in Aircraft 3.3 Which courts are appropriate for aviation disputes? (Geneva Convention). Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases 2.7 How are the Conventions applied in your jurisdiction? are brought?

The Montreal Convention 1999 is implemented in Canada by the There is no designated court for aviation disputes in Canada. Carriage by Air Act. The Cape Town Convention is implemented Each province has a provincial court and a superior court. Each by the International Interests in Mobile Equipment (Aircraft provincial court has a monetary limit on the claims that can be Equipment) Act, as amended by the Jobs and Growth Act, 2012, brought in a provincial court. Superior courts have no monetary which sets out the necessary regulatory and policy changes needed to limit on claims. Claims should be brought in the province that has facilitate Canada’s participation in the Cape Town Convention. All a real and substantial connection to the dispute. Federal Courts of of the provinces have similarly adopted corresponding legislation. Canada decide legal disputes arising in the federal domain. The Geneva Convention has no application in Canada.

3.4 What service requirements apply for the service of 2.8 Does your jurisdiction make use of any taxation court proceedings, and do these differ for domestic benefits which enhance aircraft trading and leasing airlines/parties and non-domestic airlines/parties? (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties There are different service requirements for each province and level or similar, or favourable tax treatment on the disposal of aircraft? of court. In most of the common law provinces, a court order is not required to serve a party who resides outside of the jurisdiction (ex juris). Parties to a dispute must follow the rules of court applicable Lease payments made by a Canadian resident to a non-resident are to the level of court in the jurisdiction in which they commence subject to Canadian withholding taxes of 25%, unless reduced by an their dispute. applicable tax-treaty. For example, the Canada-US Tax Treaty reduces the withholding tax on lease payments to 10% in certain circumstances. Gains from the disposal of aircraft will not be taxable in Canada 3.5 What types of remedy are available from the courts unless they arise from the disposition of business property or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis? attributable to a permanent establishment in Canada. Where an aircraft is operated in international traffic, many of Canada’s treaties provide an exemption for profits earned by a resident of Canada in Courts in Canada can award a variety of monetary remedies against foreign states, even if the business is carried on through a permanent a defendant, including damages and costs. An award of costs allows establishment in that other state. Similar treaty exemptions exist for a successful party to recover some of their expenses in bringing the

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lawsuit, including full reimbursement for reasonable disbursements, which includes expert fees. Legal fees are subject to a tariff which 4.2 How do the competition authorities in your usually works out to only a fraction of actual legal fees incurred. jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? Most superior courts also have the ability to order remedies on an interim basis including injunctions, which compel a party to do or refrain from specific acts, and interim judgments such as orders to Generally, the relevant market will be determined by the Competition freeze assets that are the subject matter of the proceeding. Bureau with a view as to whether the carriers involved in a merger and acquisition can be said to prevent or lessen competition Most commercial agreements contain terms requiring that the substantially within the industry or among sources or outlets of the parties proceed to arbitration to resolve any disputes that may arise industry. The relevant market as it relates to the airline industry may under the agreement. Generally, parties will incorporate provincial differ depending on the merger and acquisition event. In certain Canada legislation into their agreement in order to establish a forum for the circumstances, it may be as narrow as a route-by-route basis or arbitration and to give the arbitrator quasi-judicial powers so that he cargo transport, or in other circumstances as broad as the aviation or she can make final and binding decisions. Arbitrators can grant sector depending on the market power exercised. interim relief if justified. However, in Canada, the law is unclear on whether arbitrators can award injunctive relief at all. 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain 3.6 Are there any rights of appeal to the courts from the regulatory clearance/anti-trust immunity from decision of a court or arbitral tribunal and, if so, in regulatory agencies? what circumstances do these rights arise? The Competition Act provides for the issuance of an advance ruling In the common law provinces, there are rights of appeal to the courts certificate (“ARC”) where the Commissioner of Competition is from the decision of a lower court or arbitral tribunal. In general, an satisfied that there are no significant competition law issues. An ordinary trial judgment does not require leave to appeal. In the case ARC will provide a one-year window for the parties to complete the of an arbitral tribunal, an appeal may arise with the parties’ consent, proposed transaction on substantially the same terms on which the absent any agreement to the contrary. Canada is a signatory of the ARC was issued without the Commissioner of Competition seeking Convention on the Recognition and Enforcement of Foreign Arbitral review by the Competition Tribunal. Awards (New York Convention). The Commissioner of Competition may, on request, issue a binding The Supreme Court of Canada (“SCC”) is the country’s final court of written opinion on the applicability of one or more provisions of appeal. The SCC will typically hear matters of national importance the Competition Act or regulations to a proposed action. These or matters of legal uncertainty. Leave must be granted by the SCC. opinions are binding if all the material facts submitted that informed the opinion remain unchanged. 4 Commercial and Regulatory 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? All merger transactions in Canada are subject to review by the Commissioner of Competition under the Competition Act. Joint ventures, alliance agreements, arrangements, and any form Generally, the Commissioner of Competition will assess whether the of coordination agreements between carriers are subject to review merger transaction has, or is likely to have, the effect of preventing by the Commissioner of Competition if they amount to anti- or lessening, substantially, competition in a definable market. competitive practice and are contrary to the Competition Act. The Transportation Modernization Act proposes amendments to the Certain transactions, however, require pre-notification to the Competition Act that will allow for arrangements between two or Commissioner of Competition. These include transactions of a more airlines to coordinate items such as scheduling and pricing specified monetary amount. As of 2018, transactions will require on certain routes. The airlines will be required, under proposed pre-notification: (1) when the target’s assets in Canada, or revenues legislation, to provide notice to the Minister and Commissioner of from sales in or from Canada generated from those assets, exceed Competition of the proposed arrangement, in accordance with yet- $92 million; and (2) when the combined Canadian assets or revenues to-be-drafted guidelines. This legislation was expected to come into of the parties and their respective affiliates in, from, or into Canada, force in 2018 but is not yet in force. exceed $400 million. Should the Commissioner of Competition determine that an The pre-notification provisions in the Competition Act also prompt arrangement is anti-competitive, it may refer the matter to the pre-notification requirements for the airline industry under the Competition Tribunal for civil prosecution. The consequences of CTA. The Agency has authority to review to determine whether violating the criminal or civil provisions of the Competition Act can the proposed transaction raises issues of public interest as it relates be severe. Criminal infractions can result in fines, imprisonment, to national transportation. In particular, the investment by an and prohibition orders. Civil infractions can result in orders to international airline in a Canadian airline may be blocked if there stop conduct, administrative monetary penalties, and orders to is a loss of Canadian control – that is, Canadian equity participation compensate consumers. It should be noted that arrangements drops below 51%. involving foreign entities may also trigger review and compliance with the Investment Canada Act.

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point of entry into Canada. Among other regulations, the Protection 4.5 Please provide details of the procedure, including of Passenger Information Regulations (SOR/2005-346), deals with time frames for clearance and any costs of how the CBSA deals with passenger name record information. notifications.

Parties to a transaction that requires pre-notification under the 4.9 In the event of a data loss by a carrier, what Competition Act and the CTA must provide notice and await the obligations are there on the airline which has lost the data and are there any applicable sanctions? expiration of the statutory waiting period before the transaction is completed. Under the Competition Act, the waiting period is 30 days unless the Commissioner of Competition provides a supplementary A carrier will be required to provide notice to individuals and to the

Canada information request. Under the CTA, the waiting period is 150 days. Office of the Privacy Commissioner of Canada about data breaches in The fee for pre-notification under the Competition Act is $72,000 certain circumstances. Generally, these situations include instances plus applicable administrative costs. An ARC issued under the where it is reasonable to believe that the breach creates a real risk Competition Act will similarly cost $72,000 plus applicable taxes. of significant harm to the individual. Notice must be provided as An ARC and pre-notification may be submitted in relation to the soon as possible and include sufficient information so as to allow same transaction at the same time and require payment of just one the individual to understand the significance of the breach and take fee. Written opinions from the Commissioner of Competition will steps to reduce the harm. If notice is provided to an individual, the cost $5,000 plus applicable taxes. carrier will be obligated to provide notice to any other organisation or government organisation the carrier believes may help reduce or mitigate the risk of harm. Failure to provide such notice could result 4.6 Are there any sector-specific rules which govern the in an offence punishable by a fine of up to $100,000. aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid? 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other Government funding in Canada exists for airports and for related assets and data of a proprietary nature? infrastructure projects through the Airports Capital Assistance Program. Government assistance is generally not available to Intellectual property, such as patents, trade-marks, or copyright, may airlines. However, governments have in the past provided loans and be protected under any one of the following pieces of legislation: other funding to companies in the aerospace sector. ■ Patent Act; ■ Trade-marks Act; 4.7 Are state subsidies available in respect of particular ■ Copyright Act; and routes? What criteria apply to obtaining these ■ Industrial Design Act. subsidies? In the airline industry, the Patent Act may protect such new and useful inventions to improve the in-flight experience. The Trade- Federal government subsidies are generally not available in respect marks Act may protect against the use of airline logos on so-called of particular routes in Canada. Provincial governments and “griping sites”. The Copyright Act generally protects original municipalities may subsidise particular routes through discounted works of authorship including literary, dramatic, and musical works. local fees and charges. Copyright may protect airline advertising campaigns.

4.8 What are the main regulatory instruments governing 4.11 Is there any legislation governing the denial of the acquisition, retention and use of passenger data, boarding rights and/or cancelled flights? and what rights do passengers have in respect of their data which is held by airlines and airports? There is currently no denial of boarding rights legislation in Canada. The Personal Information Protection and Electronic Documents Act With that said, airlines are required to include in their tariffs the (“PIPEDA”) governs the collection, use, and disclosure of personal airline’s policy with respect to compensation for denial of boarding information, and applies to the airline industry. Under PIPEDA, as a result of overbooking. The Agency will receive air travel individuals generally have a right to the information collected complaints including those related to overbooking. Complaints may by the airline and an airline may only use such information for be submitted online through the Agency website. As discussed in the purpose which it was collected. PIPEDA applies not only to question 1.10, the Agency will be introducing a passenger bill of Canadian airlines, but may in some circumstances apply to foreign rights that will cover various topics, inter alia, compensation for airlines with operations in Canada. PIPEDA allows for the filing denied boarding. of complaints with the Privacy Commissioner, which subsequently may result in an investigation and report with respect to the airlines’ 4.12 What powers do the relevant authorities have in compliance with Canadian privacy requirements. Generally, a relation to the late arrival and departure of flights? report of the Privacy Commission will include recommendations as to how the airline can come into compliance with PIPEDA. There is currently no legislation relating to the late arrival and the late The Aeronautics Act allows for the provision of information on departure of flights. Airlines are required to include in their tariffs airline passengers in the interests of transportation security. the airline’s policy with respect to the failure to operate the service or failure to operate on schedule, as well as refunds for service that With respect to airports, PIPEDA would generally be the governing an air carrier is unable to provide. The federal government has also act, except for when the airport is considered a government authority. developed a voluntary code related to passenger rights called Flight In which case the Privacy Act would apply. This also applies to Rights Canada. Although not law, the country’s largest carriers have Canada Border Service Agency (“CBSA”) for airports that act as a

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all adopted the code. Flight Rights Canada stipulates that passengers have a right to information on flight times and schedule changes, 4.17 Is vertical integration permitted between air operators and that airlines must make reasonable efforts to inform passengers and airports (and, if so, under what conditions)? of delays and schedule changes, and, to the extent possible, the reason for the delay or change. The Agency will receive air travel Absent a violation of the Competition Act, vertical integration is complaints including those related to delayed flights. permitted between air operators and airports. This is most often manifest through designated terminals for airlines at certain airports in Canada. Vertical integration is most common in the Canadian 4.13 Are the airport authorities governed by particular airline industry between airlines and tour operators. legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? Canada 4.18 Are there any nationality requirements for entities In Canada, airports are governed by the Aeronautics Act and applying for an Air Operator’s Certificate in your associated regulation. This legislation governs the building and jurisdiction or operators of aircraft generally into and out of your jurisdiction? operation of airports. The legislation is buttressed by the National Airports Policy, which defines the federal government’s role with airports as divided into two levels: nationally significant airports Air Operator Certification and the definition of “Canadian” has been that form NAS; and regional/local airports. Generally, all NAS discussed in question 1.2. Foreign Air Operator Certification may airports are operated on land leased from the federal government. be applied for under CTA and is addressed in sections 701.07 to These airports are, in turn, run by airport authorities, which are not- 701.11 of CARs. for-profit corporations headed by a board of directors composed of members nominated by different levels of government and other 5 In Future participating organisations such as boards of trade and labour organisations. Board members cannot be elected politicians or government authorities. Airport authorities in Canada must be self- 5.1 In your opinion, which pending legislative or sustaining and must devote their entire revenues to the operation and regulatory changes (if any), or potential developments development of the airports under their management. affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? 4.14 To what extent does general consumer protection legislation apply to the relationship between the In July 2017, TC revealed proposed amendments to regulations airport operator and the passenger? relating to UAVs (commonly known as drones), with significant changes for operators to address three key issues facing the industry in Consumer protection is generally a matter of provincial jurisdiction Canada: public safety; the lack of “regulatory predictability”; and the in Canada. Each province and territory has its own consumer administrative burden caused by the volume of special flight operating protection regime that covers deceptive or unconscionable acts or certificate (“SFOC”) applications with TC. The UAV Regulations practices. Consumer protection legislation is generally broad and have not been finalised; however, No. 8, introduced in there is no carve out for airport operators. advance of a complete regulatory scheme, does create some regulation with respect to drones, but not as extensively as what is proposed. The 4.15 What global distribution suppliers (GDSs) operate in completed regulatory scheme should change the method of regulating your jurisdiction? the potential risk associated with a given operation (from regulating the weight of the drone to the purpose of the flight). Currently, any drone GDS operators in Canada are required to provide comprehensive and operated for commercial or a research purpose requires a SFOC. Under neutral information in a non-discriminatory manner in accordance new proposed amendments, the drone’s weight and physical operating with the Canadian Computer Reservation Systems Regulations environment will dictate the applicable operation requirements, with (“CRS”). Most, if not all, major GDS systems operate in Canada five new categories of drones, and without distinguishing between including Amadeus, Sabre, and Travelport. recreational operators and commercial operators. As discussed in question 1.10, the Agency is developing a new 4.16 Are there any ownership requirements pertaining to passenger bill of rights requiring air carriers to compensate GDSs operating in your jurisdiction? passengers for flight delays, cancellations and boarding denials. This development is expected to be completed by the Agency before There are no ownership requirements pertaining to GDSs operating the end of 2018. in Canada. However, a GDS system vendor must allow any carrier the opportunity to use its system, subject to technical constraints Acknowledgment outside the control of that vendor. The authors would like to thank Jacob Schroeder and Eamonn Watson for their assistance in updating this chapter. Jacob is an articling student and Eamonn is a summer student at Dentons’ Vancouver office.

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

Tel: +1 604 691 4460 Tel: +1 604 691 4460 Fax: +1 604 683 5214 Fax: +1 604 683 5214 Email: [email protected] Email: [email protected] URL: www.dentons.com URL: www.dentons.com Canada Robert Quon is the lead partner in the Aviation and Aerospace sector in Stacy Shields is an associate in the Vancouver office of Dentons Dentons’ Vancouver office and co-leads the Corporate and Commercial Canada LLP. Stacy advises clients on a broad range of corporate and group of the Vancouver office. Robert offers clients a broad range commercial matters, including mergers and acquisitions, commercial of experience in corporate and commercial transactions, with an agreements, corporate governance and corporate structuring. Stacy emphasis on mergers and acquisitions, corporate reorganisations advises aviation clients on regulatory matters and all aspects of and business investments. Robert acts for national and international leasing, selling and buying aircraft. clients, particularly in aviation and aerospace.

With nearly 70 aviation lawyers and professionals and a law firm network in over 77 countries in 173 locations spanning Canada, Australia, Africa, Asia Pacific, Central Asia, Europe, the Middle East, Russia and the CIS, Singapore, the UK and the US, Dentons possesses in-depth aviation experience and capabilities on a global scale. Dentons is the first polycentric global law firm, having no single headquarters and no dominant national culture. Diverse in geography, language, and nationalities, Dentons proudly offers talent from diverse backgrounds and countries. Dentons is ranked among the top 10 law firms in the Acritas Global Elite Brand Index and was ranked number three among 319 law firms servicing Fortune 1000 companies by BTI Client Service A-Team in 2018.

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Cayman Islands Sherice Arman

The Maples Group Shari McField

must not be used for commercial operations (i.e. for hire or reward) 1 General unless an AOC is obtained or the aircraft falls within an Article 83 bis agreement. 1.1 Please list and briefly describe the principal Legislation legislation and regulatory bodies which apply to and/ The principal legislation which applies to and regulates aviation or regulate aviation in your jurisdiction. in the Cayman Islands is the Air Navigation (Overseas Territories) Order 2013 (“ANOTO”). The Cayman Islands are a British Overseas Territory. The Secretary of State of the United Kingdom government takes lead responsibility Other notable legislation pertaining to the aviation industry is as for ensuring that the Cayman Islands (and other overseas territories) follows: comply with the obligations of the Chicago Convention. The ■ Air Navigation (Fees) Regulations, 2010. Civil Aviation Authority of the United Kingdom has established a ■ Air Navigation (Overseas Territories) (Amendment) (No. 2) subsidiary company, Air Safety Support International (“ASSI”), Order, 2014. to oversee, support and promote aviation safety regulation in ■ Air Navigation (Overseas Territories) (Amendment) Order, its overseas territories, including the Cayman Islands. ASSI is 2014. responsible for supporting the UK’s overseas territories in all ■ Air Navigation (Overseas Territories) (Amendment) Order, aspects of aviation safety regulation. 2015. Regulatory Bodies ■ Air Transport (Licensing of Air Services) Regulations, 1977. The Civil Aviation Authority of the Cayman Islands ■ Aircraft (Landing and Parking Fees) Regulations (1995 Revision). The Civil Aviation Authority of the Cayman Islands (the “CAACI”) is the body responsible in the Cayman Islands for ensuring that civil ■ Airport Regulations (1995 Revision). aviation in the Cayman Islands conforms to the standards of the ■ Airports Authority Law (2005 Revision). International Civil Aviation Organization (“ICAO”). ■ Civil Aviation Act 1949 (Overseas Territories) Order 1969 SI The CAACI’s functions include the following: No. 592 of 1969. (a) the regulatory oversight of the aviation industry throughout ■ Civil Aviation Act 1982 (Overseas Territories) (No. 2) Order the Cayman Islands; 2001 SI No. 3367 of 2001. (b) the certification and licensing of aerodromes, heliports and ■ Civil Aviation Act 1982 (Overseas Territories) Order 2001 SI air transportation services; No. 1452 of 2001. (c) registration of aircraft (including maintenance of the Cayman ■ Civil Aviation Authority Law (2015 Revision). Islands Aircraft Register (the “Aircraft Register”) and the ■ Civil Aviation (Investigation of Air Accidents and Incidents) issuance, renewal, cancellation, revocation and variation of Regulations, 2016. certificates of airworthiness of aircraft; ■ Mortgaging of Aircraft Order, 1972. (d) the validation of crew and maintenance personnel licences; ■ Mortgaging of Aircraft Regulations, 2015. (e) the safety oversight of Cayman Islands Air Operator The Overseas Territories Aviation Requirements (“OTARs”) Certificate (“AOC”) holders; provide guidance to the aviation industry in the Cayman Islands (f) the issuance of air transport permits and operating licences (and other UK overseas territories) on the effective implementation for foreign registered scheduled and non-scheduled carriers of the standards and recommended practices under the Chicago operating in the Cayman Islands; Convention and the ANOTO. (g) the regulation of charges levied by airport operators; (h) acting as liaison between the Government of the Cayman Islands and the UK Department for Transport; and 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? (i) regulation of air traffic. It should be noted that the aircraft register maintained by the CAACI Application for an AOC must be made to the CAACI as the (the “Aircraft Register”) is primarily for aircraft undertaking competent authority in the Cayman Islands with responsibility for private use operations and aircraft registered on the Aircraft Register issuing an operator’s licences.

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The operation of aircraft on a foreign air operator’s certificate is permitted, however, the grant of air transport permits and operating 1.9 What legislative and/or regulatory regime applies to licences by the CAACI will be required for foreign registered air accidents? For example, are there any particular rules, regulations, systems and procedures in place scheduled and non-scheduled carriers to operate in the Cayman which need to be adhered to? Islands. There are minimum requirements that must be met for non-scheduled/charter air transport operations to the jurisdiction as There are extensive laws, regulations and guidelines that regulate well as scheduled/charter air transport operations to the jurisdiction the reporting and investigation of accidents and incidents that are together with payment of the applicable fees. In addition, companies applicable in the Cayman Islands. These include the following: that supply more than one-off ad hoc charters or who provide air a) ICAO Annex 13 Aircraft Accident and Incident Investigation. ambulance services can be issued with either a blanket permit or verification letter. b) The Civil Aviation Act 1982 (Overseas Territories) Order 2001 – Article 75.

Cayman Islands c) Memorandum of Understanding between the Governor and 1.3 What are the principal pieces of legislation in the UKAAIB 2006. your jurisdiction which govern air safety, and who administers air safety? d) Civil Aviation (Investigation of Air Accidents and Incidents) Regulations, 2016. The principal legislation in the Cayman Islands that governs air e) Air Navigation (Overseas Territories) Order 2013 – Articles 5, 7, 174, 175. safety is the ANOTO. The CAACI is responsible for administering air safety in the jurisdiction under the provisions of ANOTO and the f) Overseas Territories Aviation Requirement (OTAR) Part 13 Civil Aviation Authority Law (2015 Revision). Occurrence Reporting (OTAR 13 Issue 4 dated April 2012). g) Overseas Territories Aviation Circular (OTAC) 13-1 Occurrence Reporting (OTAC 31-1 Issue 4 dated July 2015). 1.4 Is air safety regulated separately for commercial, cargo and private carriers? The Manual of Aircraft Accident and Incident Reporting – Part I and Part II issued by the CAACI sets out in detail a summary of the legislation, regulations and guidelines relating to aircraft accident The CAACI regulates all aspects of safety in the aviation industry. and incident reporting. The Civil Aviation (Investigation of Air Accidents and Incidents) 1.5 Are air charters regulated separately for commercial, Regulations, 2016 provide for the Governor of the Cayman Islands cargo and private carriers? to, amongst other things, appoint a chief investigator to carry out investigations into accidents involving aircraft involved in civil Air charters are not regulated separately for commercial, cargo and aviation. Accidents, Serious Incidents and Incidents (each as defined private charters. in ICAO Annex 13 Aircraft Accident and Incident Investigation) are required to be reported and investigated. 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be 1.10 Have there been any recent cases of note or other aware of, in particular when compared with ‘domestic’ notable developments in your jurisdiction involving or local operators? By way of example only, air operators and/or airports? restrictions and taxes which apply to international but not domestic carriers. We are not aware of any cases dealing specifically with air operators The Airports Authority Law (2005 Revision) provides that one and/or airports. of the functions of the Airports Authority is to ensure airports in the Cayman Islands conform to the standards and recommended 2 Aircraft Trading, Finance and Leasing practices of ICAO. Pursuant to Article 135 of ANOTO, all foreign registered aircraft operating into the Cayman Islands for valuable consideration are 2.1 Does registration of ownership in the aircraft register required to be licensed to do so by the CAACI. constitute proof of ownership?

The registration of title to an aircraft on the Aircraft Register 1.7 Are airports state or privately owned? maintained by the CAACI constitutes proof of title to the aircraft. However, such evidence is not conclusive. Airports in the Cayman Islands are state-owned.

2.2 Is there a register of aircraft mortgages and charges? 1.8 Do the airports impose requirements on carriers Broadly speaking, what are the rules around the flying to and from the airports in your jurisdiction? operation of this register?

Airports in the Cayman Islands prescribe and regulate conditions Mortgage Registration of use, as well as charges. Users of airports are subject to charges, The CAACI maintains an aircraft mortgage register (the “Mortgage which are regulated by the Cayman Islands Airports Authority under Register”) in accordance with the Mortgaging of Aircraft the Airport Regulations (1995 Revision), the Airports (Security Regulations, 1979 (the “Mortgaging Regulations”), thereby Tax) Regulations (2016 Revision), the Airports Authority (Charges) offering a system for obtaining the priority and perfection of security Regulations, 2008 and the Airports Authority Law (2005 Revision). interests over aircraft. Registration on the Mortgage Register constitutes express notice to all persons of all facts appearing on the Mortgage Register.

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The Cape Town Convention came into force in the Cayman Islands Based on the example above, where an engine owned by one party on 1 November 2015 pursuant to the International Interests in is installed ‘on wing’ of any aircraft owned by another party, it is Mobile Equipment (Cape Town Convention) Law 2015 (the “Cape common market practice for relevant parties to require entry into Town Law”). As a result, there exists a dual system for perfection a contractual ‘recognition of rights’ agreement (which is typically and priority of security over Cayman Islands registered aircraft for governed by English law) as a condition to installing an engine on entities that qualify as follows: a different airframe. As noted previously, while aircraft engines are (i) where there is a registerable ‘international interest’ under the not capable of being registered with the CAACI, relevant parties are Cape Town Convention (as defined in the Cape Town Law), able to make filings on the International Registry under the Cape any such international interest in respect of an aircraft may be Town Convention in relation to engines. recorded on the international registration facilities established under the Cape Town Convention (the “International Registry”) for aircraft that meets the requirements under 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- the Cape Town Convention. In circumstances where an Cayman Islands international interest has been registered against an aircraft added tax (VAT) and/or goods and services tax (GST), that is registered with the CAACI in accordance with the Cape and b) documentary taxes such as stamp duty; and Town Convention, priority of a mortgage over that aircraft (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of will be determined solely by the filings on the International aircraft and/or particular aircraft types or operations? Registry. No additional registrations are required with the CAACI in relation to a mortgage over such aircraft; or The Cayman Islands currently has no form of income, corporate or (ii) if the Cape Town Convention does not apply, then the priority of a registered mortgage against the particular Cayman capital gains tax and no estate duty, inheritance tax or gift tax. Islands registered aircraft will be determined in accordance Customs duty may apply to an aircraft which is brought into the with registration on the Mortgage Register pursuant to the Cayman Islands from any other jurisdiction unless the Collector Mortgaging Regulations. (as defined in the Customs Law (2017 Revision) (the“Customs Priority Notices Law”)) has exercised his discretion pursuant to section 21(1) of the It is also possible to file a priority notice with the CAACI by filing Customs Law to permit the import of such aircraft free of duty, for the applicable documentation and paying the applicable fee. If retention in the Cayman Islands on a temporary basis with a view to the relevant mortgage is filed within 14 days of the date of such its subsequent exportation, for a period not exceeding six months or a priority notice, it will be deemed to have priority from the time such extended period as the Collector may authorise. when the priority notice was registered. 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and 2.3 Are there any particular regulatory requirements Cape Town)? which a lessor or a financier needs to be aware of as regards aircraft operation? The Cayman Islands are not signatory to the Montreal Convention As mentioned in question 1.1, the Aircraft Register is primarily or Geneva Convention. for aircraft undertaking private use operations and a separate Cape Town Convention air operator’s certificate must be obtained before undertaking The Cape Town Convention came into force in the Cayman Islands commercial operations. on 1 November 2015 pursuant to the International Interests in Taking physical possession of the aircraft is permitted under Cayman Mobile Equipment (Cape Town Convention) Law 2015. Islands law. Cayman Islands law recognises self-help remedies in The Chicago Convention the context of security interests in aircraft (often over the shares of While the Cayman Islands are not signatory to the Chicago the aircraft owning vehicle) without the need to obtain a court order Convention of 1944 on International Civil Aviation, certain (subject to any liens and other statutory detention or retention rights provisions thereof are reflected in the ANOTO. of third parties); however, it is open to the relevant enforcing party to seek a court order. Permission of the CAACI is not required prior to pursuing remedies 2.7 How are the Conventions applied in your jurisdiction? on enforcement. However, possession via either a transfer of title or change of details of the entity registered with the CAACI will Cape Town Convention require the cooperation of the CAACI (and as such compliance with The UK government ratified the Cape Town Convention with any transfer requirements of the CAACI). UNIDROIT on 27 July 2015. The Cape Town Convention entered into force for the UK, and by extension the Cayman Islands, on 1 November 2015. 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests The Cayman Islands Government passed enabling legislation in a single engine are at risk of automatic transfer entitling the Cayman Islands to international recognition as a or other prejudice when installed ‘on-wing’ on an territorial unit of a contracting state to the Cape Town Convention aircraft owned by another party? If so, what are the and to recognition of the declarations deposited by the UK conditions to such title annexation and can owners government on behalf of the Cayman Islands government with the and financiers of engines take pre-emptive steps to mitigate the risks? International Institute for the Unification of Private Law acting as depository pursuant to Article 62(1) of the Cape Town Convention and Article XXXVII(1) of the Protocol – UNIDROIT. While there is no concept of title annexation under Cayman Islands law, Cayman Islands law recognises the concept of accession which is similar to annexation.

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Chicago Convention aircraft or appoint a receiver. Both are self-help remedies (i.e. they As mentioned in question 2.6, the Cayman Islands are not a are methods by which a secured creditor can enforce its security, signatory to the Chicago Convention, but certain provisions thereof realise the assets secured and obtain the repayment of the debt are reflected in the ANOTO. outstanding). A receiver may be appointed by the secured creditor in accordance with the terms of the security document pursuant to which the appointment is to be made and without an order 2.8 Does your jurisdiction make use of any taxation of the court. The receiver acts principally in the interests of his benefits which enhance aircraft trading and leasing appointor and not for the general body of creditors. Receiverships (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties are governed exclusively by the terms of the documents and the or similar, or favourable tax treatment on the disposal common law. The powers granted to a receiver are therefore of aircraft? primarily derived from the security document(s) pursuant to which the receiver is appointed. The powers are usually wide and should Cayman Islands No, the Cayman Islands do not make use of any taxation benefits generally enable him to do all things necessary to realise the secured which enhance trading and leasing. property for the benefit of the secured creditor. In the unlikely event that the security documentation does not contain a right to appoint receivers (or the right is disputed or subject to doubt), the secured 3 Litigation and Dispute Resolution creditor may apply to the court for the appointment of a receiver. The Cape Town Convention also provides creditors with self-help 3.1 What rights of detention are available in relation to remedies. These remedies include: aircraft and unpaid debts? ■ taking possession or control of any aircraft; ■ selling or granting a lease of any aircraft; Under Cayman Islands law, rights to detain (or potentially sell) an ■ collecting or receiving any income or profits arising from the aircraft can arise under the common law or legislation. Such rights management or use of any aircraft; may arise in the following circumstances: ■ procuring the: (i) de-registration of the aircraft; and (ii) (a) Airport charges: aircraft can be detained and sold for non- export and physical transfer of the aircraft from the territory payment of airport charges; default of payment creates a in which it is situated; and statutory lien. ■ certain interim relief pending the determination of any claim. (b) Possessory lien: where a person has carried out work to an aircraft with the authorisation of the owner, thereby enhancing the aircraft’s value; that person may have a lien on 3.3 Which courts are appropriate for aviation disputes? the aircraft to the extent that they remain unpaid for the work Does this depend on the value of the dispute? For carried out and may refuse to return the aircraft until they are example, is there a distinction in your jurisdiction paid. Such a lien arises from the common law. regarding the courts in which civil and criminal cases are brought? (c) Customs: where anything becomes liable to forfeiture under the Customs Law (2017 Revision), any aircraft used for the carriage, handling, deposit or concealment of that thing shall Aviation disputes will be heard by the Cayman Islands Grand Court also be liable to forfeiture. Forfeiture of an aircraft may also (Civil Division). While the Cayman Islands Grand Court has a occur where it has been adapted to be used for or is used for Financial Services Division, the majority of disputes which arise the purposes of smuggling or concealing goods. in the aviation context are unlikely to fit within the meaning of (d) Crimes: where a person is convicted of an offence, any ‘financial services proceedings’. aircraft in his or her possession or under his or her control that was used in connection with such an offence or intended 3.4 What service requirements apply for the service of to be used for that purpose may be forfeited to the Crown by court proceedings, and do these differ for domestic order of the court. airlines/parties and non-domestic airlines/parties? (e) War or national emergency: regulations made under the Emergency Powers Law (2006 Revision) can give powers to For domestic airlines/parties that are companies incorporated in the the Governor of the Cayman Islands to authorise the taking Cayman Islands, any originating process must be served on their possession or acquisition of any property. registered office in the Cayman Islands. (f) Terrorism: where a person is convicted of an offence under the Terrorism Law (2018 Revision), the court can make a For non-domestic airlines/parties, leave of the court is required forfeiture order in respect of any property in that person’s before the service out of the jurisdiction of any originating process. possession or control which he intended to use or it was Order 11 of the Grand Court Rules (“GCR”) sets out a prescribed suspected he would use for the purpose of terrorism. list of proceedings that may be served out of the jurisdiction with the leave of the court – an aviation dispute is likely to fall within this list. Before the court will order that a party has leave to serve out of 3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire the jurisdiction, it must be satisfied that: possession of the aircraft or enforce any of its rights ■ the applicant has demonstrated a good arguable case that the under the lease/finance agreement? claim has an appropriate nexus to the Cayman Islands under one or more heads set out in Order 11, rule 1 of the GCR; Self-help remedies are available under Cayman Islands law (under ■ there is a serious case to be tried on the merits; and both the common law and the Cape Town Convention). ■ it is proper in the exercise of its discretion to grant leave For creditors that have taken security, it is possible to enforce and particularly that the Cayman Islands are the appropriate certain security rights without a court order, for example, if the forum. documentation allows the mortgagee to take possession of the

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3.5 What types of remedy are available from the courts 4.5 Please provide details of the procedure, including or arbitral tribunals in your jurisdiction, both on i) an time frames for clearance and any costs of interim basis, and ii) a final basis? notifications.

Although remedies will vary depending on the nature of the dispute, Please see question 4.1. generally the following may be available:

On an interim basis: 4.6 Are there any sector-specific rules which govern the ■ an injunction relating to the aircraft and other aviation assets aviation sector in relation to financial support for air (for example, an order for detention of the aircraft or a operators and airports, including (without limitation) freezing injunction preventing the disposition of the aircraft); state aid? and ■ interim relief available under the Cape Town Convention (see We are not aware of any sector-specific rules which would apply. Cayman Islands question 3.2). On a final basis: 4.7 Are state subsidies available in respect of particular ■ damages; routes? What criteria apply to obtaining these subsidies? ■ a permanent injunction relating to the aircraft and other aviation assets; ■ an order to take control of an aircraft and other aviation assets; So far as we are aware, there are no state subsidies with respect to particular routes that apply in the Cayman Islands. ■ an order for the sale of an aircraft and other aviation assets; and ■ remedies available under the Cape Town Convention (see question 3.2). 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, and what rights do passengers have in respect of 3.6 Are there any rights of appeal to the courts from the their data which is held by airlines and airports? decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? The Cayman Islands Government enacted the Data Protection Law, 2017 (the “DPL”) on 18 May 2017. The DPL is not in force Appeals from the Grand Court are to the Cayman Islands Court of currently, however it is expected to have force of law in 2019. The Appeal (“CICA”), which usually sits three times a year. Subject to DPL will introduce legal requirements for data protection based certain restrictions, there is an automatic right of appeal to the CICA on internationally accepted principles of data privacy and will from any final decision of the Grand Court. In general, leave of the become the principal legislation regulating general data privacy court is required to appeal an interlocutory decision. in the Cayman Islands. While there are no statutory provisions An appeal may lie to the Privy Council from the CICA. under Cayman Islands law, common law principles apply. The Confidential Information Disclosure Law, 2016 provides immunity from civil law suits where information has been disclosed in 4 Commercial and Regulatory accordance with law, for example, in compliance with a court order or regulatory or information exchange laws. 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the There are no restrictions or regulations affecting joint ventures data and are there any applicable sanctions? between airline competitors in the Cayman Islands. Please see question 4.8.

4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the 4.10 What are the mechanisms available for the protection purposes of mergers and acquisitions? of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? Please see question 4.1. There are no restrictions or regulations applicable to airline competitors in the Cayman Islands. The Cayman Islands Intellectual Property Office (“CIIPO”) and relevant Cayman Islands laws provides for a robust and modern regime in the Cayman Islands for the protection of intellectual 4.3 Does your jurisdiction have a notification system property rights to the highest international standards. whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from Trade Marks regulatory agencies? Cayman Islands law provides for trade marks to be registered with the CIIPO and also for, inter alia, assignments, licences and security Please see question 4.1. There is no notification system with interests be recorded with the CIIPO against a registered trade mark. application to such parties. Patents Cayman Islands law provides for the recordal in, and extension to, 4.4 How does your jurisdiction approach mergers, the Cayman Islands of: (i) a patent that is current and effective in acquisition mergers and full-function joint ventures? the United Kingdom; (ii) a patent granted under the Convention on the Grant of European Patents designating the United Kingdom, and Please see question 4.1. which under the law of the United Kingdom is treated as if it were

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a patent granted under such law; or (iii) a patent granted under the (vii) ensure that the airports conform to ICAO-recommended Community Patent Convention. standards and practices. Design Rights Cayman Islands law provides for the recordal in, and extension to, 4.14 To what extent does general consumer protection the Cayman Islands of existing registered UK and EU design rights. legislation apply to the relationship between the airport operator and the passenger? The effect of the recording of an extension of the UK or EU patent or design right in the Cayman Islands is to afford in the Cayman There is no consumer rights legislation in the Cayman Islands that Islands to the owner of the right so recorded all the equivalent rights applies to the aviation sector. and remedies available to the owner in respect of such patent or design right in the UK. Such protection and rights in the Cayman Islands continue from the time the right arose in the UK and 4.15 What global distribution suppliers (GDSs) operate in

Cayman Islands continue in force so long as the protection and rights remain in force your jurisdiction? in the UK. Copyright The major air carriers operating in the Cayman Islands use the main GDS platforms – such as Sabre, Amadeus, Worldspan and The Copyright (Cayman Islands) Order, 2015 and the Copyright Apollo. Information regarding whether these GDSs operate from (Cayman Islands) (Amendment) Order, 2016 (the “Orders”) came the Cayman Islands is not publicly available at the time of this into force on 30 June 2016, extending certain provisions of the UK publication. Copyright, Designs and Patents Act 1988 to the Cayman Islands. The copyright regime provides modern IP protection for computer software and databases, among other things such as original literary 4.16 Are there any ownership requirements pertaining to work, dramatic, musical or artistic work. GDSs operating in your jurisdiction?

Please see question 4.15. 4.11 Is there any legislation governing the denial of boarding rights and/or cancelled flights? 4.17 Is vertical integration permitted between air operators There is no specific Cayman Islands legislation governing the denial and airports (and, if so, under what conditions)? of boarding rights and/or cancelled flights. Certain provisions of the Warsaw Convention may apply by extension to the Cayman There are no restrictions on vertical integration between air operators Islands via the United Kingdom, subject to the flight in question and airports under Cayman Islands law. being classified as an international flight. 4.18 Are there any nationality requirements for entities 4.12 What powers do the relevant authorities have in applying for an Air Operator’s Certificate in your relation to the late arrival and departure of flights? jurisdiction or operators of aircraft generally into and out of your jurisdiction? There is no specific Cayman Islands legalisation regulating late In order to qualify to hold an air operator’s certificate, an applicant arrival and departure of flights. must have a physical presence in the Cayman Islands. As a result, operators generally establish a company in the Cayman Islands or 4.13 Are the airport authorities governed by particular register in the Cayman Islands, a branch of an existing company legislation? If so, what obligations, broadly speaking, incorporated outside the Cayman Islands. are imposed on the airport authorities?

The Cayman Islands Airport Authority (“CIAA”) is governed 5 In Future primarily by the Airports Authority Law (2005 Revision). Broadly speaking, the obligations imposed on the CIAA include the 5.1 In your opinion, which pending legislative or following: regulatory changes (if any), or potential developments (i) plan, develop, redevelop, construct, administer, control and affecting the aviation industry more generally in manage airports in the Cayman Islands; your jurisdiction, are likely to feature or be worthy of (ii) provide and maintain runways, terminals and other services attention in the next two years or so? and facilities as necessary for the efficient operation of airports in the Cayman Islands; Developments in the data protection and consumer protection (iii) provide rescue and fire-fighting equipment and services at sectors are likely to feature as major focus areas for the Cayman airports, and carry out regular drills and exercises and other Islands in the next year or two. With data protection legislation set checks of all security and safety equipment; to be implemented in 2019, operators in the aviation industry will (iv) provide meteorological services to users of the airports; need to put policies and procedures in place to ensure they meet (v) provide adequate facilities for the exercise of the regulatory their obligations under the legislation. powers of the Cayman Islands, including customs, immigration Further, legislative proposals are being made to introduce safeguards and health and security checks; for consumer interests in matters relating to the supply of goods and (vi) collect prescribed or approved dues, rents, landing and services which will be worthy of attention by the aviation sector parking fees and charges; and over the course of the next couple of years, particularly during the consultation phase of the process.

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Acknowledgments Nick provides a wide range of advice on international restructurings, The authors are grateful to Partners, Mark Western and Abraham contentious and non-contentious insolvency issues, structured Thoppil and Of Counsels, Nick Herrod and Tim Dawson for their finance and derivatives. In particular, Nick specialises in cross-border contribution to this chapter. insolvency, schemes of arrangement and structuring transactions to mitigate against the risks of insolvency. (Tel: +1 345 814 5654 / Mark is the Managing Partner of The Maples Group’s legal service Email: [email protected].) team in Hong Kong where he is head of the finance practice in Asia and the global head of asset finance. Mark represents major financial Tim is a member of the Financial Services Regulation team. He aspects of banking law, specialising in asset and acquisition finance. provides all aspects of regulatory and financial services advice, He has worked extensively in the aircraft finance sector. (Tel: +852 including in respect of Cayman Islands licensing, prudential and 3690 7407 / Email: [email protected].) conduct of business requirements, reporting and information exchange obligations (including those deriving from FATCA Abraham’s expertise covers a range of areas including M&A, private and the Common Reporting Standard), and advice on duties of Cayman Islands equity, hedge fund, insurance and structured finance transactions. He data protection and confidentiality, anti-money laundering and also has extensive experience in local Cayman Islands business combatting of terrorist finance. Tim is a member of both industry matters and all types of general corporate and commercial and Cayman Islands Government legal and regulatory working law, in particular, technology, fintech, patent, trade mark and groups. (Tel: +1 345 814 5525 / Email: [email protected].) other intellectual property matters. (Tel: +1 345 814 5366 / Email: [email protected].)

Sherice Arman Shari McField The Maples Group The Maples Group PO Box 309, Ugland House PO Box 309, Ugland House South Church Street, George Town South Church Street, George Town Grand Cayman, KY1-1104 Grand Cayman, KY1-1104 Cayman Islands Cayman Islands

Tel: +1 345 814 5248 Tel: +1 345 814 5551 Fax: +1 345 949 8080 Fax: +1 345 949 8080 Email: [email protected] Email: [email protected] URL: www.maples.com URL: www.maples.com

Legal services team. Legal services team. Sherice is a partner in The Maples Group’s legal service team in the Shari is an associate in The Maples Group’s legal service team in Cayman Islands where she specialises in financing transactions, the Cayman Islands and has extensive experience advising on asset including banking and asset finance, fund and corporate finance. finance transactions with an emphasis on aircraft financing and leasing Sherice heads up the shipping group and is recognised as an industry transactions, including transactions with a capital markets or Islamic leader in asset finance in the Cayman Islands, in particular for ship element, aircraft registrations, vessel financing and registrations, and aircraft finance. She also has significant experience in the field and general corporate commercial matters. She principally advises of regulated M&A transactions and Cayman Islands regulatory advice. commercial banks, financial institutions, European export credit agencies, airlines and aircraft lessors.

Established in 1968, the leading international legal services team of The Maples Group advises global financial, institutional, business and private clients on the laws of the British Virgin Islands, the Cayman Islands, Ireland, Jersey and Luxembourg. With offices in key jurisdictions around the world, The Maples Group has specific strengths in areas of corporate commercial, finance, investment funds, litigation and trusts. Maintaining relationships with leading legal counsel in each business centre, the Group leverages this local expertise to deliver an integrated service offering for global business initiatives. For more information, please visit: maples.com.

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Colombia

Gongora Reina & Associates Jorge Góngora

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

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

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AEROCIVIL also investigates aviation accidents to determine the To ensure safety, foreign air carriers must meet the requirements set probable cause of the accident and issue safety recommendations out in 3.6.3.3.2.2 of RAC 3, including, but not limited to: in order to prevent similar accidents from occurring in the future ■ A designation or permit granted by the signatory State of the (RAC 8). bilateral agreement. Finally, in accordance with RAC 98, AEROCIVIL is in charge of all ■ A detailed description of requested routes, frequencies, fares Search and Rescue (“SAR”) operations. and liberties. ■ A detailed description of equipment. 1.4 Is air safety regulated separately for commercial, ■ Insurance policies. cargo and private carriers? ■ A description of net capacity. ■ Incorporation of the company in the country. Colombia Aviation safety rules are contained in RAC 3 and RAC 4. ■ Securities. RAC 3 divides commercial civil aerial activities as follows:

A. Scheduled common carriers. 1.7 Are airports state or privately owned? 1. Domestic common carriers. a) Trunk. There are 476 airports in Colombia, of which 75 are owned by the b) Secondary. State, 313 are private, and 88 are owned by local governments. c) Cargo. Eighteen of the airports owned by the State are granted in 2. International common carriers. concession to private airport operators such as OPAIN in Bogotá, a) National air carriers. and Aeropuertos de Oriente in Medellín. i) Passengers. There are 13 international airports in the country. ii) Cargo. b) Foreign air carriers. 1.8 Do the airports impose requirements on carriers i) Passengers. flying to and from the airports in your jurisdiction? ii) Cargo. Most airports maintain minimum standards of safety and efficiency. B. Private carriers. Enforcement of these standards is undertaken by AEROCIVIL. 1. State civil aviation. Accordingly, airports are allowed to manage their operations a) State civil aviation. as long as they provide access to all authorised carriers without b) General aviation. discrimination. i) Business. Airports may enter into lease agreements with all air carriers, ii) Sports. granting access to gates and facilities in exchange for regulated iii) Aeroclubs. charges. Airports often establish their own rules and regulations, including hours of operation, noise restrictions, baggage handling requirements, ground transportation and fuelling requirements. 1.5 Are air charters regulated separately for commercial, cargo and private carriers? 1.9 What legislative and/or regulatory regime applies to Aviation safety rules for non-scheduled flights are contained in RAC air accidents? For example, are there any particular 3 and RAC 4. rules, regulations, systems and procedures in place which need to be adhered to? RAC 3 divides non-scheduled aerial activities as follows: 1. Domestic. AEROCIVIL conducts independent investigations as State authority a) Air Taxi Services. into all transportation accidents and major incidents within b) Charter. Colombian territory. Investigations involving criminal conduct are 2. International. coordinated with Fiscalía General de la Nación, the public entity in charge of criminal investigations. a) Air Taxi Services. b) Charter. The purpose of an AEROCIVIL investigation is to gather, collect and record all available information regarding the accident or incident, to publish recommendations on air safety, to determine 1.6 As regards international air carriers operating in your the probable cause of the accident/incident, whenever possible, and jurisdiction, are there any particular limitations to be complete a final report. aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, According to Article 1948 of the Commercial Code, AEROCIVIL’s restrictions and taxes which apply to international but investigation is independent from any judicial or administrative not domestic carriers. aimed at determining liability. The main stages of the investigation are: notification and setting up; Bilateral aviation agreements prevent Colombia from discriminating on-the-ground investigation; documentary evidence; analysis of lab against foreign air carriers seeking to operate in the country. As evidence; and submission of the final report. a result, foreign air carriers are treated the same as domestic air carriers and are subject to similar regulations.

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1.10 Have there been any recent cases of note or other 2.4 As a matter of local law, is there any concept of title notable developments in your jurisdiction involving annexation, whereby ownership or security interests air operators and/or airports? in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an On 28 April 2018 AEROCIVIL issued the final report on the accident aircraft owned by another party? If so, what are the conditions to such title annexation and can owners of flight 2933 of charter company LAMIA, which occurred on 28 and financiers of engines take pre-emptive steps to November 2016 just a few miles from Medellin’s International mitigate the risks? Airport, and caused the death of 71 occupants on board, with only six survivors. Most of the passengers were members of the Brazilian No, there is no concept of title annexation in Colombia. football team Chapecoense. According to the report, total loss of Colombia fuel was the main cause of the accident. However, poor execution of the flight plan by the pilot (who was also co-owner of the airline), 2.5 What (if any) are the tax implications in your negligence and inadequate decision-making, all circumstances jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), affected by the pressure of complying with a contract of carriage by and b) documentary taxes such as stamp duty; and air, were key factors in this fatal accident. (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? 2 Aircraft Trading, Finance and Leasing Pursuant to the Colombian Tax Code and its regulations, international 2.1 Does registration of ownership in the aircraft register operational leases are subject to a GST of 1%, as long as they constitute proof of ownership? incorporate in the contract of lease a buy option. For any other types of leases, they are subject to a VAT of 19%, and Yes. According to Article 1792 of the Commercial Code, the a GST of 25%. National Aeronautical Registry is administrated by AEROCIVIL, There are no documentary taxes such as stamp duty. and its main objectives are: ■ To serve as means of proof of ownership and transfer of domain of aircraft. 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and ■ To give publicity over contracts regarding aircraft trading and Cape Town)? leasing. ■ To provide warranties of authenticity and security into titles, Yes. The Republic of Colombia is a signatory to the main acts or documents subject to registry. international Conventions. The Conventions entered into force in ■ To perfect any act, contract or caution regarding an aircraft. Colombia on the following dates: ■ The Geneva Convention – 10 July 2003. 2.2 Is there a register of aircraft mortgages and charges? ■ The Montreal Convention – 21 November 2001. Broadly speaking, what are the rules around the ■ The Cape Town Convention – 13 July 2005. operation of this register?

Yes. The National Aeronautical Registry is a public registry for 2.7 How are the Conventions applied in your jurisdiction? recording conveyances that affect title to, or interest in, an aircraft. The rules of the Registry are set forth in Chapter VII of RAC 20. A The Conventions are applied in Colombia pursuant to the procedures notarised public deed referring to the mortgage or charge must include: that govern the implementation of international treaties, requiring ■ Names of contracting parties. ratification and, in some cases, regulatory implementation. With ■ Aircraft identification, including the make, model, serial the exception of the Cape Town Convention (implemented by number and registration number. RAC 20 of AEROCIVIL), aviation international conventions have been self-executing and therefore have not required legislative or ■ The kind of mortgage or charge incorporated. administrative implementation. ■ An indication of registry data regarding title to, or interest in, an aircraft. 2.8 Does your jurisdiction make use of any taxation benefits which enhance aircraft trading and leasing 2.3 Are there any particular regulatory requirements (either in-bound or out-bound leasing), for example which a lessor or a financier needs to be aware of as access to an extensive network of Double Tax Treaties regards aircraft operation? or similar, or favourable tax treatment on the disposal of aircraft? Aircraft operations are regulated by AEROCIVIL in RAC 20. Accordingly, the lease or other agreement must be registered in No, there are no taxation benefits which enhance aircraft trading the National Aeronautical Registry, including contracts concluded and leasing. abroad, with effect in Colombia. 20.7.3 RAC.

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3 Litigation and Dispute Resolution 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties? 3.1 What rights of detention are available in relation to aircraft and unpaid debts? 3.4.1 In civil matters, service of process is regulated by Article 290 of the CGP. Rights of detention are primarily governed by Articles 590–604 of Service may be completed by: the General Procedure Code (“CGP”). Generally, when an aircraft owner or operator has unpaid debts, a creditor may seek to obtain an 3.4.1.1 Personal delivery of a summons to the defendant’s residence or last known place of business. enforceable court judgment and foreclose upon a lien. Such court judgment shall be registered in the National Aeronautical Registry 3.4.1.2 If personal delivery fails, papers shall be mailed to Colombia the defendant’s residence or last known place of administrated by AEROCIVIL, according to 20.7.3 of RAC 20. business. However, Article 1908 of the Commercial Code establishes that the 3.4.1.3 If the defendant’s residence or last place of business is actual seizure of the aircraft cannot be enforced until a final decision unknown, service may be completed by publication, from the court is rendered. followed by appointment of a public defender. 3.4.2 In administrative matters, service of process is regulated by 3.2 Is there a regime of self-help available to a lessor Article 621 of the CGP. or a financier of an aircraft if it needs to reacquire 3.4.2.1 Service may be completed by mailing the papers possession of the aircraft or enforce any of its rights to the electronic mailbox of the public entity: a under the lease/finance agreement? mandatory requirement for these entities. 3.4.2.2 In the case of private defendants, service may be Although Colombia is a signatory of the Cape Town Convention, as completed by mailing the papers to their registered it was ratified through Law 967 of 2005, Colombian constitutional electronic address, if such is applicable, or by principles prohibit any regime of self-help available to a lessor or mailing the papers to the defendant’s residence or a financier of an aircraft for reacquiring possession of the aircraft last known place of business. under the lease/finance agreement. 3.5 What types of remedy are available from the courts 3.3 Which courts are appropriate for aviation disputes? or arbitral tribunals in your jurisdiction, both on i) an Does this depend on the value of the dispute? For interim basis, and ii) a final basis? example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases Depending on the circumstances surrounding the case, civil courts, are brought? at the plaintiff’s request, may order equitable remedies (specific performance of injunctive relief, such as embargoes, seizures, 3.3.1 All civil claims, including civil aviation disputes, can be repossession, freezing of accounts, etc.) on an interim basis. heard before the civil jurisdiction. In administrative matters, administrative courts, at the plaintiff’s The Civil Municipal Courts hear cases in which the amount request, may order the provisional suspension of decisions issued in controversy does not exceed the equivalent in COP of US$36,000. by, or fines or penalties imposed by, public entities. The Civil Circuit Courts hear cases in which the amount in controversy exceeds the equivalent in COP of US$36,000, 3.6 Are there any rights of appeal to the courts from the and the second instance (appeal) of cases is decided by the decision of a court or arbitral tribunal and, if so, in Civil Municipal Courts. what circumstances do these rights arise? The Superior Tribunals hear the second instance (appeal) of cases decided by the Civil Circuit Courts. The judicial system in Colombia is fundamentally based on the The Supreme Court of Justice hears an extraordinary resource principle of double instance. (recurso de casación) in cases decided in the second instance 3.6.1 In civil matters, except for cases decided by Municipal Civil by the Superior Tribunals, in which the amount in controversy Courts in which the amount of the controversy does not exceeds the equivalent of COP of US$245,000, and under exceed the equivalent in COP of US$36,000, once a case is very special and restricted circumstances. decided by a trial court, a party may appeal as a matter of 3.3.2 Cases in which a public entity is involved, including aviation right to the next level appellate court for review, as described claims, can be heard before the administrative jurisdiction. in question 3.3, point 3.3.1 above. The Administrative Circuit Courts hear cases in which the 3.6.2 In administrative matters, except for cases decided by the amount in controversy does not exceed the equivalent in COP Administrative Courts in which the amount of the controversy of US$120,000. cannot be determined, once a case is decided by a trial court, a party may appeal as a matter of right to the next level The Administrative Tribunals hear cases in which the amount appellate court for review, as described in question 3.3, point in controversy exceeds the equivalent in COP of US$120,000, 3.3.2 above. If the decision is against a public entity acting and the second instance (appeal) of cases decided by the as defendant, and it is not appealed in due course, it will Administrative Circuit Courts. automatically be consulted by the next level appellate court The Council of State hears the second instance (appeal) of for review, as described in question 3.3, point 3.3.2 above. cases decided by the Administrative Tribunals. 3.6.3 In arbitration parties, once a case is decided by an Arbitration If the contracting parties agree, they can settle their disputes Tribunal, a party is entitled to request the annulment as a through arbitration, which is regulated by Law 1563 of 2012. matter of right to the Superior Tribunal. The decision of the Tribunal is subject to annulment, decided by the Tribunal of the incumbent District.

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and Commerce, or to AEROCIVIL for aviation matters, containing a 4 Commercial and Regulatory pre-evaluation request and a brief report of the operation, according to the instructions set forth by the Superintendence’s regulations. 4.1 How does your jurisdiction approach and regulate The Superintendence shall publish details of the application in a joint ventures between airline competitors? national newspaper, in order to allow third parties to provide useful elements for the analysis of the projected operation. Pursuant to Law 1340 of 2009, the Superintendence of Industry and Within three months, authorities must reach a final decision. Article Commerce primarily regulates joint ventures. 10 of Law 1340 of 2009. However, Article 8 of Law 1340 of 2009, exclusively for the aviation industry, allows AEROCIVIL to keep its jurisdiction in all

Colombia 4.6 Are there any sector-specific rules which govern the matters related to authorisations of commercial operations between aviation sector in relation to financial support for air airline competitors, including codeshare agreements, joint ventures, operators and airports, including (without limitation) charters, interchange and block space. state aid?

4.2 How do the competition authorities in your Decree 2344 of 1971 and Decree Law 2180 of 2014 created and jurisdiction determine the ‘relevant market’ for the organised air services into National Territories, under the umbrella of purposes of mergers and acquisitions? a State air carrier, SATENA. The Central Government provides some kind of direct financial support to this air carrier, in order to provide The Superintendence of Industry and Commerce, as the national services to communities in remote areas or on non-profit routes. antitrust authority, according to Colombian antitrust policy, for the prior analysis and in the final guidelines expected to be issued with 4.7 Are state subsidies available in respect of particular respect to horizontal mergers subject to its control, shall take into routes? What criteria apply to obtaining these account microeconomic variables such as the cross-elasticity of subsidies? demand, in order to accurately determine the relevant market. The Superintendence shall adopt the criteria of substantially There are no State subsidies available in respect of particular routes. lessening competition in order to analyse the adverse competitive However, as stated in question 4.6 above, the Government provides effects that this kind of operation may cause in the market. financial support to SATENA, allowing it to provide services on Additionally, aspects such as the capacity of supply substitution and routes not operated by common carriers. the execution of free trade agreements shall be taken into account in the above-referred analysis. Article 9 of Law 1340 of 2009. 4.8 What are the main regulatory instruments governing In aviation matters, AEROCIVIL is in charge of the above-mentioned the acquisition, retention and use of passenger data, analysis. and what rights do passengers have in respect of their data which is held by airlines and airports?

4.3 Does your jurisdiction have a notification system 3.10.1.4 of RAC 3 establishes that passengers’ personal data shall whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from only be used for the purposes of managing the reservation and regulatory agencies? ensuring the performance of the contract of carriage by air. Air carriers must protect personal data in order to avoid unlawful No. There is no such system of regulatory clearance/antitrust use, and data may not be commercialised in any case. immunity in Colombia’s jurisdiction. According to Article 9 of There are no specific regulations regarding airports. Law 1340 of 2009, companies shall always notify or request prior authorisation from the antitrust authorities. 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the 4.4 How does your jurisdiction approach mergers, data and are there any applicable sanctions? acquisition mergers and full-function joint ventures? While 3.10.7.18 of RAC 3 allows individuals to file a complaint, Depending upon the amount of operational income or the amount there are no specific sanctions or fines regarding the loss of private of total assets, individually or combined, in the previous fiscal year, consumer data within the aviation industry. parties seeking to merge or acquire another company, or to form a cooperative agreement or joint venture, must request authorisation 4.10 What are the mechanisms available for the protection from the Superintendence of Industry and Commerce, and from of intellectual property (e.g. trademarks) and other AEROCIVIL in the aviation market, prior to closing. assets and data of a proprietary nature? If the two parties combined do not reach 20% of the relevant market, only a notification is needed. Article 9 of Law 1340 of 2009. Protection of intellectual property in Member States of the Andean Community is primarily regulated in Colombia by the 4.5 Please provide details of the procedure, including Superintendence of Industry and Commerce, as per Decision 486 time frames for clearance and any costs of of 2000 of the Andean Community. To protect intellectual property notifications. and other assets of a proprietary nature, an individual or company may file a patent, register a trademark or register a copyright with Parties seeking the approval of mergers, acquisition mergers and joint the Patent and Trademark Office of the Superintendence of Industry ventures must file an application to the Superintendence of Industry and Commerce.

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4.11 Is there any legislation governing the denial of 4.15 What global distribution suppliers (GDSs) operate in boarding rights and/or cancelled flights? your jurisdiction?

3.10.2.13.2 of RAC 3 governs the denial of boarding rights in cases Amadeus, Travelport and Sabre operate in Colombia. of delay, cancellations and overbooking.

In cases of delay, the carrier must provide the passenger with 4.16 Are there any ownership requirements pertaining to refreshments, a phone call and a meal, whenever the delay is less GDSs operating in your jurisdiction? than five hours. If the delay exceeds five hours, the carrier must compensate the passenger with at least 30% of the price of the ticket. No. There are no ownership requirements pertaining to GDSs

In cases of cancellation, the carrier shall be exonerated of any liability operating in Colombia. Colombia if it reimburses the passenger with the total price of the ticket. In cases of overbooking, the carrier must embark the passenger on 4.17 Is vertical integration permitted between air operators the next available flight. and airports (and, if so, under what conditions)?

4.12 What powers do the relevant authorities have in There is no specific prohibition on the subject of vertical integration. relation to the late arrival and departure of flights? Air operators do not own equity in airports, but they may enter into long-term use and lease agreements. The air operator agrees to the AEROCIVIL is in charge of enforcing the regulations established in terms of use and other regulatory responsibilities in terms of gates, 3.10.13.2 of RAC 3 as stated above, and in accordance with RAC 7, ticket counters and terminals. it has the legal power to impose fines on air carriers. Air carriers must establish a Customer Service System, with 4.18 Are there any nationality requirements for entities counters in every airport in which to perform operations, with the applying for an Air Operator’s Certificate in your purpose of assisting passengers’ complaints or requests regarding jurisdiction or operators of aircraft generally into and out of your jurisdiction? delays, cancellations and diversions.

According to 20.8.1 of RAC 20, ownership or effective control of 4.13 Are the airport authorities governed by particular commercial aircraft may only be granted to Colombian nationals. legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? Non-commercial aircraft may be owned by Colombians or foreigners residing in Colombia. Airport operators are primarily governed by AEROCIVIL, pursuant to Articles 1813 and 1815 of the Commercial Code. RAC 14 5 In Future requires airport operators to obtain a construction and/or reform certificate, which is part of the process of any operating certificate. RAC 14 also requires airport operators to obtain an airport 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments operating certificate, whether they are public or private. They must affecting the aviation industry more generally in comply with specific conditions regarding safety, maintenance and your jurisdiction, are likely to feature or be worthy of operational conditions. attention in the next two years or so? For public airports, the certificate does not expire. For private airports, the certificate expires after three years. AEROCIVIL has been working on concluding the process of the harmonisation of RAC with the Latin American Aeronautical Regulations (“LAC”). This process may be concluded in the next 4.14 To what extent does general consumer protection legislation apply to the relationship between the two years. airport operator and the passenger?

According to RAC 3, the proper authority to enforce provisions of the National Statute of the Consumer in aviation matters (Law 1480 of 2011) is AEROCIVIL. This applies to the relationship between the airport operator and the passenger.

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Jorge Góngora Gongora Reina & Associates Carrera 4 # 18-50 Office 1606 Bogotá, D.C. Colombia

Tel: +57 1286 8788 +57 3102 8170 73 Email: [email protected] URL: www.gongoralaw.com

Colombia Jorge Góngora is a principal of the firm Gongora Reina & Associates in Bogotá, which also has offices in Cali, Colombia, South America. He graduated as a lawyer from the University of Los in Bogotá, 1985. He has an LL.M. in Insurance Law from Xaveriana University in Bogotá, 1985. He has an LL.M. in Commercial Law from University of Los Andes, 1991, and an LL.M. in Air & Space Law, McGill University, Montreal, 1995. He was the Director of the Insurance Division of the Colombian Financial Superintendence, the Legal Manager of Grancolombiana Insurance Company, an in-house lawyer at AVIANCA, and the Aeronautical Advisor for the Government of Belize. In 1997, he entered private practice with Gongora Reina & Associates. His areas of specialty involve litigation and consulting in commercial, insurance and aviation law. He is Ombudsman for the Financial Consumer for several insurance companies, and a Post-Graduate Professor in Transportation Jurisprudence and Aviation Insurance at Externado de Colombia University.

Gongora Reina & Associates is a second-generation boutique law firm based in Colombia, with offices in Bogotá D.C. and Cali, and correspondents in several cities. The firm specialises in aviation, insurance and commercial law. With over 30 years of experience, we offer reliable and personal service to our national and international clients, seeking to maintain long-term relationships and to provide professional expertise.

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Denmark

IUNO Aage Krogh

There are two types of operating licence: 1 General ■ One pertaining to aircraft with a maximum certificated take-off mass of 10 MTON or more and/or fewer than 20 or more seats. 1.1 Please list and briefly describe the principal ■ The other pertaining to aircraft with a maximum certificated legislation and regulatory bodies which apply to and/ take-off mass of less than 10 MTON and/or fewer than 20 seats. or regulate aviation in your jurisdiction. Operating licences are granted by the CAA. The application forms can be found on the CAA’s website (www.trafikstyrelsen.dk). Danish legislation The main framework legislation governing Danish aviation law is 1.3 What are the principal pieces of legislation in Act no. 1149 of 2017 (the “Air Navigation Act”). your jurisdiction which govern air safety, and who The Danish Transport Agency issues binding executive orders, so- administers air safety? called “BLs”, which constitute the more detailed Danish aviation law regulations. The Air Navigation Act is the main legislation governing air safety European Union Orders (“EC Regulation”) in Denmark. The legislation is supplied by the relevant BLs and Denmark is also subject to the vast quantity of EC legislation the EC Regulations regulating the area. Air safety within Danish concerning aviation law, which are directly applicable under Danish aviation law is furthermore dependent on a vast quantity of Law. guidelines from the European Aviation Safety Agency (“EASA”). International conventions As a signatory to the Chicago Convention, Denmark must also ensure that air navigation equipment and operations comply with standards Denmark has ratified: from the International Civil Aviation Organisation (“ICAO”). ■ The 1993 Rome Convention, signed in Rome on 29 May The CAA administers and supervises air safety in Denmark and 1933. is responsible for enforcing Danish law as well as international ■ The 1944 Chicago Convention, signed in Chicago on 7 regulations and standards applicable to air safety in Denmark. December 1944. ■ The 1948 Geneva Convention, signed in Geneva on 19 June 1948. 1.4 Is air safety regulated separately for commercial, cargo and private carriers? ■ The 1999 Montreal Convention, signed in Montreal 28 May 1999. In general, safety regulations for commercial, cargo and private ■ The 2001 Cape Town Convention, signed 16 November 2001. carriers are the same. The Cape Town Implementation Act entered into force on 1 The most noticeable difference in air safety regulation between February 2016 in Denmark. commercial, cargo and private carriers is within the area of Continuous Airworthiness Management Organisation (“CAMO”), Regulatory bodies subject to EC Regulation no. 1321/2014. The main regulatory bodies are: ■ The Danish Transportation Agency (the “CAA”). 1.5 Are air charters regulated separately for commercial, ■ The Danish Competition Council. cargo and private carriers? ■ The Danish Consumer and Competition Authority. No separate regulation applies to EU carriers operating air charters 1.2 What are the steps which air carriers need to take in in Denmark. order to obtain an operating licence? Air charters by non-EU carriers are separately regulated by the CAA’s executive order BL 10-1, whereby such non-EU carriers The conditions of obtaining an operating licence are stipulated shall submit an application to the CAA 48 hours in advance of in EC Regulation no. 1008/2008, as amended by EU Regulation the intended landing in Denmark, and 30 days in advance of the 2018/1139, specifically in Article 4. intended landing, if the intention is to carry out more than four chartered flights within two months in Danish air space.

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1.6 As regards international air carriers operating in your 2 Aircraft Trading, Finance and Leasing jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, 2.1 Does registration of ownership in the aircraft register restrictions and taxes which apply to international but constitute proof of ownership? not domestic carriers. A registration of ownership can lead to the presumption that the International carriers from outside the EU are subject to more registered owner is the owner of the aircraft, but in some cases, it restrictions than EU carriers, as aircraft arriving from or departing to does not constitute proof of ownership by itself. Ownership will be airports outside the EU VAT area which have not been pre-approved determined case-by-case and depends on the specific details regarding Denmark by the Danish Customs and Tax Administration will be subject to the aircraft. customs search and control. There are no taxes applied exclusively to international air carriers (inside or outside the EU) and none to 2.2 Is there a register of aircraft mortgages and charges? domestic air carriers. Broadly speaking, what are the rules around the operation of this register? 1.7 Are airports state or privately owned? Yes. The register is referred to as the Danish Register of Rights Larger airports in Denmark are generally, fully or partly owned over Aircraft and is administered by the CAA. It is a prerequisite by the state or local municipalities. Copenhagen airport, CPH for registration of rights over an aircraft in the Danish Register of (Københavns Lufthavne A/S) is a public limited company listed on Rights over Aircraft, that the said aircraft is registered in the Danish the Danish Stock Exchange (NASDAQ OMX Copenhagen). Nationality Register. The processing time is required by law not to exceed 10 days from the entry. Entries are given priority based on the date of the entry. Both security interest by agreement and by 1.8 Do the airports impose requirements on carriers judicial order can be and are perfected by registering the aircraft. flying to and from the airports in your jurisdiction? International interests are registered in the International Registry of Mobile Assets as according to the Cape Town Convention. Carriers will enter into an agreement with the relevant airport about The registry is recognised by all ratifying states and priority is the terms of use of the airport. Such agreement will include, in determined on a first-to-file basis. Registration of interest serves as addition to provisions under general contract law, some of the a notification and is considered best practice for owners, creditors, provisions on airport regulation imposed by the CAA. debtors, lessors, lessees, agents and others in protecting their financial In addition to the general terms and conditions applicable to the interest. airport, the airport will determine airport charges payable by the carriers. The determination of such airport charges is subject to prior authorisation by the CAA. 2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation? 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular Denmark has implemented the Cape Town Convention; however, rules, regulations, systems and procedures in place the Cape Town Convention only applies to rights established after which need to be adhered to? 1 February 2016. That means that registrations made before 1 February 2016 are subject to the previous regime under the Danish Air accidents and investigative procedures related hereto are regulated Aircraft Registration Act, i.e. the Geneva Convention set-up, where by the Air Navigation Act and by EC Regulation no. 996/2010. ownership and mortgage rights over aircraft also cover attached In case of an air accident within the territory of Denmark, the air components, and it is not possible to register specific rights over carrier must inform the Danish Accident Investigation Board of components. Consequently, a lessor or financier needs to be aware the accident, supplying all information on the aircraft and flight in of whether they have an interest in an aircraft or an engine in a fleet question as soon as possible. which is subject to a component pooling arrangement, and which According to the Air Navigation Act, Section 127, the owner of an includes aircraft registered in Denmark before 1 February 2016. aircraft has strict liability for any personal injury or property damage. If this is the case, the related component is at risk of transferring mortgage and ownership rights to an aircraft, to which it is more than temporarily attached to. 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving air operators and/or airports? 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests On 2 June 2017, the Danish Supreme Court ruled that the passengers in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an of a SAS flight were not entitled to compensation for a 3hr 43min aircraft owned by another party? If so, what are the delay due to a diversion to Philadelphia caused by bad weather in conditions to such title annexation and can owners Washington, D.C. SAS was acquitted of the compensation claim and financiers of engines take pre-emptive steps to based on Article 5(3) of EC Regulation no. 261/2004, because the mitigate the risks? delay was “caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken”. See our answer above to question 2.3.

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In order to maintain an attachment once levied, the creditor must 2.5 What (if any) are the tax implications in your initiate confirmatory action with the civil courts no later than one jurisdiction for aircraft trading as regards a) value- week after the attachment is levied by the Bailiff’s court. added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and In addition to the above, it is possible on a non-statutory basis for (to the extent applicable) do exemptions exist as a creditor to exercise a right of retention in an asset if the asset is regards non-domestic purchasers and sellers of in the creditor’s possession and the debt is related to it (much like a aircraft and/or particular aircraft types or operations? garage keeper’s lien). The Air Navigation Act further provides for a specific right for Sale of aircraft to carriers where the aircraft is mainly meant for airport operators to retain an aircraft for unpaid take-off or landing operating outside of Denmark is VAT-exempted. charges, provided the due take-off or landing charges in question concern a recent take-off or landing in the relevant airport. Denmark 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and 3.2 Is there a regime of self-help available to a lessor Cape Town)? or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights Yes. See question 1.1 above. under the lease/finance agreement?

2.7 How are the Conventions applied in your jurisdiction? No. All repossessions of aircraft or collection of debt require the assistance of a competent court; see also question 3.1. The Conventions can either be ratified and then implemented in Danish law or there can be a specific law that directly incorporates a 3.3 Which courts are appropriate for aviation disputes? Convention into Danish law. A Convention is not applicable law in Does this depend on the value of the dispute? For Denmark just by mere ratification. example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases are brought? 2.8 Does your jurisdiction make use of any taxation benefits which enhance aircraft trading and leasing The Danish courts are competent in all civil cases as well as criminal (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties cases. or similar, or favourable tax treatment on the disposal of aircraft? 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic Danish Double Tax Treaties are based on the OECD Model Tax airlines/parties and non-domestic airlines/parties? Convention. The convention stipulates that profits from the operation of aircraft in international traffic, i.e. leasing and trading, Normally, a Danish court would informally use the same procedure is taxable only in the Contracting State in which the place of for service abroad as within Denmark and send out court effective management of the enterprise is situated. documentation with a request for the receiving party to sign and Some Danish Double Tax Treaties may have a provision stating that return an evidence of service. If this does not work, EC Regulation the above-mentioned rule only applies to the Danish shares of the no. 1393/2007 can be applied on the service in the Member States of Nordic airline SAS. judicial and extrajudicial documents in civil or commercial matters.

3 Litigation and Dispute Resolution 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis? 3.1 What rights of detention are available in relation to aircraft and unpaid debts? Please refer to question 3.1 above. Interim precautions are not available in arbitration. Under the Danish Administration of Justice Act, it is possible to levy execution against a debtor’s assets through the Bailiff’s court for 3.6 Are there any rights of appeal to the courts from the the purpose of having the asset sold on public auction, the proceeds decision of a court or arbitral tribunal and, if so, in of which may then be applied for the satisfaction of the creditor’s what circumstances do these rights arise? claim. Usually, it is a requirement that the debt is confirmed by judgment of a civil court (or arbitration tribunal). Except for claims of less than DKK 20,000, all decisions by Danish If execution cannot be levied, it will be possible to have the courts can be appealed once (i.e. from the city courts to the high courts Bailiff’s court levy as an attachment on the aircraft, provided that or from the high courts to the Supreme Court). In cases of general the creditor’s possibility of collecting the debt would be severely principal importance, a third instance appeal can be granted by a impaired without the attachment. In the case of aircraft, however, special appeal board. It is also possible to appeal claims of less than no attachment can be made if the aircraft is i) used exclusively for DKK 20,000 if they are granted appeal by the special appeal board. public purposes, ii) used on regular routes in public air traffic, or Except with respect to specific matters regarding formality, which iii) is determined for carriage of goods or passengers, if the aircraft can be tried by the ordinary courts, arbitral awards cannot be is ready for such carriage, provided that the debt for which the appealed. attachment is sought was not established in connection with the Denmark has ratified and implemented the 1972 New York Convention contemplated carriage or during the carriage. on the Recognition and Enforcement of Foreign Arbitral Awards.

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a notification is complete within 10 working days upon receipt of the 4 Commercial and Regulatory notification. In practice, the Authority may have several additional questions and may sometimes even begin negotiating possible 4.1 How does your jurisdiction approach and regulate commitments with the parties before the Phase I period is triggered. joint ventures between airline competitors? The filing fee amounts to DKK 50,000 for simplified notifications and 0.015% of the parties’ turnover for non-simplified notifications. Joint ventures between competing airlines are subject to the general The filing fee is capped at a maximum of DKK 1.5 million. competition rules as applied by the Danish Competition Council and the Danish Competition and Consumer Authority. 4.6 Are there any sector-specific rules which govern the The Competition Act provides the overall regulatory framework. aviation sector in relation to financial support for air Denmark According to the preparatory works of the Competition Act, its operators and airports, including (without limitation) provisions must be interpreted in accordance with EU competition state aid? rules. The Competition Act is complemented by a considerable amount of secondary legislation, including executive orders and guidelines. There are no sector-specific Danish rules which govern financial support for air operators and airports.

4.2 How do the competition authorities in your The relevant regulatory framework for such support consists of the jurisdiction determine the ‘relevant market’ for the Danish and EU State aid rules. purposes of mergers and acquisitions? According to Section 11a of the Competition Act, the Danish Competition Council may order the termination or repayment of aid The competition authorities generally tend to follow the European that distorts competition and that is not granted lawfully according Commission’s market definitions for the purpose of assessing a merger to public regulation. In practice, the Danish State aid rules mainly or an acquisition. The point of origin and the point of destination, in target municipal aid, which can be of interest with regard to practice a specific route, could specify a relevant market. municipality-owned airports. When a State aid measure affects trade between EU Member States, 4.3 Does your jurisdiction have a notification system the Danish Competition Council may refrain from dealing with whereby parties to an agreement can obtain an aid case and the EU State aid rules will generally apply. Of regulatory clearance/anti-trust immunity from particular importance are the Commission’s guidelines on State aid regulatory agencies? to airports and airlines (OJ 2014/C 099/03), which were adopted in 2014 and replaced the previous guidelines from 2005. Unlike the EU, Denmark has not abolished the notification system for agreements. According to Section 8(2) of the Competition Act, parties can notify an agreement in order to obtain an individual 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these exemption. The competition authorities may, however, refrain from subsidies? considering a notification, if the agreement may appreciably affect trade between the EU Member States. As a result, the notification Subsidies, in respect of particular routes, are given by the local system is rarely applied. airports or local authorities. The Danish State does not offer state subsidies to routes directly but offers financial support to certain 4.4 How does your jurisdiction approach mergers, airports instead. The criteria for obtaining these subsidies are acquisition mergers and full-function joint ventures? determined by the bodies granting the subsidies, but they must comply with applicable State aid rules. Mergers, acquisition mergers and full-function joint ventures are subject to mandatory notification if one of the two sets of turnover 4.8 What are the main regulatory instruments governing thresholds in Section 12(1) of the Competition Act is exceeded: the acquisition, retention and use of passenger data, ■ the combined aggregate turnover in Denmark of all the and what rights do passengers have in respect of undertakings concerned is more than DKK 900 million and their data which is held by airlines and airports? the aggregate turnover in Denmark of each of at least two of the undertakings concerned is more than DKK 100 million; or As of 25 May 2018, the EU General Data Protection Regulation ■ the aggregate turnover in Denmark of at least one of the (“GDPR”) is directly applicable under Danish law. Passengers have undertakings concerned is more than DKK 3.8 billion and numerous rights under GDPR: the data subject’s rights of access; the aggregate worldwide turnover of at least one of the other the data subject’s right to rectification; the right to be forgotten; undertakings concerned is more than DKK 3.8 billion. the data subject’s right to restriction of processing; the right to be informed; the right to data portability; the right to object; and the 4.5 Please provide details of the procedure, including data subject’s right to not be subject to a decision based solely on time frames for clearance and any costs of automated processing. notifications.

A concentration that is notifiable in Denmark must not be put into 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the effect before it has been approved by the Danish Competition data and are there any applicable sanctions? Council or the Council’s time limits have expired. This creates waiting periods of 25 working days (Phase I) after a In the event of a personal data breach, GDPR requires that the complete notification has been received, or additionally 90 working data controller notifies the Danish Data Protection Agency without days (Phase II) after the expiry of the first waiting period. The undue delay and, where feasible, not later than 72 hours after having Danish Competition and Consumer Authority must declare whether become aware of the breach. Before the agency is notified, the data

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controller is obliged to carry out thorough investigations to ensure that the nature of breach is known. If the data breach poses a high 4.16 Are there any ownership requirements pertaining to risk to those individuals whose data has been affected, they should GDSs operating in your jurisdiction? be informed about the breach without undue delay. There are no specific Danish regulation requirements pertaining to If a data loss is caused by any non-compliance with GDPR, the data GDS ownership. controller may be subject to penalties by the Danish Data Protection Agency and be liable in damages towards the data subjects involved. 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? Vertical integration between air operators and airports is not Denmark prohibited as such in Denmark. Any such constellation would have The main Danish regulation on intellectual property rights is the to comply with applicable competition law rules and the specific regulation on the protection of copyrights, trademarks, patents regulatory requirements for both businesses. and design rights. The ordinary courts are competent to handle intellectual property cases. Nevertheless, intellectual property cases 4.18 Are there any nationality requirements for entities will often begin in the Commercial and Maritime Court. applying for an Air Operator’s Certificate in your jurisdiction or operators of aircraft generally into and out of your jurisdiction? 4.11 Is there any legislation governing the denial of boarding rights and/or cancelled flights? To obtain a Danish AOC, the applicant must submit an application to the CAA. The entity must, among other things, submit documentation EC Order no. 261/2004 regulates matters relating to compensation that the company’s principal place of business is located in Denmark. and assistance to passengers in the event of delays, cancellations, Furthermore, the company will be required to supply a variety of and denied boarding. financial information pursuant to EC Regulation no. 1008/2008, Articles 5 and 8. 4.12 What powers do the relevant authorities have in A third-country operator (i.e. a non-EU and non-EFTA state) that relation to the late arrival and departure of flights? intends to perform commercial air transport operation into an EU Member State or an EFTA State requires a Third Country Operator Passengers who have been subject to late arrivals or departures (“TCO”) Authorisation issued by EASA. can complain to the CAA or file a complaint directly to the Danish courts. The CAA will not handle complaints regarding cargo delays, damage to cargo or passengers, or a carrier’s liability towards the 5 In Future passenger under the contract made between the carrier and the passenger. Claims regarding the latter are to be made directly to the Danish Courts. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments The CAA supervises the carrier’s compliance with EC Regulation no. affecting the aviation industry more generally in 261/2004 and the relevant regulation under the Air Navigation Act. your jurisdiction, are likely to feature or be worthy of attention in the next two years or so?

4.13 Are the airport authorities governed by particular Effective from 1 April 2018, the Swedish Government has legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? implemented an Aviation Tax that affects passengers travelling from Swedish airports. The tax applies to aircraft with a seating Subject to the Air Navigation Act, the CAA grants licences for the capacity of more than 10. The tax rate depends on the passenger’s establishment and operation of airports in Denmark and supervises final destination and ranges from SEK 60 to SEK 400 per passenger. the airports’ compliance with regulations on the operation of airports. The tax is paid by the passenger through an increase in ticket pricing. The tax has had a positive effect on air traffic in Denmark since air carriers such as SAS and Norwegian have redirected departures to 4.14 To what extent does general consumer protection Denmark to avoid the Swedish tax. The tax is expected to affect air legislation apply to the relationship between the airport operator and the passenger? traffic to and from Denmark further in the years to come.

General Danish consumer protection legislation is fully applicable in the relationship between the airport operator and the passenger.

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

The main GDS systems provided in Denmark are Amadeus, Galileo, Sabre, Worldticket and Worldspan by Travelport.

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Aage Krogh IUNO Njalsgade 19C Copenhagen Denmark

Tel: +45 5374 2702 Email: [email protected] URL: www.iuno.dk

Denmark Aage Krogh is head of the transport and aviation team at IUNO. He is a specialist in aviation law and he represents some of the world’s largest and most prominent airlines. Aage is recognised in The Legal 500 as one of Denmark’s leading lawyers within transport law. He is recognised by his clients for his ability to communicate complex matters and for his thorough understanding of how aviation law works in practice. Aage is a certified member of the Danish Association of Board Attorneys, and he frequently speaks to networking groups within aviation law.

IUNO is an internationally-oriented law firm. With the newest technology and untraditional approach, we provide highly specialised advice in the most important business law areas to clientele, consisting mainly of large and medium-sized companies in Denmark and abroad. IUNO can assist air carriers with the many requirements and restrictions that apply to aviation. In case of injuries to passengers, damage to luggage or the aircraft, we are by your side right from the initial claim, and if necessary, all the way until the Supreme Court has handed down a ruling.

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France Maylis Casati-Ollier

Clyde & Co Benjamin Potier

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

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■ Regulation (EU) 340/2015 of 28 April 2015, which substitutes ■ As to non-community air carriers, they must seek authorisation Regulation 805/2011 of 10 August 2011, which lays down from the DGAC to operate into or out of France, whether detailed rules for air traffic controllers’ licences and certain they are carrying out intra-community air services or extra- certificates. This Regulation applies as of 30 June 2015. By community air services. Such authorisation will be granted way of derogation from paragraph 1, Member States had the only if the necessary traffic rights exist. opportunity to decide not to apply Annexes I to IV, in whole or in part, before 31 December 2016 (Article 11). 1.7 Are airports state or privately owned? In order to make use of this possibility, Member States needed to notify the Commission and the Agency by 1 July 2015 at the latest. All French airports are directly owned by the State or public bodies, In France, different DGAC departments are responsible for

France except for Paris-Charles de Gaulle, Paris-Orly, Paris-Le Bourget and enforcing air safety regulation, whether French or European; in other aerodromes in the Paris region (région Ile de France). particular, the OSAC (Organisation for Civil Aviation Security) These are privately owned by the Aéroports de Paris company; and the DCS (Safety Oversight Directorate). The Minister for however, the French State must own more than 50% (currently 52%) Transport also has powers in respect of safety inspections of aircraft, of the company’s shares (Article L6323-1 of the Code of Transport). equipment and organisations and their employees. French safety rules are contained in Article L6341 and the subsequent Articles of the Code of Transport. 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? Any aircraft, whether French or foreign, at a French airport, and any premises and facilities at which controlled activities are carried out, may be inspected to ensure compliance with French and European Conditions of use are imposed, as well as charges. In particular, civil aviation regulations. In case of any breach of these regulations, there are regulations on noise and curfews in some airports, the minister may prescribe any measure to correct and restrict especially in Roissy-Charles de Gaulle. operations, including the grounding of an aircraft. 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular 1.4 Is air safety regulated separately for commercial, rules, regulations, systems and procedures in place cargo and private carriers? which need to be adhered to?

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

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

2.1 Does registration of ownership in the aircraft register constitute proof of ownership? 2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation? France is a party to the Geneva Convention of 19 June 1948 and rights in relation to the ownership of aircraft are consistent with the Leases (i.e. dry lease) are not required to be registered. However, rules set out therein. they may be registered on the French aircraft registry. When a lease Registration of ownership constitutes proof of ownership and is is recorded, the owner’s liability to third parties is subject to proof binding on third parties (Article L6121-1 of the French Code of of negligence of the owner. The registry only records the existence Transport). No transfer of title is binding on third parties until the of the lease to the operator, and its duration. owner is registered as the owner on the register which is kept by the aircraft may only be arrested in France in a very DGAC. For the purpose of registering an aircraft or a change of limited number of circumstances; for example, in the event of ownership, the DGAC will require an original bill of sale and other sums due by the owner for acquiring the aircraft, or for training such documentation necessary to verify the authenticity of the transfer. or maintenance (Article 6123-1 of the French Code of Transport), and also for airport or traffic dues and fines for curfew and similar 2.2 Is there a register of aircraft mortgages and charges? violations. Broadly speaking, what are the rules around the operation of this register? 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests Mortgages on aircraft registered in France must be registered on in a single engine are at risk of automatic transfer the French aircraft register in order to be binding on third parties or other prejudice when installed ‘on-wing’ on an (Article L6122-8 of the French Code of Transport). Mortgages may aircraft owned by another party? If so, what are the only be taken on an entire aircraft (for example, one may not take a conditions to such title annexation and can owners mortgage on an engine only). and financiers of engines take pre-emptive steps to mitigate the risks? Mortgages must be an instrument in writing signed by both parties (the owner as mortgagor, and the creditor of the owner as Engines installed on an aircraft are deemed to belong to the aircraft mortgagee). The amount secured must be indicated; the mortgage and so to the owner of the aircraft. An engine plate showing may secure the principal plus three years of past due interest, in different ownership can mitigate risk with limited success as there addition to the interest accrued during the year of enforcement. The is no engine registry. security consists of the aircraft, engines and all other parts; it may also be extended to spare parts provided that a list identifying each of them is included in the mortgage agreement. Mortgages may be 2.5 What (if any) are the tax implications in your obtained by contract only and not by Court Order. jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), A single mortgage may cover several aircraft or even an entire fleet and b) documentary taxes such as stamp duty; and (if the entire fleet is registered in France) as long as all aircraft (to the extent applicable) do exemptions exist as included in the security are identified. regards non-domestic purchasers and sellers of An original of the mortgage agreement must be sent to the DGAC for aircraft and/or particular aircraft types or operations? the purpose of filing a mortgage. In the same manner as for registration of ownership, the DGAC will require a number of documents in order Engine sales are subject to a 20% VAT. However, there is an to verify the authenticity of the mortgage; the mortgage agreement exemption for carriers which operate more than 80% abroad (Article does not need to be notarised. The registration of the mortgage is valid 262 II. 4. of the French Tax Code). for 10 years; if the mortgage agreement provides that the mortgage is granted for a period in excess of 10 years, a re-filing/re-recordation is required upon the expiry of the 10-year period.

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A freezing injunction is not necessary when the creditor already has 2.6 Is your jurisdiction a signatory to the main a judgment which is not yet enforceable, or a similar document such international Conventions (Montreal, Geneva and as an unpaid cheque or a notarised agreement; in such circumstances, Cape Town)? the freezing of an aircraft can be pursued directly by a bailiff.

France is a signatory of and has ratified most international aviation conventions, including, inter alia: 3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire ■ The 1929 Warsaw Convention, as amended by the Hague possession of the aircraft or enforce any of its rights Protocol of 28 September 1955. under the lease/finance agreement? ■ The 1944 Chicago Convention. France ■ The 1963 Tokyo Convention on offences and certain acts There is no such self-help regime under French law. A lessor or a committed on board aircraft. financier has no choice other than to seek an injunction to repossess ■ The 1952 Rome Convention on damage caused by foreign an aircraft. aircraft to third parties on the surface. ■ The 1968 Geneva Convention on the international recognition 3.3 Which courts are appropriate for aviation disputes? of rights in aircraft. Does this depend on the value of the dispute? For ■ The 1999 Montreal Convention. example, is there a distinction in your jurisdiction The Cape Town Convention on international interests in mobile regarding the courts in which civil and criminal cases are brought? equipment has been signed by France; however, to date it has not been ratified. The French judicial system is not based on sector/industry, but on the nature and value of the dispute. 2.7 How are the Conventions applied in your jurisdiction? Commercial courts will have jurisdiction on all commercial claims or other disputes related to trade, finance and commerce. As such, Ratified conventions are recognised and enforced by the court and commercial courts will have jurisdiction for claims between a lessor prevail over French domestic law. and a lessee, or between an airline and a repair company, etc. Criminal cases are heard by criminal courts. Prosecutions for 2.8 Does your jurisdiction make use of any taxation manslaughter will be heard by the Tribunal correctionnel, which benefits which enhance aircraft trading and leasing can also make decisions on a civil victim’s compensation for harm (either in-bound or out-bound leasing), for example arising from manslaughter. access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal Civil matters are heard by civil courts; mainly the Tribunal de of aircraft? Grande Instance for claims above EUR 10,000 (including claims arising from death or injury), and the Tribunal d’instance and Article 39 C II.1. of the French Code of taxes (Code Général Juge de proximité for small claims below EUR 10,000 (including des Impôts) provides for a mechanism called GIE Fiscal which baggage claims, claims for delayed flights, etc.). allows special tax treatment for releasers of aircraft in detailed Disputes with the French administration (for example, airport taxes circumstances and under specific conditions. and navigation service taxes) are heard by the Tribunal administratif.

3 Litigation and Dispute Resolution 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties? 3.1 What rights of detention are available in relation to aircraft and unpaid debts? The usual way to start litigation in France is to serve a Writ in Summons on the Defendant. The service is done by a bailiff. Then Any person who has possession of an aircraft can retain it until the original of the Writ in Summons is filed with the relevant court payment of charges, fees or costs, which arose from the subject which has jurisdiction over the matter. possession, such as repair and maintenance costs, hangar fees, etc., Service on parties residing abroad varies according to whether the have been satisfied. Defendant’s state is a member of the European Union or has signed Aircraft that are dedicated to public transportation or to state a bilateral or multilateral convention with France. services are protected, in the sense that they can be subject to As to non-EU Member States, service is usually done via the diplomatic freezing injunctions only for debts related to the sale or maintenance channel. The French court has no obligation to wait for evidence that: of the aircraft or training (Article L6123-1 of the French Code of the service on the foreign Defendant was actually completed; service Transport) and for unpaid airport or air service charges (Article is deemed completed; and it is sufficient to give evidence to the court L6123-2 of the French Code of Transport). that the Summons was sent to the public prosecutor who will take care In other circumstances, freezing injunctions can be sought pursuant of service abroad. If it transpires that service was not done, resulting to the common rules provided by the Law of 9 July 1991, before the in a Judgment by Default, this would be a specific cause for an appeal. Juge de l’Exécution. The conditions are: ■ The debt must appear certain. 3.5 What types of remedy are available from the courts ■ Under certain circumstances, the creditor can assume that he or arbitral tribunals in your jurisdiction, both on i) an will have difficulty in getting paid. interim basis, and ii) a final basis?

Remedies vary depending on the nature of the dispute.

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On an interim basis, the Claimant can start a procédure de référé for In France, Article L420-1 of the Code of Commerce forbids joint urgent cases in order to obtain an ordonnance de référé for: actions, agreements, explicit or implicit collusions or alliances ■ a provisional Injunction Order to prevent the other party from which have as their object, or can have as their effect, the prevention, doing something that clearly violates the law; or restriction or distortion of competition within a market, directly or ■ a provisional payment for damages. even indirectly through a foreign holding company. On a final basis, the Claimant can start aprocédure au fonds in order If the scope of such an agreement affects only the French market, to obtain a decision on the merits of his claim. For example: the French Authority in charge of competition (Autorité de la Concurrence) will have jurisdiction (Articles L420-1 and L420-2 of ■ damages; the Code of Commerce). ■ an injunction to do or not to do something; 4.1.2 Concentrations France ■ a decision on the ownership and repossession order; or (Article 2 of Regulation (EC) 139/2004) ■ other. and French law (Article L430-6 of the Code of Commerce) It should be noted that there is no definitive list of what a French forbid concentrations which would significantly impede effective court may order. competition in the common market or in a substantial part of it. Regarding the arbitral award, it has the authority of The European Commission (see point 4.1.2.1) or the French or can be declared provisionally enforceable in accordance with authorities (4.1.2.2) will have jurisdiction over the concentration Article 1484 of the French Code of Civil Procedure. depending on the turnover of the undertakings involved. Concentrations which have very little impact on the market given 3.6 Are there any rights of appeal to the courts from the the size of the undertakings, are not subject to any control (4.1.2.3). decision of a court or arbitral tribunal and, if so, in 4.1.2.1 European competence what circumstances do these rights arise? Regulation (EC) 139/2004 sets thresholds to define the Community dimension of the concentration, and therefore the competence of the Except for small cases below EUR 4,000, there is a right of appeal European Commission. to a Court of Appeal (Cour d’appel). The Court of Appeal has the power to make a new decision on all aspects of the matter, both on A concentration has a Community dimension where: questions of fact and questions of law. ■ the combined aggregate worldwide turnover of all the After a Court of Appeal decision, or if the appeal was not open, there undertakings concerned is more than EUR 5,000 million; and is also an appeal before the French Supreme Court (Cour de cassation for civil matters or Conseil d’Etat for administrative matters). The ■ the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 250 million, Supreme Court only rules on matters of law: it merely ensures that the lower court has correctly applied the law to the facts, without unless each of the undertakings concerned achieves more than two- contradicting the Court of Appeal as to what the facts are (with the thirds of its aggregate Community-wide turnover within one and the exception of a clear misrepresentation or distortion of the facts). same Member State. Arbitral decisions cannot be subject to an appeal, except in very Alternatively, a concentration that does not meet the thresholds laid limited circumstances. down previously has a Community dimension where: ■ the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2,500 million; 4 Commercial and Regulatory ■ in each of at least three Member States, the combined aggregate turnover of all the undertakings concerned is more than EUR 100 million; 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? ■ in each of at least three Member States included for the purpose of the above point, the aggregate turnover of each of at least two of the undertakings concerned is more than EUR There are no sector-specific competition law rules that apply to the 25 million; and aviation sector. ■ the aggregate Community-wide turnover of each of at least Joint ventures such as alliances or code shares can be considered to two of the undertakings concerned is more than EUR 100 be agreements which are incompatible with the market (see point million, 4.1.1 below) or as a concentration (see point 4.1.2). unless each of the undertakings concerned achieves more than two- 4.1.1 Agreement incompatible with the market thirds of its aggregate Community-wide turnover within one and the Article 101§1 of the Treaty on the Functioning of the European same Member State. Union (TFEU) prohibits all agreements between undertakings, 4.1.2.2 French competence decisions by associations of undertakings, and concerted practices If the above-mentioned thresholds are not met, the French Authority which may affect trade between Member States and which have in charge of competition will have jurisdiction. as their object or effect the prevention, restriction or distortion of competition within the internal market (i.e. the European Single 4.1.2.3 Absence of control Market). Concentrations which will not have a substantial impact on the The European Commission will have jurisdiction if it finds that an market are not controlled. agreement falls within the scope of this Article. This is the case when the following thresholds are not met (Article The European Commission may declare that Article 101§1 of the L430-2 of Code of Commerce): TFEU shall not apply to certain categories of agreements, decisions ■ the combined aggregate worldwide turnover of all the of associations, and concerted practices, in the air transport sector undertakings concerned is more than EUR 150 million; and (see question 4.3). ■ the French aggregate turnover of each of at least two of the undertakings concerned is more than EUR 50 million,

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or alternatively, if at least two of the undertakings concerned operate doubts as to its compatibility with the common market, undertakings one or several retail store(s), or at least one undertaking operates can offer commitments to make the concentration compatible with all or any part of its activity in one or several French overseas the common market. The European Commission will authorise it departments or in the French overseas collectivities of Mayotte, if it finds that the concentration, following the commitments, no Saint-Pierre-et-Miquelon, Saint-Martin and Saint-Barthélemy, and: longer raises serious doubts. ■ the combined aggregate worldwide turnover of all the By a decision of 14 July 2010, the European Commission authorised undertakings concerned is more than EUR 75 million; and an alliance between British Airways, American Airlines and Iberia, ■ the French aggregate turnover of each of at least two of the which was first seen as incompatible with the common market. undertakings concerned is more than EUR 15 million. But the undertakings committed to make landing and take-off slots

France available at London Heathrow, which were considered essential to 4.2 How do the competition authorities in your facilitate the entry or expansion of competitors on routes between jurisdiction determine the ‘relevant market’ for the London and several airports. It was an important step because slots purposes of mergers and acquisitions? are seen as market barriers. Regarding incompatible agreements with the market, under Regulation The “relevant market” comprises all the goods and services which (EC) 487/2009, the European Commission may, by Regulation, can be regarded as substitutable. declare that Article 101§3 TFEU shall not apply to certain categories They are determined by analysing the relevant product market and the of agreements and concerted practices in the air transport sector. relevant geographic market. As regards the relevant product market, both supply and demand will be taken into account, which implies 4.4 How does your jurisdiction approach mergers, looking closely at the goods or services provided by competitors. acquisition mergers and full-function joint ventures? The French Authority defines the relevant market by reference to European case law, as the Minister of Economy did in a decision of There is no control of foreign ownership. 27 April 2000 concerning the merger between Air France and Brit Air. Jurisdiction is distributed between French and European authorities The European Commission later defined several relevant markets depending on the combined aggregate turnover of all the between airline competitors in a decision of 27 February 2013 undertakings (see question 4.1). concerning the merger of Ryanair and Aer Lingus. Here, relevant Under Articles L430-1 and subsequent of the Code of Commerce, markets included routes, types of flights, types of passengers and concentrations shall be notified, and cannot be implemented before types of services. The European Commission considers that an they are authorised (see question 4.5 for further details). Origin and Destination are not substitutable by another, but two Under French law, joint ventures can only be considered airports serving the same city can be. The substitutability between concentrations if they “will be performing on a lasting basis all the direct and non-direct flights depends on the length of the flight. functions of an autonomous economic entity” (Article L430-1 II of Different categories of passenger can constitute different relevant the Code of Commerce). markets. The market packaging of the flight also has an influence on the definition of the relevant market because of the different services that can be linked to the flight. 4.5 Please provide details of the procedure, including time frames for clearance and any costs of notifications. 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain 4.5.1 In French law regulatory clearance/anti-trust immunity from regulatory agencies? Concentrations shall be notified to the French Competition Authority prior to their implementation. The Authority must then respond 4.3.1 In French law within 25 working days. Yes. The parties to a concentration can notify the project to the It can then find that the agreement does not fall within the scope of Authority in charge of competition (Autorité de la Concurrence), Articles L430-1 and L430-2 of the Code of Commerce. It can also with commitments which aim to make the concentration compatible authorise the agreement, or order a further in-depth examination. with the market. Under Article L430-5 II of the Code of Commerce, Within five working days from the day he/she is informed of the the Authority can then authorise the concentration, provided that the Authority’s decision, the Minister of Economy can call for a further undertakings comply with their commitments. in­depth examination of the agreement according to Article L430- Parties to an anticompetitive agreement may also obtain regulatory 7-1. In the absence of such a call, the agreement will be deemed clearance. Under Article L420-4 of the Code of Commerce, they authorised by the Authority. must prove that said agreement contributes to promoting economic 4.5.2 In European Union law progress, while allowing consumers a fair share of the resulting Concentrations in the scope of the European Regulation (EC) benefit, and does not afford the parties the possibility of eliminating 139/2004 (see question 4.1) have to be notified to the European competition in respect of a substantial part of the products in Commission prior to their implementation. question. Proceedings before the European Commission are set out in Articles 4.3.2 In European Union law 4 et seq. of Regulation (EC) 139/2004. Its decision shall be made Similar provisions apply in European Union law when the European within 25 working days starting from the receipt of the reasoned Commission has jurisdiction (see question 4.1): the agreement must submission by the Commission. be notified to the relevant European authority. It can then find that the agreement does not fall within the scope of Under Articles 6 and 8 of Regulation (EC) 139/2004, if the the Regulation. It can also decide not to oppose the concentration, European Commission finds that the concentration raises serious or declare the concentration incompatible with the common market.

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■ Right to withdraw consent. 4.6 Are there any sector-specific rules which govern the ■ Right to object to marketing. aviation sector in relation to financial support for air operators and airports, including (without limitation) ■ Right to complain to the relevant data protection authority(ies). state aid? 4.9 In the event of a data loss by a carrier, what This is a European Union law matter. Under Articles 107 to 109 obligations are there on the airline which has lost the of the TFEU, state aid that distorts or could distort competition is data and are there any applicable sanctions? basically incompatible with the common market, although some aid might be exempted in consideration of its purpose. The controller of the data is responsible for reporting a personal Under Articles 87 and 88 of the EC Treaty and Article 61 of the EEA data breach without undue delay (and in any case within 72 hours of France Agreement, the European Commission has set guidelines regarding first becoming aware of the breach) to the relevant data protection state aid in the Aviation Sector (94/ C 350/07 OJ C 950/1994; OJ C authority, unless the breach is unlikely to result in a risk to the rights 312/2005). and freedoms of the data subject(s). A processor must notify any data breach to the controller without undue delay. Those guidelines concern the financing of airports and start-up aid for airlines. The notification must include the nature of the personal data breach including the categories and number of data subjects concerned, the The aim of the airport financing guidelines is to allow an airport name and contact details of the Data Protection Officer or relevant under public ownership to behave as a private firm. Consequently, point of contact, the likely consequences of the breach and the a reduction in airport fees is free of aid if the airport is guided by measures taken to address the breach including attempts to mitigate long-term profitability. In France, there are many examples of possible adverse effects. small airports conceding reductions in fees to Ryanair, which have allowed them to develop significantly. Start-up aid for airlines has the main objective of maintaining 4.10 What are the mechanisms available for the protection certain routes (see question 4.7). of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? In France, there are no sector-specific provisions that regulate direct or indirect financial support to companies or airports. In French law, there are no specific provisions relating to intellectual property rights in relation to aircraft. All the mechanisms available 4.7 Are state subsidies available in respect of particular are provided by the French Code of Intellectual Property. routes? What criteria apply to obtaining these As regards jurisdiction, special courts are established to deal with subsidies? intellectual property issues. Furthermore, the European Union joined the in French law has not made available any specific national aid for 2009. The accession covers those matters in respect of which legal airlines since 2005. Assistance must be sought at a European level. competence has been transferred to the EU from the Member States. Article 86 of the EC Treaty rules that state aid in the form of public Ratification is therefore required by each Member State in order for service compensation may be granted to undertakings entrusted with the benefits to be realised. the operation of services of general economic interest. Within this Article, Regulation (EEC) 2408/92 and a Decision from the European Commission of 28 November 2005 set the rules that Member States 4.11 Is there any legislation governing the denial of have to apply to provide public service compensation to airlines. The boarding rights and/or cancelled flights? main goal followed by the regulation is to maintain routes considered vital for the economic development of certain regions. Regulation (EC) 261/2004, directly applicable in France, provides for the rights of the passengers in case of denial of boarding (passengers may receive compensation up to EUR 600). In case 4.8 What are the main regulatory instruments governing of a dispute on the application of the Regulation’s provisions, civil the acquisition, retention and use of passenger data, state courts will have jurisdiction. and what rights do passengers have in respect of their data which is held by airlines and airports? Regarding Regulation (EC) 261/2004, the European Commission proposed the modification of the existing air passenger rights From 25 May 2018, the principal data protection legislation in the regulations, to address the court’s decisions. The Parliament EU and so in France will be Regulation (EU) 2016/679 (the General adopted its first-reading position on the proposal in February 2014. Data Protection Regulation or “GDPR”). The GDPR repeals But the revised Regulation has not yet come into force: although the Directive 95/46/EC (the Data Protection Directive) and leads to Council has made some progress on the file, it has not yet agreed on increased (though not total) harmonisation of data protection law a general approach for negotiations with the Parliament. across the EU Member States. In case of a dispute that is not covered by Regulation (EC) 261/2004, Under the GDPR the passengers’ rights are the following: French law applies (no specific regulation). ■ Right of access to data/copies of data. ■ Right to rectification of errors. 4.12 What powers do the relevant authorities have in ■ Right to deletion/right to be forgotten. relation to the late arrival and departure of flights? ■ Right to object to processing. Regulation (EC) 261/2004 also provides for the rights applicable in ■ Right to restrict processing. case of delay. ■ Right to data portability.

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According to Article R160-1 of the French Civil Aviation Code, the French Commission administrative de l’aviation civile may impose 4.16 Are there any ownership requirements pertaining to a penalty of up to EUR 7,500 for non-compliance with Regulation GDSs operating in your jurisdiction? (EC) 261/2004 (including late arrival of flights). No, there are not. In order to contest such a penalty, an action may be brought before the Administrative Court (Article R160-14 of the French Civil Aviation Code). 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

4.13 Are the airport authorities governed by particular France legislation? If so, what obligations, broadly speaking, Since most French airports are controlled by the State, such are imposed on the airport authorities? integration would presuppose political will. In any case, there are no legal impediments to vertical integration Airports, and subsequently airport authorities, are governed by between air operators and airports. the Transport Code, Section 6, Book III, which provides for the legal status applicable to airports, for safety rules and for noise 4.18 Are there any nationality requirements for entities regulations. applying for an Air Operator’s Certificate in your In addition, airports are governed by European Regulations, such jurisdiction or operators of aircraft generally into and as (EC) 216/2008, implementing common rules in the field of civil out of your jurisdiction? aviation, and (EU) 219/2014, which deals with airport certification. There are no such nationality requirements, except that the holder of a French AOC can only operate aircraft registered in France (there 4.14 To what extent does general consumer protection are exemptions). legislation apply to the relationship between the airport operator and the passenger? 5 In Future Most of the disputes that arise between airports and passengers relate to bodily injury. In case of such disputes, administrative liability applies. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments The general consumer protection legislation in France mainly affecting the aviation industry more generally in stems from EU legislation and is focused on safety, the protection your jurisdiction, are likely to feature or be worthy of of financial interests and the duty of information. Most of these attention in the next two years or so? general Regulations deal with the consumer’s protection within the context of sale or use of goods, and are therefore not relevant to the The most likely change in regulation is the amendment of Regulation relationship between the airport operator and its passengers. (EC) 261/2004, which provides for the rights of passengers in the However, the general consumer protection legislation applies to case of denial of boarding and cancelled flights. There has been a lot the relationship between the airport operator and passengers using of criticism against the EU and French courts’ interpretation of the airport parking. Regulation, extending the right to compensation to delayed flights and dramatically restraining the possibilities for the airlines to avoid financial compensation (extraordinary circumstances). The burden 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? of financial compensation paid by the airlines to the passengers is significant. An amendment has been sought for years but has not yet been achieved. Clarification as to whether the EU Commission will Amadeus, Sabre and Galileo are the most common GDSs used in accept the courts’ interpretation by implementing their decisions France. within the revised version of Regulation (EC) 261/2004, or counter the said interpretations, is expected.

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

Tel: +33 1 44 43 88 88 Tel: +33 1 44 43 89 96 Fax: +33 1 44 43 88 77 Fax: +33 1 44 43 88 77 Email: [email protected] Email: [email protected] URL: www.clydeco.com URL: www.clydeco.com France Maylis’ expertise covers counselling (aircraft financing, purchase, Benjamin advises his clients mainly in the field of aviation. He practises charter and lease agreements) as well as litigation and arbitration litigation before civil, commercial, administrative and criminal courts. for airline companies and their insurers in all aspects of aviation law Benjamin’s expertise in transport is recognised by Who’s Who Legal – and aviation and aeronautical activities, including: major accidents; France. He also holds a private pilot’s licence. disputes relating to freight; ground handling; product liability; sports and leisure aviation; regulations; and airline insurance law. Maylis holds a Diploma of Advanced Studies (DEA) from the University of Paris X (Nanterre) (1976), as well as a Master of from the University of Michigan Law School (1979). Maylis’ expertise in aviation law is recognised by Who’s Who Legal, Chambers, The Legal 500 and Best Lawyers 2011.

The Clyde & Co Paris aviation department is currently the largest aviation legal practice in France. Our experience spans more than 35 years, acting for a number of airlines including, inter alia, Air France and the various airlines in its group. We are specialists in aviation law and our expertise covers important disputes arising from major aircraft accidents as well as aircraft financing, purchase, charter and lease agreements, litigation and arbitration for airline companies and their insurers. We advise on all aspects of aviation law, including aeronautical activities, disputes relating to freight, ground handling, product liability, sports and leisure aviation, regulations and airline insurance law. We appear in court frequently, whether representing clients in individual or in major accident cases.

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Germany Rainer Amann

Urwantschky Dangel Borst PartmbB Claudia Hess

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

1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ As Germany is a Member State of the EU, Regulation (EC) No. or regulate aviation in your jurisdiction. 1008/2008 applies and licensed activities are governed by this Regulation. In Germany, aviation law is mainly governed by international According to Article 3 para. 1 of Regulation (EC) No. 1008/2008, treaties and European law. “no undertaking established in the Community shall be permitted to Germany is a party to the main following multilateral agreements carry by air passengers, mail and/or cargo for remuneration and/or relating to international carriage: hire unless it has been granted the appropriate operating licence”. ■ Convention on International Civil Aviation (Chicago) – Under Article 15 of Regulation (EC) No. 1008/2008, air carriers 8 June 1956. from European Economic Area (EEA) Member States are entitled to ■ International Air Services Transit Agreement (Chicago) operate flights within the Community whereas a special application – 8 June 1956. or notification is not required. This also applies to air carriers from ■ Convention on the international recognition of rights in Switzerland. aircraft (Geneva) – 5 October 1959. Regulation (EC) No. 1008/2008 does not apply to the following ■ Convention for the unification of certain rules relating to undertakings: international carriage by air (Warsaw) – 29 December 1933. ■ foreign carriers based outside the EEA; and ■ Protocol to amend the Warsaw Convention (The Hague) – ■ carriers based in Germany that operate round-trips or carry 1 August 1963. passengers or cargo by hot-air balloon. ■ Convention, supplementary to the Warsaw Convention, In respect of scheduled air traffic, air carriers from non-EEA for the unification of certain rules relating to international Member States have to obtain an operating licence from the carriage by air performed by a person other than the Luftfahrt-Bundesamt (LBA) prior to commencing scheduled air contracting carrier (Guadalajara) – 31 May 1964. services from and to Germany. ■ Convention for the unification of certain rules relating to international carriage by air (Montreal) – 28 June 2004. In respect of non-scheduled air traffic, an entry permission must be requested for commercial flights of non-EEA air carriers to and from ■ Convention on offences and certain other acts committed on Germany. The permission for entry will only be granted if the state board aircraft (Tokyo) – 16 March 1970. registry of the air carrier submitting the application grants entry to Furthermore, the European Regulations on aviation law apply in German air carriers in the same way (reciprocity clause). Germany. As far as international treaties and regulations are not applicable, 1.3 What are the principal pieces of legislation in German national law applies, especially the German Air Traffic your jurisdiction which govern air safety, and who Act (Luftverkehrsgesetz – LuftVG), the Air Traffic Regulation administers air safety? (Luftverkehrs-Ordnung – LuftVO) and the Aviation Security Act (Luftsicherheitsgesetz – LuftSiG). In Germany, safety issues are largely governed by EU regulations, The Luftfahrt-Bundesamt (LBA) in Braunschweig is the main especially Regulation (EC) No. 216/2008. government body regulating the aviation industry. It is responsible for The national rules governing air traffic safety are primarily the granting certificates of airworthiness and operating licences. It is the German Air Traffic Regulation (Luftverkehrsordnung – LuftVO), competent authority for aircraft registrations and entry permissions. the Regulation for the Operation of Aircraft (Betriebsordnung für It furthermore deals with environmental issues, aviation safety and Luftfahrtgerät – LuftBO) and the Regulation on the Examination of security as well as aviation personnel. The LBA is also the main Aircraft (Verordnung zur Prüfung von Luftfahrtgerät – LuftGerPV). supervisory body in the aviation industry and as such the National The German provisions apply in cases where the EU regulations are Enforcement Body regarding various European Regulations. not applicable. In Germany, the European Aviation Safety Agency (EASA) based in Cologne, Germany, the LBA based in Braunschweig and the

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Federal Agency for Aircraft Accident Investigation (Bundesstelle für Flugunfalluntersuchung – BFU) based in Braunschweig are the 1.9 What legislative and/or regulatory regime applies to competent authorities for air safety. Air traffic control is administered air accidents? For example, are there any particular rules, regulations, systems and procedures in place by the Deutsche Flugsicherung GmbH (DFS) based in Langen. which need to be adhered to?

1.4 Is air safety regulated separately for commercial, Under German law, accidents of civil aircraft must be reported cargo and private carriers? immediately to the German authority for the investigation of accidents and disruptions, the Federal Agency for Aircraft Accident In Germany, an individual framework of regulations on air safety for Investigation (Bundesstelle für Flugunfalluntersuchung – BFU), by commercial, cargo and private carriers does not exist. the pilot, a crew member or the owner of the aircraft. Germany Incidents that endanger or could endanger an aircraft, its passengers 1.5 Are air charters regulated separately for commercial, or third persons must be reported to the LBA. cargo and private carriers? A danger to air traffic must be immediately reported by the pilot to the competent air traffic control (ATC). Non-EEA charter carriers must apply for an entry permission if they Under German law, accident investigation and reporting is governed wish to fly to Germany. The permit can be obtained for a single by the Law on the Investigation of Accidents and Disruptions in flight or for several flights. The permit is only granted if the home the Operation of Civil Aircraft (Gesetz über die Untersuchung country of the charter carrier grants entry permissions to German von Unfällen und Störungen bei dem Betrieb ziviler Luftfahrzeuge charter carriers in the same way (reciprocity principle). – FlUUG), which is the transposition of Directive 94/56/EC into German law. 1.6 As regards international air carriers operating in your The FlUUG applies to accidents and disruptions that occur in the jurisdiction, are there any particular limitations to be Federal Republic of Germany and applies to: aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, ■ accidents in which: restrictions and taxes which apply to international but ■ a person suffers a fatal or severe injury on board or in not domestic carriers. connection with an aircraft; or ■ an aircraft has suffered damage because of which the Under Article 3 of the German Air Traffic Act (Luftverkehrsgesetz aircraft’s performance, its structural strength or flight – LuftVG), an aircraft can only be registered in the German Aircraft characteristics are impaired and the reparation involves Register if it is exclusively owned by EU nationals or German considerable efforts or a replacement of the damaged part; nationals. In the case of ownership by German registered entities, the ■ disruptions that impair or could impair the safe operation of a main part of the capital and the actual control thereof must be owned flight; or by EU or German nationals, and the majority of representatives or ■ fatal and severe injuries. personally liable shareholders must be EU or German nationals. The BFU establishes a report on every investigation in which, inter Under the German Air Traffic Tax Act (Luftverkehrssteuergesetz alia, the details of the accident or disruption, the aircraft concerned, – LuftVStG), carriers whose registered place of business is not the external circumstances, the results of the investigations and the in Germany or in the EU must determine a German-based tax discovery of the (potential) cause of the accident or disruption are representative. The Air Traffic Act requires air carriers to pay a tax indicated. When establishing the report, the BFU may hear the for each passenger departing from Germany on their flights whereas operator of the aircraft, the manufacturer, the crew, representatives the tax amount is calculated on the basis of the distance flown. The of foreign states, ATC and the German Meteorological Service. tax representative to be designated by non-EU air carriers is the The BFU may also request assistance, information, documents and intermediary between the tax authorities and the air carrier and bears equipment from other states for conducting the investigation. the same obligations as the air carrier himself. The tax representative The aim of the BFU is to determine the cause of an accident but they is also the tax debtor next to the air carrier. For German or EU not establish liability. carriers, such tax representative must not be appointed.

1.10 Have there been any recent cases of note or other 1.7 Are airports state or privately owned? notable developments in your jurisdiction involving air operators and/or airports? In Germany, airports can be either state owned, privately owned or partly state and partly privately owned. a) In its decision of 20 March 2018 (ref. X ZR 25/17), the German airports are mainly state owned by way of operating German Federal Court of Justice (the highest German civil court) held a clause in an airline’s Terms and Conditions, companies organised under private law. which stated that a ticket is non-refundable. In the case decided by the Federal Court, the passengers 1.8 Do the airports impose requirements on carriers claimed for a full refund of the ticket price from Lufthansa flying to and from the airports in your jurisdiction? after they had cancelled their booking due to an illness of one of the passengers. In the Terms and Conditions of the airline, The airports impose airport charges on the air carriers flying to and it said concerning these tickets “A cancellation of the booking from the relevant airport. The charges are levied in accordance with is not possible. The unused taxes and charges are refundable. the applicable Airport Charges Regulation issued by each airport. The international/national charges are not refundable”. Upon the cancellation of their booking, the airline refunded Such Regulation requires prior approval by the supervisory authority. the taxes and charges but not the fare to the passengers. The Federal Court decided that this clause is valid under German law. It held that the exclusion of the right to cancel

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the booking is not unfair for the passengers. The expenses officers are of clearly subordinate economic importance to an airline saves because of the booking cancellation are the airline in view of its turnover, its total costs and its profit rather low as the costs of an airline are mainly fixed costs and can be easily included in the air fare and thus passed on concerning the flight itself which are hardly reduced ifan to passengers. individual passenger does not take the flight. The Federal Court further took the view that a passenger who does not wish to pay the higher ticket price for a flexible booking 2 Aircraft Trading, Finance and Leasing guaranteeing a refund of the fare in the case of a booking cancellation, can cover the risk of illness by taking out the relevant insurance. 2.1 Does registration of ownership in the aircraft register The Federal Court concluded that the exclusion of the right to constitute proof of ownership? Germany cancel the booking and the aim to facilitate the performance of a contract of carriage does not put the passenger at an The aim of registering an aircraft in the German Aircraft Register is unreasonable disadvantage. so that the aircraft is authorised to operate in Germany. The Federal Court thus decided in favour of the airlines, However, registration in the Aircraft Register does not establish and contrary to the decisions of Regional Court Frankfurt ownership over the aircraft. Therefore, an incorrect registration and other German courts which had previously held that does not create a legal presumption of ownership for a person non-refundable tickets are not per se non-refundable, and registered incorrectly. had made high demands of airlines in terms of evidence on whether the flight was fully booked and which expenses the airline had saved. 2.2 Is there a register of aircraft mortgages and charges? b) In its decision of 26 July 2018 (ref.: III ZR 391/17), the Broadly speaking, what are the rules around the German Federal Court of Justice held that airlines are not operation of this register? entitled to a refund against the Federal Republic of Germany concerning the payments they have to effect to third parties In Germany, aircraft mortgages can be registered in the Aircraft for the transport of Federal Police Officers (“Sky Marshals”). Mortgage Register (Register für Pfandrechte an Luftfahrzeugen) at According to the German Federal Police Act, airlines have to the Local Court in Braunschweig. transport officers of the German Federal Police free of charge An application for registration of an aircraft mortgage can only be as air marshals on certain flights determined by the Federal filed once the aircraft is registered on the Aircraft Register. The Police. A German airline requests the Federal Republic of Germany to reimburse the passenger-related expenses that it application for registration of an aircraft mortgage must: had to pay to third parties (domestic and foreign airports and ■ indicate the aircraft register number for the relevant aircraft; authorities) for the carriage of these sky marshals who are and carried as passengers. These expenses include, for example, ■ be drafted and filed by a German notary by way of notarial transport taxes, entry charges and other charges (e.g. customs deed in the German language. duties, take-off and landing charges). The notarial deed must be filed with the Local Court in Braunschweig The Federal Court held that the fact that the transport of the and include the following documents and information: sky marshals is, by law, free of charge for the Federal Police, this excludes any right to reimbursement of expenses incurred ■ The application for registration of the mortgage, which in connection with the transport of the police officers. indicates the mortgage amount and the interest specifications. Irrespective of whether the police officers only have ■ General information on the aircraft, including the: sovereign powers in German airspace, the obligation to ■ page number of the Aircraft Register on which the aircraft carry flight safety attendants free of charge also applies to is registered; international flights. In these cases, the entire transport to the ■ nationality and registry mark of the aircraft; (foreign) destination airport and the subsequent return flight ■ aircraft type; to Germany are covered, in the case of the performance of tasks commenced on German territory. The onward carriage ■ serial number of the airframe; and beyond the national border, like the return flight to Germany, ■ name and place of residence of the aircraft owner. is a necessary actual consequence of the prior performance of ■ An affidavit confirming that the mortgagor is the sole owner tasks in Germany. Moreover, there should be no reason why of the aircraft and that the aircraft is not mortgaged to another the flight safety attendant, as the representative of the pilot person or entity. in command, should not be authorised to exercise “in-flight power” outside German territory if and to the extent that this ■ An affidavit confirming the value of the aircraft. does not lead to a collision with foreign sovereignty. ■ Confirmation that the mortgagor owes the secured obligations The Federal Court also held that the obligation to carry sky to the mortgagee. marshals free of charge is justified by sufficient reasons of ■ A declaration subjecting the aircraft to immediate enforcement public interest. This obligation primarily has the aim to proceedings in the case of default under the mortgage, which prevent the hijacking of aircraft, terrorist attacks and hostage- includes enforcement measures against the mortgagor. taking and thus to prevent and avert dangers to the health and ■ Confirmation that the mortgagee can obtain an enforceable life of aircraft passengers and crew members. The Federal copy of the notarial deed. Court held that the obligation to carry the sky marshals free ■ Confirmation that the mortgagor must bear the costs of of charge is also proportionate as the passenger-related costs the notarial deed and of registration of the mortgage in the do not unreasonably burden the airline. Furthermore, the Aircraft Mortgage Register. sky marshals benefit the airlines themselves as they lead to an increase in safety and a reduction in risk and relieves the On receipt of the application, the Local Court of Braunschweig airlines of similar safety measures of their own. The Federal will request payment of the registration fees. The amount of Court reasoned that the airlines are the direct beneficiaries of these fees is based on the value of the mortgage, and is calculated the police activity. In addition, the passenger-related costs in accordance with the provisions of the German Court Fee Act to be paid to third parties for the carriage of Federal Police (Gerichtskostengesetz).

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The aircraft mortgage is registered once the payment of the registration fees is made and once the Court has reviewed and 2.4 As a matter of local law, is there any concept of title approved the required documents. Registration of an aircraft annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer mortgage takes about two to three days from receipt of payment by or other prejudice when installed ‘on-wing’ on an the Court. aircraft owned by another party? If so, what are the There is no separate mortgage register for aircraft engines and spare conditions to such title annexation and can owners parts in Germany. An aircraft mortgage can only be registered over and financiers of engines take pre-emptive steps to the whole aircraft. Spare parts or engines attached to the aircraft mitigate the risks? are not identified separately in the Aircraft Mortgage Register. The engines and spare parts are considered as parts of the aircraft. A Under German law, spare parts cannot individually be subject to an registered aircraft mortgage will also cover spare parts and engines aircraft mortgage. A mortgage can only be registered over the whole Germany if both: aircraft. Spare parts or engines are not identified separately in the Aircraft Mortgage Register. ■ The aircraft owner is also the owner of the spare parts and engines. Spare parts are considered as parts of the aircraft. A registered ■ The engines and spare parts are attached to the aircraft. aircraft mortgage also covers spare parts if both the: The parties can agree that an aircraft mortgage extends to engines ■ Owner of the aircraft is also the owner of the spare parts. and spare parts that are located elsewhere and are not attached to the ■ Spare parts are affixed to the aircraft. aircraft. However, it is not possible to grant a mortgage solely over If the spare parts are not affixed to the aircraft but are located in the engines and/or spare parts. a different place, the parties can agree that the aircraft mortgage To perfect an aircraft mortgage, the mortgage must be registered in also covers these spare parts. The extension of the mortgage over the German Aircraft Mortgage Register (Register für Pfandrechte an these spare parts must also be registered in the Aircraft Mortgage Luftfahrzeugen). A registered aircraft mortgage takes priority over Register. any subsequently registered mortgage. The buyer of an aircraft will However, it is not possible to register a mortgage solely over spare become the owner subject to any previously registered mortgage parts in the Aircraft Mortgage Register. (and free of any mortgage that was not registered at the time of the The following other forms of security can be taken over spare parts purchase). under German law: ■ Retention of title (Article 449, German Civil Code 2.3 Are there any particular regulatory requirements (Bürgerliches Gesetzbuch) (BGB)). which a lessor or a financier needs to be aware of as ■ Chattel mortgage (Articles 929 and 930, BGB). regards aircraft operation? ■ Lien (Articles 1204 et seq., BGB). There is no specific register for aircraft leases in Germany. These forms of security are not registered in any official register, but are solely based on the agreement between the grantor of the An aircraft lease is not in itself registered in the Aircraft Register. security and the secured party. However, if both the owner and the operator (that is, the lessee) of the aircraft are registered when the aircraft is registered, it is implied that the aircraft is a leased aircraft. 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- An aircraft lease must be approved by the German Civil Aviation added tax (VAT) and/or goods and services tax (GST), Authority (Luftfahrt-Bundesamt) (LBA). The application form and b) documentary taxes such as stamp duty; and must be filed with the LBA at least four weeks before the intended (to the extent applicable) do exemptions exist as start of the lease. The following documents and information must regards non-domestic purchasers and sellers of be provided to the LBA with the application form: aircraft and/or particular aircraft types or operations? ■ Aircraft type. ■ Aircraft registration number. The import of an aircraft into Germany is exempt from VAT if the aircraft is to be used by a company that predominantly undertakes ■ Aircraft serial number. international air carriage (Articles 4 and 8, paragraph 2, no.1, ■ Name and address of the operator and the owner. German Value Added Tax Act (Umsatzsteuergesetz – UStG)). The ■ Copy of the certificate of airworthiness. German Federal Ministry of Finance has published a list of the ■ Copy of the lease agreement or description of the lease companies that mainly operate international air carriage. agreement, including the financial agreements. If the conditions for VAT exemption are not met, import VAT may be ■ A declaration signed by the lessee that the parties are aware payable at a rate of 19%. However, pre-tax allowances may apply. of their responsibilities. ■ Proof that the foreign air carrier (if any) has a valid operating permit and a valid air operator certificate (AOC), and that the 2.6 Is your jurisdiction a signatory to the main international aircraft subject to the lease is listed in the AOC of the foreign Conventions (Montreal, Geneva and Cape Town)? air carrier (in the case of a wet lease). ■ Proof that the aircraft is insured against damages covered by Germany is a party to the main following multilateral agreements the statutory liability of German air carriers. relating to international carriage: ■ Convention on International Civil Aviation (Chicago) – 8 June 1956. ■ International Air Services Transit Agreement (Chicago) – 8 June 1956.

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■ Convention on the international recognition of rights in aircraft (Geneva) – 5 October 1959. 3.2 Is there a regime of self-help available to a lessor ■ Convention for the unification of certain rules relating to or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights international carriage by air (Warsaw) – 29 December 1933. under the lease/finance agreement? ■ Protocol to amend the Warsaw Convention (The Hague) – 1 August 1963. Self-help remedies are not recognised in Germany, including in the ■ Convention, supplementary to the Warsaw Convention, event of default. The lessor or financier must abide by the remedies for the unification of certain rules relating to international and procedures provided by German laws to reacquire possession carriage by air performed by a person other than the of the aircraft. contracting carrier (Guadalajara) – 31 May 1964.

Germany ■ Convention for the unification of certain rules relating to international carriage by air (Montreal) – 28 June 2004. 3.3 Which courts are appropriate for aviation disputes? ■ Convention on offences and certain other acts committed on Does this depend on the value of the dispute? For board aircraft (Tokyo) – 16 March 1970. example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases Germany signed the Cape Town Convention on 17 September 2002 are brought? but has not ratified it. Germany has no current plans to ratify the Cape Town Convention. In Germany, special courts for aviation disputes do not exist. Civil claims have to be brought before the German civil courts and 2.7 How are the Conventions applied in your jurisdiction? administrative or criminal claims have to be brought before the German administrative/criminal courts. The International Conventions are ratified and thereby implemented Concerning civil court cases, the Local Courts handle cases with a into directly applicable national and EU law. dispute value of up to €5,000. Cases with a dispute value of more than €5,000 as well as appeals are heard before the Regional Courts. 2.8 Does your jurisdiction make use of any taxation An appeal against a judgment is not possible if the dispute value is benefits which enhance aircraft trading and leasing €600 or less. (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal 3.4 What service requirements apply for the service of of aircraft? court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

Germany has transposed the Sixth Directive 77/388, as amended by In principle, the court documents shall be delivered to the Plaintiff Directive 92/111, into national law. or, if known to the court, to the person or entity authorised to accept The European Court of Justice has ruled on 19 July 2012: service on behalf of the Plaintiff. There are no distinctions between “Article 15(6) of Directive 77/388, as amended by Directive foreign and domestic parties. 92/111, must be interpreted as meaning that the exemption for When service on foreign parties has to be effected abroad, the which it provides also applies to the supply of an aircraft to an operator who is not itself an ‘airline operating for reward procedure of service depends on whether service is made in an chiefly on international routes’ within the meaning of that EU or a non-EU country. Service in EU countries can be made provision but which acquires that aircraft for the purposes of via a registered letter, whereas service in non-EU countries must exclusive use thereof by such an undertaking.” be effected in compliance with the relevant bilateral agreements between the sending and the receiving state. Service to certain non- EU countries has to be effected via formal diplomatic channels. 3 Litigation and Dispute Resolution The court and the LBA can ask the airlines from non-EU Member States to determine a person or entity in Germany who is authorised 3.1 What rights of detention are available in relation to to accept service on the airline’s behalf. The relevant correspondence aircraft and unpaid debts? will then be sent to this designated entity. When service on foreign parties is effected abroad, the courts often First, the creditor has to obtain an enforceable title in respect of the arrange for a translation of the court documents. outstanding debts by filing legal proceedings before a civil court. The losing party has to bear the costs for the translation and also the If the aircraft in question is registered in the German Aircraft service costs. Register, the creditor can file an application with the Local Court in Braunschweig (where the Mortgage Register is kept) for the entry 3.5 What types of remedy are available from the courts of a registered mortgage on the aircraft. With the mortgage, the or arbitral tribunals in your jurisdiction, both on i) an creditor can force the aircraft owner (in rather formal proceedings) interim basis, and ii) a final basis? that the aircraft is sold in a public auction. If the aircraft is not registered in the Aircraft Register (e.g. because it Concerning passenger claims, on 1 November 2013, the conciliation is a foreign aircraft), the title in respect of the outstanding debts can instrument of ADR came into force in Germany to avoid court be enforced by instructing a bailiff with the seizure of the aircraft. proceedings in the case of delays, cancellations and denied boarding As a further measure, the creditor can apply for an arrest of the as well as baggage claims. A framework for voluntary conciliation aircraft until the enforcement proceedings actually start. has been created, so that passengers can make use of this if an airline does not satisfy their claims within two months. Claims of up to

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€5,000 will be dealt with by the conciliation institutions. There in respect of the merging of companies. The essential authority are private law ADR bodies that have been certified by the German with regards to mergers and acquisitions is the authorities and which airlines can join. If an airline has not joined (Bundeskartellamt). such ADR body, the passenger can turn to the ADR authority within The relevant legal framework in this regard is the German the German Ministry of Justice. The conciliation proceedings are Act against Restrictions on Competition (Gesetz gegen free of charge for the passenger. Wettbewerbsbeschränkungen). German cartel law fully applies to The German Civil Aviation Authority (Luftfahrtbundesamt – LBA) is aviation-related companies (e.g. airlines). the national enforcement body regarding Regulation (EC) 261/2004 and regarding Regulation (EC) 1107/2006. It handles passenger 4.3 Does your jurisdiction have a notification system complaints free of charge for the passenger. However, the LBA whereby parties to an agreement can obtain does not have the power to order an airline to pay compensation regulatory clearance/anti-trust immunity from Germany or to undertake certain measures towards the passenger but only to regulatory agencies? impose a fine on an airline for not paying compensation or for not providing certain assistance. According to Article 35 and the following of the Act against The most common and important remedy is the filing of a lawsuit Restraints in Competition (Gesetz gegen Wettbewerbsbeschränkungen with the competent courts to pursue one’s rights. Representation by – GWB), parties can obtain regulatory approval for mergers from the a lawyer is not mandatory for claims not exceeding €5,000. Bundeskartellamt. Concerning civil court cases, the Local Courts (Amtsgericht) handle cases with a dispute value of up to €5,000. Cases with a dispute value 4.4 How does your jurisdiction approach mergers, of more than €5,000 as well as appeal cases coming from the Local acquisition mergers and full-function joint ventures? Courts are heard before the Regional Courts (Landgericht). If the Regional Court is the competent court in the first instance (dispute value Article 37 of the Act against Restraints in Competition (Gesetz exceeding €5,000), the Higher Regional Court (Oberlandesgericht) gegen Wettbewerbsbeschränkungen – GWB) legally defines a is the competent appeal court. An appeal against a judgment is not merger as an acquisition of assets, acquisition of joint or sole possible if the dispute value is €600 or less, unless the Regional Court control, acquisition of shares (50% or at least 25%) or exercise of explicitly grants an appeal if the case is of major importance or if an competitively significant influence. appeal is considered to be necessary for the development of the law.

In certain cases, the appeal court can admit a further appeal 4.5 Please provide details of the procedure, including (Revision) to the Federal Court of Justice (Bundesgerichtshof – time frames for clearance and any costs of BGH). This is only possible if the appeal court considers the case notifications. to be of major importance or if a further appeal is considered to be necessary for the development of the law. Once the Bundeskartellamt has received the complete notification, the examination procedure begins. The authority then has one month 3.6 Are there any rights of appeal to the courts from the to assess whether the project needs to be examined more closely decision of a court or arbitral tribunal and, if so, in or whether it can be approved (so-called “first phase”). The vast what circumstances do these rights arise? majority of the more than 1,000 merger control proceedings per year can be concluded with a clearance in the first phase. If the first instance court is a Local Court, an appeal is possible if the If there are indications of competition problems that cannot be dispute value exceeds €600. In such a case, an appeal can be filed resolved within the preliminary examination procedure, a formal with the Regional Court. main examination procedure is initiated (so-called “second phase”), If the first instance court is a Regional Court, the competent appeal which can take a total of four months from the date of notification. court is the Higher Regional Court. The notification of mergers is subject to charges. The amount of the In special cases, a further appeal is admitted which is dealt with by notification proceeding is determined on the basis of the personnel the Federal Court of Justice being the highest German civil court. and material expenditure of the cartel authority under consideration of the economic significance of the concentration. According to Article 80 para. 2 sentence 2 No. 1 of the Act against Restraints in 4 Commercial and Regulatory Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB) the fee may not exceed €50,000; in exceptional cases it may be double (Article 80 para. 2 sentence 3 of the Act against Restraints in 4.1 How does your jurisdiction approach and regulate Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB). joint ventures between airline competitors?

Joint ventures between airline competitors are subject to merger 4.6 Are there any sector-specific rules which govern the control if the joint venture is designed as a merger. aviation sector in relation to financial support for air operators and airports, including (without limitation) If the joint venture is created on the basis of a cooperation state aid? agreement, German cartel law can be relevant. Sector-specific rules do not exist but there are diverse forms of 4.2 How do the competition authorities in your support, e.g. tax relief regarding kerosene and VAT, and also state jurisdiction determine the ‘relevant market’ for the aid for airlines. purposes of mergers and acquisitions?

Much like European law, under German law, to avoid dominant market positions, the cartel authority can control company growth

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industrial property includes patents for inventions, trademarks, 4.7 Are state subsidies available in respect of particular industrial designs and geographical indications. Copyright covers routes? What criteria apply to obtaining these literary works (such as novels, poems and plays), films, music, subsidies? artistic works (e.g., drawings, paintings, photographs and sculptures) and architectural design. The state subsidies are regulated under the so-called “public service In Germany, intellectual property is protected by industrial property obligations” according to Article 16 and the following of Regulation rights against the unauthorised use of such signs, which could (EC) No. 1008/2008. The single criteria are determined in the public mislead consumers, and against misleading practices in general. tender procedure (Articles 16 para. 10 and 17 Regulation (EC) No. 1008/2008). The German Patent and Trademark Office (Deutsches Patent- und Markenamt) is the administrative body dealing with industrial Germany property rights. 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, German copyright law protects works of literature, science and art, and what rights do passengers have in respect of provided such works are the intellectual creation of the author. their data which is held by airlines and airports? The most important requirement for copyright protection under German law is the creative and individual nature of the work. The main regulatory instruments governing the acquisition, retention The level of originality required for protection under the German and use of passenger data are the General Data Protection Regulation Copyright Act (Urheberrechtsgesetz) is to be determined in accordance (Regulation (EU) 2016/679) and the German Federal Data Protection with the type of work. Act (Bundesdatenschutzgesetz – BDSG). The GDPR and the BDSG The German copyright is not subject to any registration proceeding. apply to the protection of personal data of an individual, thus also In fact, copyright protection arises automatically with mere creation passenger data. According to Article 6 of the GDPR, personal data of the work. Thus, neither any registration nor any publication is may only be collected, saved, used and processed if: required. (a) the data subject has given consent to the processing of his or A breach of an industrial property right can be pursued in court her personal data for one or more specific purposes; proceedings. (b) processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract; 4.11 Is there any legislation governing the denial of (c) processing is necessary for compliance with a legal obligation boarding rights and/or cancelled flights? to which the controller is subject; (d) processing is necessary in order to protect the vital interests In Germany, passenger rights are mainly governed by EU regulations, of the data subject or of another natural person; especially Regulation (EC) No. 261/2004 regarding flight cancellations (e) processing is necessary for the performance of a task carried and delays, as well as denied boarding and overbooking. Also, the out in the public interest or in the exercise of official authority Montreal Convention applies in respect of passenger rights. vested in the controller; or (f) processing is necessary for the purposes of the legitimate 4.12 What powers do the relevant authorities have in interests pursued by the controller or by a third party, except relation to the late arrival and departure of flights? where such interests are overridden by the interests or fundamental rights and freedoms of the data subject which The German Civil Aviation Authority (Luftfahrtbundesamt – LBA) is require protection of personal data, in particular where the data subject is a child. the national enforcement body regarding Regulation (EC) 261/2004 and regarding Regulation (EC) 1107/2006. It handles passenger complaints free of charge for the passenger. However, the LBA 4.9 In the event of a data loss by a carrier, what does not have the power to order an airline to pay compensation obligations are there on the airline which has lost the or to undertake certain measures towards the passenger but only to data and are there any applicable sanctions? impose a fine on an airline for not paying compensation or for not providing certain assistance. In the event of a data loss by a carrier, the airline must notify On 1 November 2013, the conciliation instrument of ADR came into immediately (without undue delay) and not later than 72 hours force in Germany to avoid court proceedings in the case of delays, after having become aware of it, such a data loss to the competent cancellations and denied boarding as well as baggage claims. A supervisory authority, unless the personal data breach is unlikely to framework for voluntary conciliation has been created so that result in a risk to the rights and freedoms of natural persons. passengers can make use of it if an airline does not satisfy their claims The loss of data must also be reported to the data subject concerned. within two months. Claims of up to €5,000 will be dealt with by the The sanction for non-compliance with the reporting obligations is a conciliation institutions. There are private law ADR bodies that have fine of up to €10 million or up to 2% of the annual worldwide turnover been certified by the German authorities and which airlines can join. of the preceding financial year in case of an enterprise, whichever is If an airline has not joined such ADR body, the passenger can turn greater. to the ADR authority within the German Ministry of Justice. The conciliation proceedings are free of charge for the passenger. 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other 4.13 Are the airport authorities governed by particular assets and data of a proprietary nature? legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? Intellectual property refers to creations of the mind: inventions; literary and artistic works; and symbols, names and images used Airport operators are subject to German and EU legislation and the in commerce. Intellectual property is divided into two categories: international agreements signed by Germany.

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Under the German Air Traffic Act (Luftverkehrsgesetz – LuftVG), the construction and operation of an airport is subject to the permission 4.17 Is vertical integration permitted between air operators of the relevant authority. and and airports (and, if so, under what conditions)? requirements have to be taken into account. Vertical integration is permitted between airport operators and Airport coordination is based on EU law. The airports Berlin airports, i.e. it would be possible for an air operator to buy shares (Schönefeld and Tegel), Bremen, Dresden, Düsseldorf, Erfurt, of an airport. However, potential restrictions could apply under the Frankfurt/Main, Hamburg, Hannover, Cologne/Bonn, Leipzig/ relevant laws. Halle, Munich, Münster/Osnabrück, Nuremberg, Saarbrücken and Stuttgart are coordinated airports as per Regulation (EC) No. 95/93. The slots are allocated by Airport Coordination Germany 4.18 Are there any nationality requirements for entities (FHKD), which is an independent non-profit organisation financed applying for an Air Operator’s Certificate in your Germany by German airlines and airports. jurisdiction or operators of aircraft generally into and out of your jurisdiction?

4.14 To what extent does general consumer protection The general requirements for the application of an Air Operator’s legislation apply to the relationship between the Certificate are as follows: airport operator and the passenger? ■ The undertaking’s principal place of business must be in the Member State in which the application for an operating Consumer protection law is a very broad field of law which appears licence is made. as a cross-sectional subject in a wide variety of areas. Consumer- ■ The main activity is the provision of air services, either protection regulations can be found in various fields of law and legal alone or in conjunction with any other form of commercial codes so that there is no independent set of regulations. operation of aircraft or repair and maintenance of aircraft. The aim of consumer protection law is to protect the consumer, ■ The air carrier must be owned directly or through majority who can regularly find themselves in a weaker negotiating and ownership by Member States and/or nationals of Member knowledge situation than the companies. Consumers should be States. protected when concluding a contract or making a purchase. That is ■ It must at all times be effectively controlled by those States or why transparency and consumer information are very important for their nationals. the German market. ■ Air carriers must have at least one aircraft either as owner or The consumer-protection regulations protect the general interests of under a dry lease contract. consumers with regard to unfair commercial practices, misleading ■ The aircraft to be used by an air carrier shall be listed in the and comparative advertising, price indications and labelling, unfair relevant national registers or within the Community. contract terms, distance selling and doorstep selling, time sharing ■ German approval authorities generally require the registration and package tours and rights of holiday or business travellers. in the German Aircraft Register. As a general rule, however, there is no contractual relationship between passengers and airport operators. Passengers normally enter into air carriage contracts with airlines or tour operators. The 5 In Future airlines, in turn, enter into agreements with airport operators for the provision of services to passengers. Therefore, passengers and 5.1 In your opinion, which pending legislative or airport operators do not have a direct contractual relationship and regulatory changes (if any), or potential developments many consumer protection rules are therefore not directly applicable affecting the aviation industry more generally in between these parties. your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? Special transparency is required with regard to airport charges payable by passengers. There are also many general public regulations relating to safety and security in Germany in order to The new European Basic Aviation Regulation (Basic Regulation) protect customers in airports. As an example, Regulation (EC) No. entered into force on 11 September 2018: 1107/2006 concerning the rights of disabled persons and persons “Regulation (EU) 2018/1139 of the European Parliament with reduced mobility when travelling by air provides that passengers and of the Council of 4 July 2018 on common rules in the with a disability or reduced mobility must be appropriately assisted field of civil aviation and establishing a European Union Aviation Safety Agency, and amending Regulations (EC) No. by airport operators. 2111/2005, (EC) No. 1008/2008, (EU) No. 996/2010, (EU) No. 376/2014 and Directives 2014/30/EU and 2014/53/EU of 4.15 What global distribution suppliers (GDSs) operate in the European Parliament and of the Council, and repealing your jurisdiction? Regulations (EC) No. 552/2004 and (EC) No. 216/2008 of the European Parliament and of the Council and Council Regulation (EEC) No. 3922/91 (Text with EEA relevance).” After several consolidations, basically, there are only three global systems left: Amadeus; Galileo/Travelport; and Sabre. This Regulation thus replaces the previous Basic Regulation of 2008 ((EC) No. 216/2008) and the previous Regulations. The new Regulation provides for a large number of significant changes in all 4.16 Are there any ownership requirements pertaining to areas of European aviation. GDSs operating in your jurisdiction? Therefore, also various national laws and regulations will have to be updated. No. In Germany, there are no ownership requirements pertaining to GDSs.

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Rainer Amann Claudia Hess Urwantschky Dangel Borst PartmbB Urwantschky Dangel Borst PartmbB Insel 1 Insel 1 89231 Neu-Ulm 89231 Neu-Ulm Germany Germany

Tel: +49 731 70 70 937 Tel: +49 731 70 70 941 Fax: +49 731 70 70 999 Fax: +49 731 70 70 999 Email: [email protected] Email: [email protected] URL: www.udabo.de URL: www.udabo.de

Germany Rainer Amann joined Urwantschky Dangel Borst in 2000 and has been a Claudia Hess joined Urwantschky Dangel Borst in April 2007. She partner since 2006. The firm has specialised in aviation law since 1955. graduated from the law school of the University of Passau and completed a law and language education in English, French and . She Mr. Amann has extensive experience in German and international completed her legal traineeship at the Higher Regional Court Nuremberg. aviation law. He mainly acts for airlines, aircraft manufacturers, insurers Moreover, she has studied at Sichuan University in Chengdu, China, and and reinsurers. has worked in Beijing for a German-Chinese law firm and a German He has considerable expertise in many extra-judicial and litigation matters automobile manufacturer as well as for the Sichuan-American Chamber on passenger, hull, cargo and baggage claims and subrogation claims of Commerce in Chengdu, China. for airlines and their insurers. He is regularly involved in the negotiation Ms. Hess has been a partner in the firm since 2012. She handles cases and drafting of air transport agreements and terms and conditions of for airlines and their insurers worldwide related to both German and EU carriage. He also advises on product liability claims, airport, ground law. She provides advice and assistance out of court and represents her handling, regulatory matters and financing. His clients are profiting from clients in court proceedings and proceedings initiated by administrative his links with aviation law experts throughout the world. bodies. Mr. Amann studied at the University of Constance from 1993 to 1998 She deals with cases and queries involving liability and regulatory issues, and worked with the Regional Court in Ulm from 1998 to 2000. He was compliance, commercial and contractual matters, consumer protection admitted to the German Bar in 2000. claims against airlines as well as claims related to EU Regulations and He was awarded a specialist degree in transportation law from the Bar international treaties. She drafts and reviews terms and conditions as Association. well as data protection policies and assists airlines in complying with the requirements of ETS. Mr. Amann is an active member of the Aviation Insurance Association, the European Air Law Association and the Transportation Lawyers Ms. Hess is a member of the European Air Law Association (EALA), Association. the International Aviation Womens Association (IAWA) and the French Society of Air and Space Law (SFDAS). Ms. Hess is fluent in German, He is regularly mentioned in the annual editions of Who’s Who Legal, in English, French and Chinese (Mandarin). the Best Lawyers in Germany and in the Expert Guides of the World’s Leading Lawyers. She is regularly invited as a speaker and panelist to international air law conferences. She is recommended in various legal publications such as Who’s Who Legal, and The Legal 500, etc. She regularly writes articles in air law publications and she is a co- author of The Aviation Law Review, Aviation Finance, Lexology Aviation Navigator and Getting the Deal Through – Aviation Liability.

The law firm Urwantschky Dangel Borst – Attorneys at Law acts for clients nationally and internationally and has offices in Neu-Ulm and Ulm. We are active in specialist fields of law and we attach great importance to the comprehensive and personal support of our clients. We act for our clients both in litigation and out of court. Experience, expertise and commitment are necessary prerequisites with which we successfully counsel and represent our clients. We have very good professional and personal contacts to other law firms worldwide as well as to tax advisors, authorities, institutions and experts. In the international field, we are active in commercial law, aviation law and Chinese law. Our clients profit from our comprehensive knowledge, our 50 years’ experience in the international legal business as well as from our close cooperation with law firms all over the world. Since 1955, we have been active in the field of German and international aviation law. We consult and represent German and foreign air carriers and their insurers and reinsurers in all fields of aviation law and we have acted on almost all major air crash disasters involving Germany and/or German nationals. Our aviation law team advise on all aspects of national and international aviation liability cases, including legal matters arising out of air crashes, injuries onboard aircraft, passenger claims, damage and loss of cargo, and damage to aircraft. Moreover, we also deal with regulatory and financing matters and advise on product liability claims and airport and ground handling issues. We also assist our clients in reviewing and designing contracts. For instance, we are involved in the negotiation and drafting of air transport agreements and General Conditions of Carriage. With regard to the increasing number of EU Regulations and Directives in the aviation field, we assist and consult air carriers in complying with European provisions. Our experienced and specialist lawyers provide qualified and skilled advice by tailoring our range of services to our clients’ needs.

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India Neeraj Dubey

Lakshmikumaran & Sridharan Rohit Subramanian

1 General Legislation Function (i) Establishes the AAI; and (ii) makes the AAI responsible 1.1 Please list and briefly describe the principal The AAI Act, 1994 for the development, finance, legislation and regulatory bodies which apply to and/ operation and maintenance of all or regulate aviation in your jurisdiction. government airports in India. CARs are issued by the DGCA The Ministry of Civil Aviation (MCA) is the nodal Ministry under Rule 133A of the AR1937 responsible for the formulation of policy and regulation of The Civil Aviation Requirements and provide the standards civil aviation in India. The MCA oversees the planning and (CARs) expected to be met before a licence, certificate, approval or implementation of schemes for the growth and expansion of civil permission is granted/accorded. air transport, airport facilities, air traffic services and carriage of passengers and goods by air. The following are the principal Governs the rights and liabilities regulatory authorities functioning under the authority of the MCA: of air carriers and is applicable to The Carriage by Air Act, 1972 both domestic and international 1. The Directorate General of Civil Aviation (DGCA) enforces (CAA) carriage by air, irrespective of civil air regulations, regulates air transport services, air safety the nationality of the aircraft and airworthiness standards. The DGCA draws its authority performing the carriage. from the Aircraft Act and Rules and performs functions like issuance of licences, approvals, certificates and permits. Regulate air carriage of dangerous goods (hazard to 2. The Airports Authority of India (AAI) creates, upgrades, health, safety, property or maintains and manages civil aviation infrastructure both on environment) and prescribe the ground and in the air space in India. Aircraft (Carriage of Dangerous the training procedure for 3. The Airport Economic Regulatory Authority (AERA) Goods) Rules, 2003 shippers, operators, ground determines the tariff for aeronautical services and Passenger handling agencies and/or Service Fees to monitor performance standards relating to freight forwarders involved in the transportation of such quality, continuity and reliability of service. dangerous goods. 4. The Bureau of Civil Aviation Security (BCAS) ensures that the aviation security standards follow national and The ratification of the Montreal international obligations/treaties on air safety to which Convention brought this India is a signatory. To meet this end and prevent unlawful legislation, which defines The Suppression of Unlawful interference in aviation, BCAS issues orders, instructions and and punishes offences like Acts against Safety of Civil guidelines to State/Union Territory Police, Central Industrial committing violence on board Aviation Act, 1982 Security Force, airport authorities and air carriers. an aircraft, offences at airports, causing destruction of or damage Based on the field of activity concerned within the aviation sector, to navigation facilities, etc. the applicability of regulatory laws may also differ. Some of the principal regulations are:

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

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

1. Pre-application phase – Wherein the applicant is required to 1.5 Are air charters regulated separately for commercial, submit a letter of intent to the DGCA outlining the proposal. cargo and private carriers? Upon examining the proposal from financial, economic and legal perspectives, which may also include a pre-application meeting, the MCA, upon satisfaction of these aspects, may Yes. No air transport service, other than a scheduled air transport issue a No-objection Certificate. service, can be operated by any undertaking except with the special permission of the central government or under a non-scheduled 2. Formal application – The applicant is required to submit a complete application in the prescribed form to the DGCA, operator’s permit granted by the central government. A foreign- along with prescribed fees and relevant supporting documents; registered aircraft shall be required to obtain non-scheduled flight upon completing the assessment of the applicant’s proposal, clearances as stipulated by the relevant CAR issued under Section the DGCA may invite the applicant for a formal meeting to 3, Air Transport (Series F, Part I). The DGCA also regulates the discuss further details relating to the certification process. operation of tourist charter flights to and from India as part of an 3. Document evaluation – During this phase, the DGCA shall Inclusive Tour Package under AIC #12 dated October 6, 2008. conduct a series of discussions to assess the applicant’s Besides the safety requirements stipulated by the DGCA, general capability to conduct aircraft transport operations by verifying safety guidelines applicable to non-scheduled air transport, as the documents submitted by the applicant. The documents prescribed under Rule 140 of the AR1937, must be complied with shall reflect precisely the mode and way the applicant intends by air charter operators. to conduct the proposed operations and, upon approval, they shall form a part of the understanding between the DGCA and the operator regarding future functioning of the operator. 1.6 As regards international air carriers operating in your 4. Demonstration and inspection – The applicant is then jurisdiction, are there any particular limitations to be required to demonstrate to the DGCA its capability of aware of, in particular when compared with ‘domestic’ conducting the proposed operations in accordance with the or local operators? By way of example only, restrictions and taxes which apply to international but procedures detailed in the documents/manuals reviewed not domestic carriers. during the previous phase. All the details provided by the applicant shall be scrutinised in detail, including inspection of facilities and sufficiency of resources. In the event the The DGCA is also responsible for the regulatory oversight of foreign DGCA is satisfied with the authenticity of the documents and aircraft operating in India. As per the bilateral air services agreements the inspection process, approved flight(s) will be conducted entered into between India and other foreign countries, every such to destinations of intended operations, as determined by the party/foreign country is required to designate airline(s) for operating DGCA. In the event the DGCA requires the applicant to the agreed services on the specified routes and to withdraw or alter make operational changes, the same shall be carried out by such designations. AIC #8 dated December 1, 2010 recognises this the applicant prior to moving on to the next phase. obligation and imposes conditions on ownership, control and the 5. Certification – Upon completion of the procedure stated in qualifications of the air carrier. Besides, the international carrier is the previous phases and the fulfilment of criteria stipulated by required to comply with minimum requirements laid down under the DGCA in this regard to the DGCA’s satisfaction, an Air Rules 134 & 134A, safety requirements under Rule 140 of the Operator’s Permit shall be issued by the DGCA along with AR1937, and CARs. the associated operations specifications. Once certified, the operator is responsible for continued compliance with the initial conditions of certification and applicable legislative 1.7 Are airports state or privately owned? requirements and the DGCA’s requirements promulgated from time to time. Airports can be owned by state entities as well as private parties. In line with the government’s open-sky policy, the AAI has collaborated with private entities for operation, management and development 1.3 What are the principal pieces of legislation in under the Public-Private Partnership model. The Joint Venture your jurisdiction which govern air safety, and who administers air safety? Cell has been formed to ensure compliance under the operation, management and development agreement. The AAI operates 126 airports and civil enclaves out of 449 airports and airstrips located India follows the ICAO guidelines on safety. The DGCA throughout India. The airports at Bengaluru, Delhi, Hyderabad, administers safety requirements to be observed by aircraft including Kochi and Mumbai are handed over to private operators. The foreign aircraft operating in India. General safety conditions for Government of India has granted ‘in principle’ approval for setting operators, crews, airworthiness, flights, etc. are prescribed under up 18 greenfield airports in the country, to be developed by private Part III of the AR1937. The mandatory safety pre-requirements parties, State government or other government agencies. prior to the grant of an operation permit by the DGCA include: the

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The government has approved a proposal to manage Ahmedabad, 737MAX plane operated by Indonesia’s Lion Air in October 2018. Jaipur, Lucknow, Mangalore, Thiruvananthapuram and Guwahati The AD is mandatory and requires replacement of High Pressure under the Public Private Partnership (PPP) model to revamp these Compressor front hub corrosion within a specified period. airports to meet international standards. The Excise duty on Aviation Turbine Fuel has been reduced to 11% from 14% which offsets the impact of high oil prices. 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? 2 Aircraft Trading, Finance and Leasing The AR1937 restrict and qualify access to airports in India, and India AIC #8 dated December 1, 2010 on the “Requirements for grant 2.1 Does registration of ownership in the aircraft register of Operating Authorisation to Foreign Airlines under Bilateral Air constitute proof of ownership? Services Agreements” imposes certain requirements. No. Rule 5 of the AR1937, as a pre-condition to flying, prescribes 1.9 What legislative and/or regulatory regime applies to mandatory registration and affixation of registration marks. Rule 30 air accidents? For example, are there any particular of the AR1937 provides for the grant of a certificate of registration rules, regulations, systems and procedures in place by the DGCA. Based on nationality and ownership, an aircraft which need to be adhered to? may be registered and categorised under Category “A” or Category “B”. The aircraft register is merely a public record maintained by The Aircraft Accident Investigation Bureau of India established the DGCA for administration purposes and will not be sufficient under the Aircraft (Investigation of Accidents and Incidents) Rules, to establish legal ownership of the aircraft, for which the owner 2012 is responsible for the investigation of accidents or incidents should be in possession of valid title documents duly stamped and arising out of, or during, navigation in or over India of any aircraft, registered under applicable law(s). and prescribes a list of powers and functions of the investigation body, procedure of investigation, reporting of incidents and powers 2.2 Is there a register of aircraft mortgages and charges? of the inquiry officer. CARs on implementing Flight Safety Broadly speaking, what are the rules around the Awareness, and an Accident/Incident Prevention Programme for operation of this register? all operators engaged in scheduled or non-scheduled air transport services, have also been issued. No. The DGCA does not maintain a separate register for aircraft mortgages and charges but the owner of the aircraft must provide 1.10 Have there been any recent cases of note or other his consent supported by documents evidencing any mortgage. notable developments in your jurisdiction involving Such mortgage/hypothecation shall be endorsed on the Certificate air operators and/or airports? of Registration and if the mortgagor is a corporate entity registered in India, requisite filings should be completed with the Registrar of As per para. 15 (2) of Schedule XI to AF1937, the Director General Companies (RoC). has the power to suspend/cancel an Air Operator’s Certificate on sufficient grounds recorded in writing. In October 2012, the DGCA 2.3 Are there any particular regulatory requirements suspended the debt-ridden Kingfisher Airlines from flying, as the which a lessor or a financier needs to be aware of as operator was unable to revive its financial position. The airline was regards aircraft operation? compelled to lock out and suspend its airline operations because of a strike by its employees for unpaid salaries/dues, and even failed It is mandatory to obtain permission from the DGCA, prior to to renew its permit within the deadline stipulated under clause 7 leasing an aircraft in India. Once permission has been granted by of CAP 3300. Eventually, in November 2016, the Bangalore High the DGCA, a formal lease agreement should be executed between Court passed an order for the winding-up of the Company. the parties. Depending on the type of lease, the registration, In another matter, a complaint was filed with the Competitive airworthiness and safety requirements under the AR1937 and any Commission of India (CCI) against airline operators as Jet Airways, relevant CARs may vary subject to the applicability of the Article IndiGo Airlines, Spicejet, Air India and Go Airlines on grounds that 83 BIS Agreement with ICAO, the Aircraft Leasing Manual (CAP such airlines were engaged in anti-competitive agreements. It was 3200), taxation laws, contract laws and/or foreign exchange laws. alleged that airlines colluded with each other to introduce a “fuel surcharge” which was levied on transportation of cargo. The CCI 2.4 As a matter of local law, is there any concept of title directed its Directorate General (DG) to investigate the complaint annexation, whereby ownership or security interests and DG concluded that the alleged collusive actions by the airlines in a single engine are at risk of automatic transfer were not sufficient to constitute a cartel. The CCI disagreed with or other prejudice when installed ‘on-wing’ on an this finding and levied a penalty of 1% on the turnover ofthe aircraft owned by another party? If so, what are the airline companies engaged in such cartel activity. The appellate conditions to such title annexation and can owners tribunal, however, reversed this unreasoned order and the matter and financiers of engines take pre-emptive steps to was remanded back to the CCI to give parties an opportunity to file mitigate the risks? objections. An aircraft in India is registered wholly with its engines, spare The DGCA had directed two Indian Airlines (IndiGo and Go Air) to parts and other components attached to the aircraft. The AR1937 address issues regarding 15 of the Pratt & Whitney engines powering do not provide for ownership interests with respect to an engine their A320 neo planes as a part of the Airworthiness Directive or any other part of the aircraft. The DGCA may prescribe a (AD). Both the carriers together have around 82 such planes. This “Type Certificate” separately for an engine/propeller designed or directive comes in light of issues flagged by the Federal Aviation manufactured in India. Administration, USA as an advisory after the crash of a Boeing

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2.5 What (if any) are the tax implications in your 3 Litigation and Dispute Resolution jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and 3.1 What rights of detention are available in relation to (to the extent applicable) do exemptions exist as aircraft and unpaid debts? regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? Under Section 46 of the Sale of Goods Act, 1930, an unpaid seller of goods, despite the property having passed to the buyer, has the Under the Central Goods and Service Tax (GST) Act, 2017, any right to: (a) a lien on the goods for the price while he is in possession

India transfer of right in goods or of undivided share in goods without of them; (b) stop the goods in transit after he has parted with the the transfer of title thereto or transfer of the right to use any goods possession of them in case of the insolvency of the buyer; and (c) for the purpose for cash, deferred payment or other valuable re-sale. In the case that the property has not passed to the buyer, consideration, is considered a supply of services, for which GST the unpaid seller has a right of withholding delivery like, and co- is payable. Though the customs duty for import of aircraft (in extensive with, his rights of lien and stoppage in transit where the lease) is “Nil” except for aircraft, it attracts GST on the basis of its property has passed to the buyer. The DGCA can detain an aircraft “unladen weight”, which means the weight of the machine when in under Section 8 of the AA1934 in case of intended flight, or for normal flying order, excluding the weight of the crew and of fuel unpaid charges, or to ensure compliance under the AA1934/AR1937 and equipment other than permanently fitted items of equipment. and to implement any court order. GST in such cases is the inter-state GST (IGST) of 5% when the unladen weight of the aeroplane and other aircraft not for personal 3.2 Is there a regime of self-help available to a lessor usage (i) does not exceed 2,000 kg, (ii) is between 2,000 and 15,000 or a financier of an aircraft if it needs to reacquire kg, or (iii) exceeds 15,000 kg. Personal usage of the aeroplane possession of the aircraft or enforce any of its rights and other aircraft attracts 28% of IGST. In addition to the IGST, a under the lease/finance agreement? compensation cess of 3% is imposed on the overall consideration. Stamp duty varies depending on the transaction/instrument evidencing There is no specific statutory provision regarding this. The lease the transaction. Schedules to the stamp legislation list the instruments agreement should provide specific responsibilities and powers of and corresponding rates of duty payable. the parties, and liabilities for lack of airworthiness, operational oversight and control of the aircraft. Contractual rights can be enforced though the courts or by an application to the AAI unless 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and done amicably. In case of a dispute regarding termination of an Cape Town)? aircraft lease, action can be taken under Section 8(1)(b) of AA1934 for detention to implement a court order. India is a signatory to the Montreal Convention (ratified on May 1, 2009) and the Cape Town Convention (ratified on March 31, 2008). 3.3 Which courts are appropriate for aviation disputes? India has not ratified the Geneva Convention. Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases 2.7 How are the Conventions applied in your jurisdiction? are brought?

Under Article 253 of the , the Parliament of The AERA Appellate Tribunal governs disputes between service India can make any law to give effect to an international treaty. providers or between service providers and consumer groups. The CAA gave effect to the Warsaw Convention (amended by the Consumer disputes are taken up by the consumer dispute redressal Hague Protocol). The CAA was amended by the Carriage by Air forums at district, state and national level under the Consumer (Amendment) Act, 2009 to incorporate provisions of the Montreal Protection Act, 1986 (CPA). Compensation-related matters under Convention. The Cape Town Convention caused an amendment in Section 9B of AA1934 are dealt with as per the existing agreement the AR1937 with regard to irrevocable de-registration and export or by an arbitrator appointed by the central government. The type request authorisation by the airline operator. of court assigned is determined by the value of the dispute. The type of process followed is determined by whether the case is civil 2.8 Does your jurisdiction make use of any taxation or criminal in nature. benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example 3.4 What service requirements apply for the service of access to an extensive network of Double Tax Treaties court proceedings, and do these differ for domestic or similar, or favourable tax treatment on the disposal airlines/parties and non-domestic airlines/parties? of aircraft?

The Code of Civil Procedure, 1908 states that a summons signed Yes. The import of aircraft, aircraft engines and other aircraft parts by the judge and sealed with a court seal may be served to the into India is exempted from GST. However, 5% IGST is applicable defendant in person or his agent or pasted in his office/residence on the lease rental paid by the importer. The GST is levied at 5% for to appear and answer the claim within 30 days from the institution aircrafts like aero planes and helicopters and their part thereof other of the suit. For defendants in other jurisdictions, the issuing court than those for personal use. The GST for aircraft for personal use may issue a summons to the court having jurisdiction in the place are levied at the rate of 28%. where the defendant resides. Where the defendant resides outside The IndiGo airlines continue working on the sale-and-lease back India, the summons is addressed to the place of residence by courier/ model instead of outright purchase of aircraft in view of the rising fax/email. fuel prices and the fluctuating exchange rate.

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wait for the prescribed time to elapse, or for an order to this effect. 3.5 What types of remedy are available from the courts CA2002 should be read with the CCI (Procedure in regard to the or arbitral tribunals in your jurisdiction, both on i) an transaction of business relating to combinations) Regulations, 2011 interim basis, and ii) a final basis? which prescribe thresholds/exemptions.

An interim injunction may be awarded. A final order/award would cover the aspects of compensation/damages, repossession or sale of 4.4 How does your jurisdiction approach mergers, an aircraft, or an injunction. acquisition mergers and full-function joint ventures?

Besides the CCI, M&As/JVs are regulated by the RoC and the 3.6 Are there any rights of appeal to the courts from the Securities Exchange Board of India (SEBI) under the provisions India decision of a court or arbitral tribunal and, if so, in of the Companies Act, 2013 (CA2013) and the Securities and what circumstances do these rights arise? Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Code), respectively. Yes, the right to appeal does exist. Arbitral awards can also be challenged on certain grounds such as: incapacity; void agreement; Chapter XV of CA2013 contains provisions with regard to where enforcement would be contrary to public policy; and compromises, arrangements and the acquisition of unlisted or corruption. companies. Any proposal/scheme evidencing the corporate restructuring should stand up to the scrutiny of shareholders/ creditors/other stakeholders. The National Company Law Tribunal 4 Commercial and Regulatory is the adjudicating authority that approves the scheme. SEBI regulates listed entities as well as entities proposed to be listed on stock exchanges in India. The Takeover Code regulates the 4.1 How does your jurisdiction approach and regulate acquisition of shares/voting rights of a listed company and triggers joint ventures between airline competitors? open offer requirements in some cases whereby the acquirer of shares shall be obligated to make an offer to purchase the shares The MCA does not regulate joint ventures or any form of of the remaining shareholders. Besides, listed entities are required corporate structuring in the civil aviation sector; the open sky to disclose/notify the stock exchange(s) in which such securities policy approach adopted by India has paved the way for numerous are listed as prescribed under the SEBI (Listing Obligations and corporate integrations, despite merger control restrictions under Disclosure Requirements) Regulations, 2015. the Competition Act, 2002 (CA2002) and/or foreign investment Exchange control aspects of M&A are regulated by the Reserve norms imposed under the Foreign Exchange Management Act, 1999 Bank of India (RBI) under the extant FEMA regulations, which (FEMA). Tata SIA Airlines Limited is one such recent successful prescribe strict pricing and reporting requirements. As per the joint venture company formed by Tata Sons and Singapore Airlines, prevailing foreign direct investment policy, foreign investment of up operating domestically under the brand Vistara. Etihad holds to 100% of the share capital is allowed without any approval from 24% Equity stake in Jet Airways, which has a great impact on the Indian operators in scheduled air transport services, or domestic international routes of Jet Airways. Media reports suggest that there scheduled passenger airlines. is a discussion regarding the buyout of Jet Airways by the Tata Group with the aim of expanding Vistara airlines. Foreign airlines are allowed to invest up to 49% under the approval of the government in Indian companies operating scheduled and non-scheduled air transport services. The government on approval 4.2 How do the competition authorities in your permits 49% of foreign investment in the national carrier, Air India. jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? 4.5 Please provide details of the procedure, including Under Indian competition law(s), the “relevant market” is determined time frames for clearance and any costs of based on references drawn from the relevant product market or the notifications. relevant geographic market or both, at the CCI’s sole discretion. Geographically, the relevant market can comprise the area in which CA2002 provides for strict timelines within which combination the conditions of competition for the supply of goods or services or notifications are to be filed for CCI approval. The chronological the demand for goods or services are distinctly homogenous and can sequence of steps involved in the notification procedure is as be distinguished from the conditions prevailing in the neighbouring follows: areas. From a product perspective, the “relevant market” shall be a ■ Depending on the nature of the transaction, a combination market comprising all those products or services which are regarded notification should be filed within 30 days from the approval as interchangeable or substitutable by the consumer, based on the of the proposal by the acquiring company’s board or the characteristics of the products/services, prices and/or intended execution of the document or agreement evidencing the use. The identification of the “relevant market” is essential for the transaction. assessment of the effect that such combinations may have on the ■ Within 30 days from the receipt of the notification, the CCI competitive conditions governing similar/identical businesses. shall be required to form a prima facie opinion as to whether such combination has caused or shall cause an appreciable adverse effect on competition conditions applicable to the 4.3 Does your jurisdiction have a notification system relevant market. whereby parties to an agreement can obtain ■ The CCI is also empowered to approve, reject and accept regulatory clearance/anti-trust immunity from the proposed combinations or even require the parties to regulatory agencies? file additional information or make modifications to the transactions. If the CCI does not reply within 210 days, the Yes, CA2002 requires parties entering a combination to notify the combination is deemed to be approved. CCI in the prescribed form and pay its accompanying fees, and

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■ In the event modifications are made to the combination legal recognition to transactions carried out by means of electronic scheme, the parties are required to accept the modifications data interchange. The IT (Reasonable Security Practices and within 15 days. Procedures and Sensitive Personal Data or Information) Rules, 2011 ■ In the event the CCI forms a prima facie opinion that the were introduced to protect “sensitive personal data” collected by combination will cause an appreciable adverse effect on bodies corporate or persons located in India. Sensitive personal data competition, the CCI may issue a notice to the parties to show includes, inter alia, information relating to: passwords; credit/debit within 30 days the cause as to why an investigation should card information; biometric information; condition of physical, not be conducted. If such apprehensions persist despite the physiological and mental health, etc. In the event that such body party’s reply, the CCI may direct its DG to investigate the corporate possessing, dealing or handling sensitive personal data proposed combination.

India is negligent in implementing and maintaining reasonable security ■ Within seven days from the date of receipt of reply to the practices and procedures, resulting in wrongful loss or gain to notice, or of the preparation of a report by its DG, the CCI may any person, such body corporate shall be liable to pay damages direct the parties to publish information on the combination. by way of compensation to the person so affected. The Personal The CCI is required to pass an order within 210 days of the Data Protection Bill 2018 in India follows the implementation of notification. Based on factors such as combined market share, the General Data Protection Regulation (GDPR). The Telecom the parties may choose to provide details either in Form I or Form Regulatory Authority of India (TRAI) has stated that each user owns II. Whereas Form I provides minimal details with respect to the his data and the entities processing such data are mere custodians. transaction, Form II is much more detailed in nature and can be specifically directed by the CCI to be filed. The responsibility to file the notification lies on the acquirer, except in case of merger or 4.9 In the event of a data loss by a carrier, what amalgamation, wherein the responsibility shall be jointly shared by obligations are there on the airline which has lost the data and are there any applicable sanctions? the parties. The fees to file the notification may vary depending on the Form filed by the party. The Information Technology (Indian Computer Emergency Response Team and Manner of Performing Functions and Duties) Rules, 2013 4.6 Are there any sector-specific rules which govern the (CERT-in Rules) impose an obligation on all corporate entities, aviation sector in relation to financial support for air which includes airlines, to notify the Indian Computer Emergency operators and airports, including (without limitation) Response Team (CERT-in) in case of a cybersecurity breach. The state aid? IT Act does not have a provision requiring data owners or processors to notify individuals in case of a breach of data. However, the No, the aviation sector is not governed by sector-specific rules that company which has lost the data is liable to pay compensation to prescribe financial support or aid to air operators and airports. The the passengers, and may also be punished with imprisonment for central government, as it deems fit, may grant such aid or other disclosure of information by breach of contract. financial support and facilities to the aviation sector as a matter of state policy, keeping in mind the growth and development of the aviation sector. The National Civil Aviation Policy, 2016 (NCAP 4.10 What are the mechanisms available for the protection 2016) proposes the implementation of a Regional Connectivity of intellectual property (e.g. trademarks) and other Scheme (RCS) that, inter alia, seeks to provide various concessions assets and data of a proprietary nature? and support to air operators, airports and other stakeholders. As India is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), numerous pieces 4.7 Are state subsidies available in respect of particular of legislation have been enacted and updated over the years to protect routes? What criteria apply to obtaining these intellectual property rights (IPRs). Specific statutes exist for the subsidies? protection of all types of IPRs, such as: trademarks, protected by the Trade Mark Act, 1999; designs, by the Designs Act, 2000; copyright One of the main objectives of the RCS envisioned under NCAP 2016 protection laws are prescribed under the Copyright Act, 1957, is to enhance air connectivity by making it affordable. The revival of last amended by the Copyright (Amendment) Act, 2012; and the unserved or under-served airports/routes is another objective that this latest amendments made in 2005 to the Patents Act, 1970 introduce scheme seeks to achieve. For this purpose, various support measures, product patent protection for food, pharmaceutical and chemical including viability gap funding, are proposed to be extended by inventions, among others. Besides this, geographical indications the central government and/or the state governments. The RCS and plant varieties have also been protected under the Geographical envisages a market-based mechanism for the selection of an airline Indications of Goods (Registration and Protection) Act, 1999, and operator to operate on an RCS route or a network. Air operators the Protection of Plant Varieties and Farmers’ Rights Act, 2001, eligible to avail themselves of support shall be assessed and selected respectively. Each of the said pieces of legislation provides for the by the implementing agency designated by the MCA through a mechanisms and procedure for the filing, registration and protection bidding process, and only air operators with valid credentials shall be of the relevant IPR both in domestic as well as foreign jurisdictions, permitted to participate. One of the eligibility criteria for participation subject to international commitments, and also the action that can be is having a valid air operator permit issued by the DGCA. taken for alleged or actual infringement.

4.8 What are the main regulatory instruments governing 4.11 Is there any legislation governing the denial of the acquisition, retention and use of passenger data, boarding rights and/or cancelled flights? and what rights do passengers have in respect of their data which is held by airlines and airports? There is no specific legislation governing denial of boarding In India, data privacy and protection are governed by the provisions rights; however, the DGCA has issued regulation on “Facilities of the Information Technology Act, 2000 (IT Act), which provides to be provided to passengers by airlines due to denied boarding, cancellation of flights and delays in flights” as per CAR, Section

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3, Series M, Part IV in this regard which are required to be adopted and implemented by airline operators as and when applicable. The 4.15 What global distribution suppliers (GDSs) operate in CARs prescribe a refund and compensation amount that can be your jurisdiction? claimed by the aggrieved passenger in case of denial of boarding and is popularly termed “denied boarding compensation” (DBC). Computer Reservation Systems (CRSs) or Global Distribution Only a passenger with a confirmed booking who has arrived on or Systems (GDSs) are used for hosting inventory and before the scheduled time has the right to claim DBC. seat reservation transactions. In India, GDSs are not governed by specific legislation. However, the DGCA has issued CARs in this If the passenger voluntarily vacates the seat then the airline regard to promote fair competition in the airline sector and to ensure compensates at its own discretion, whereas if the seat is vacated

that consumers do not receive inaccurate or misleading information India against the wish of the passenger, then the airline is liable to pay on airline services. The said CARs prescribe obligations on system monetary compensation as per the regulation. In the case of a vendors, participating carriers, as well as subscribers. cancellation of a flight, the Airline is required to refund the ticket if the passenger is not willing to travel on an alternate route or the subsequent flight, or on another airline’s flight within a specified 4.16 Are there any ownership requirements pertaining to time. The Airline is bound to provide alternate travel opportunities GDSs operating in your jurisdiction? at no additional cost, if the passenger desires. If the passenger has already reported at the airport to undertake the journey on the With respect to the applicability of CARs, the DGCA has specifically original flight and has to wait for the alternate flight, the airline is stated that these regulations shall be applicable to all GDSs, as shall obliged to provide meals and refreshments. The passenger will not their essential elements operating in India for displaying or selling be entitled for any compensation when the cancellation occurs due air services irrespective of: (i) the legal status or nationality of the to extraordinary circumstances beyond the control of the airline. system vendor; (ii) the source of the information used; or (iii) the When the airline fails to inform the passengers of the cancellations, location of the relevant data processing centre, and irrespective of then the airline is liable to refund the entire ticket cost of the air where the air services are provided. ticket along with additional compensation. The compensation has to be paid in cash, bank transfer or travel 4.17 Is vertical integration permitted between air operators vouchers, according to the preference of the customer. and airports (and, if so, under what conditions)?

4.12 What powers do the relevant authorities have in As stated previously, the DGCA do not specifically prohibit vertical relation to the late arrival and departure of flights? integration between air operators and airports. However, as stated earlier, the provisions of CA2002 shall govern such vertical As per the CARs issued by the DGCA in this respect, in the event combinations. the delay is beyond 24 hours, airlines shall be obligated to provide meals and refreshments in relation to the waiting time, as well as 4.18 Are there any nationality requirements for entities hotel accommodation if necessary. However, exceptions have been applying for an Air Operator’s Certificate in your provided with respect to the aforesaid requirement, in the event that jurisdiction or operators of aircraft generally into and the delay occurs because of extraordinary circumstances. out of your jurisdiction?

Yes, the Air Operator’s Permit is issued by the DGCA in accordance 4.13 Are the airport authorities governed by particular with Rule 134 and Rule 134A read along with Schedule II of the legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? Aircraft Rules, 1937. The permits of Scheduled and Non-scheduled Air Transport Service (passenger) is issued in accordance with CAR Section 3 Series C Part II and CAR Section 3 Series C Part VIII, The nodal authority controlling all airports in India is the AAI, respectively. Accordingly, the certificate of operating is granted only which was established under the AAI Act, 1994, later amended to a citizen of India; or a company or a body corporate provided that: by the AAI (Amendment) Act, 2003 providing a legal framework (i) it is registered and has its principal place of business within India; for airport privatisation. The aforesaid legislation provides the (ii) its Chairman and at least two-thirds of its directors are citizens functions of the AAI, which includes the efficient management of of India; and (iii) its substantial ownership and effective control is airports, civil enclaves and aeronautical communication stations. vested in Indian nationals. The Air Transport Cargo Services as per Further, the legislation states that it is the duty of the AAI to provide CAR Section 3 Series C Part IV can be granted only to: (i) a citizen an air traffic service and air transport service at any airport and civil of India; (ii) a group of individuals of Indian Nationality or a trust/ enclave. In the discharge of its functions, the AAI shall have due society registered under the Societies Registration Act, 1860; (iii) regard to the development of the air transport service and to the Non-Resident Indian (NRI)/ Overseas Corporate Bodies (OCB); efficiency, economy and safety of such service. (iv) or a company registered under the Companies Act, 1956, having its principal place of business within India and with or without 4.14 To what extent does general consumer protection foreign equity participation (excluding NRI equity) as approved by legislation apply to the relationship between the Government from time to time; or (v) the Central Government or a airport operator and the passenger? State Government or an Undertaking owned or controlled by either of the said Governments. The general consumer protection legislation applicable in India is the CPA, under which aggrieved consumers can approach the consumer tribunals at the district, state and national level. However, liability and compensation for accidents that occur in the airport or in the air, for which the airport operator may be liable, are governed by the CAA (amended in 2016).

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(iv) The Requirements for the Operation of Civil Remotely 5 In Future Piloted Aircraft Systems, 2017, issued by the DGCA. (v) The MRO industry in India is likely to expand and gain 5.1 In your opinion, which pending legislative or expertise in the likeliness of a fully fledged MRO venture regulatory changes (if any), or potential developments hosted by Thailand. The venture is favoured owing to the affecting the aviation industry more generally in fast-growing commercial aviation market in India. your jurisdiction, are likely to feature or be worthy of (vi) Government has planned to enter into an ‘Open Sky’ Air attention in the next two years or so? Service Agreement as per National Civil Aviation Policy 2016, on a reciprocal basis with SAARC countries and countries with territory located entirely beyond a 5,000km India The following developments are of note: (i) The proposal to replace the DGCA with a new regulator – radius from New Delhi. the Civil Aviation Authority – with financial autonomy and (vii) The taxes levied on the Aviation Turbine Fuel must be power to address issues relating to consumer protection and brought within the purview of GST, which will attract input environment regulations. tax credit thereby enabling the airlines to pass down the cost (ii) The government’s proposed construction of 17 highways- fully to passengers. cum-airstrips; 18 greenfield airports; reviving 50 unserved (viii) The DGCA until recently had prohibited the use of drones and under-served airstrips in the next three financial years; in India citing privacy and security concerns. Past attempts starting a new regional connectivity scheme; and reviving an by the civil aviation regulator to draw a framework to govern air services agreement with countries (an agreement already its operations in India was met with criticism and never saw having been concluded with the Netherlands to operate up to fruition. In 2014, the DGCA issued a public notice enlisting 28 flights each week). several approvals required for civil application of an unmanned (iii) The Executive Development Programme of Rajiv Gandhi aircraft vehicle; followed by draft guidelines issued in 2016 National Aviation University in collaboration with the US– and 2017. Although the drafts were not given effect, it largely India Cooperation Program to promote skills development announced the Government’s intention to permit the use of for the senior leadership and close the gap of increasing UAV’s for civilian and recreational purposes in the future. On demand for trained people in the aviation sector. August 27, 2018, the National Drone Policy has legalised the use of drones in India to be effective from December 1, 2018.

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

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Mr. Neeraj Dubey is a Partner and heads the Corporate Division of the Mr. Rohit Subramanian is a Principal Associate stationed in the Bangalore office of Lakshmikumaran & Sridharan. He is a corporate Bangalore office of Lakshmikumaran & Sridharan. Rohit advises lawyer with over 14 years of legal experience encompassing the vast both domestic and international clients on structuring transactions gamut of business law, contract management, IP, employment and and drafting and negotiating transaction documents in relation to technology law. He routinely counsels manufacturing and service acquisitions, investments, joint ventures and debt-related transactions. industry companies on a wide range of compliance matters in all Rohit’s practice also extends to General Corporate Commercial elements of commerce and business, including contracts, corporate and advisory work including legal opinions on a variety of corporate governance, competition, labour and employment, health, safety and and commercial laws. Rohit also advises entrepreneurs and start- environment. Neeraj’s industry focus spreads across automobile, up companies by guiding them through the legal and regulatory aviation, banking, chemicals, defence, energy, food, pharmaceuticals, environment of doing business in India. Rohit’s industry focus spreads information technology and waste management. across aviation, defence, pharmaceuticals, information technology and manufacturing. Neeraj regularly contributes to conferences as a speaker and/or moderator, and has spoken at several national as well as international events, including the I-Techlaw Conference and Inter-Pacific Bar Association Conference, and in forums like the Associated Chambers of Commerce of India, Confederation of Indian Industry, Federation of Indian Chambers of Commerce and Industry, Bangalore Chamber of Industry and Commerce, etc. He holds a degree in Law from the Campus Law Centre, Faculty of Law, University of Delhi.

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

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Ireland Donna Ager

The Maples Group Mary Dunne

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

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licence holders are permitted to take passengers, cargo and/or mail Furthermore, under the EU’s external aviation policy, the European on aircraft with fewer than 20 seats and/or less than 10 tonnes of Commission has been mandated to negotiate air transport maximum take-off weight. agreements on behalf of the EU and its Member States with certain third countries. Under this process, so-called “Open Skies” agreements have been negotiated, removing restrictions on capacity, 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who routing and other limits, creating a free market for services between administers air safety? the parties to that agreement. Most bilateral air transport agreements require that substantial The IAA is responsible for administrating Ireland’s international ownership and effective control be maintained by nationals of each

aviation safety obligations and agreements in accordance with party to the agreement. Within the EU, community airlines are required Ireland standards set by the International Civil Aviation Organisation to be at least 50% owned by EU nationals. The EU has indicated its (“ICAO”) and the European Aviation Safety Agency (“EASA”). willingness to negotiate these current ownership and control limitations The Safety Regulation Division of the IAA ensures specific with States prepared to similarly waive the requirement on a reciprocal compliance with safety objectives set down under section 14 of the basis. However, progress on this matter has been slow. Irish Aviation Authority Act 1993 and the annexes to the Chicago Convention which are implemented through a combination of EU 1.7 Are airports state or privately owned? and domestic Irish legislation. The IAA’s remit with respect to safety includes certification and The three main airports, Dublin, Cork and Shannon, are 100% State- registration of aircraft airworthiness, licensing personnel and owned. Dublin and Cork airports are owned by daa plc. Shannon organisations involved in aircraft maintenance, incident reporting Airport is owned by Shannon Airport Authority. and management, the protection, storage and collection of The regional airports, the largest of which are Donegal, Knock, information, licensing pilots, air traffic controllers and aerodromes Kerry and Waterford, are privately owned. and approving and monitoring air carrier operating standards. There are EU safety regulations relating to initial and continuing 1.8 Do the airports impose requirements on carriers aircraft airworthiness that are directly effective in the EU (including flying to and from the airports in your jurisdiction? Ireland), for example, Regulation (EU) No 748/2012 regarding the implementation of essential requirements for environmental Dublin Airport is the only Irish airport currently subject to economic protection and Regulation (EU) No 1321/2014 relating to the regulation of its charges. Economic regulation of charges at Dublin continuing airworthiness of aircraft and aeronautical products, parts Airport is based on the Aviation Regulation Act 2001 and is and appliances, and on the approval of organisations and personnel implemented by CAR. involved in these tasks. Terminal charges are levied by the IAA at Dublin, Cork and Shannon airports and until 2015 were regulated by CAR. 1.4 Is air safety regulated separately for commercial, Under the Single European Sky (“SES”) initiative, economic cargo and private carriers? regulation of en route over-flights was introduced by way of performance and charging schemes to drive performance by setting No, the IAA regulates commercial cargo and private carriers. binding targets on Member States Regulation 2017/373, which came into force in March 2017, sets out the requirements for improving 1.5 Are air charters regulated separately for commercial, air traffic management and air navigation services within Europe cargo and private carriers? which will apply to Member States from 2020. All airlines must comply with EU legislation on reduced mobility No, the IAA regulates air charters. and consumer protection.

1.6 As regards international air carriers operating in 1.9 What legislative and/or regulatory regime applies to your jurisdiction, are there any particular limitations air accidents? For example, are there any particular to be aware of, in particular when compared with rules, regulations, systems and procedures in place ‘domestic’ or local operators? By way of example only, which need to be adhered to? restrictions and taxes which apply to international but not domestic carriers. The AAIU is responsible for conducting technical investigations The creation of the EU single market for aviation in the 1990s into air accidents in Ireland, as well as incidents outside of Ireland removed all commercial restrictions on airlines flying within the involving Irish-registered aircraft. EU. Under the single market, all EU carriers can operate services The Air Navigation (notification and investigation of accidents, on any intra-EU route. serious incidents and incidents) Regulations 2009 (“2009 Outside the EU single market, access to the air transport market is Regulations”) give effect to the requirements of Annex 13 of the still heavily regulated under the framework set down in the Chicago Chicago Convention and gives the AAIU the powers it needs to Convention. Under the Chicago Convention, Ireland has negotiated carry out full and detailed technical investigations. bilaterally with a wide range of States to agree market access rights for EU Regulation 996/2010 on the Investigation and Prevention of both passenger and cargo services. A list of States with which Ireland Accidents and Incidents in Civil Aviation is directly applicable in has a bilateral is available on DOTTS’ website: Ireland. www.dttas.ie. Following the “Open Skies” judgment in the European Following an investigation, the AAIU will issue safety Court of Justice in 2002, all market access rights negotiated by each of recommendations to the appropriate aviation authority. The AAIU the EU Member States in their bilateral agreements must be equally does not purport to apportion blame or liability in respect of an available to all EU carriers. accident.

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requests to note a mortgage or third-party interest on the aircraft 1.10 Have there been any recent cases of note or other register or related file. The IAA acknowledges the Irrevocable De- notable developments in your jurisdiction involving Registration and Export Request Authorisation Register (“IDERA”) air operators and/or airports? pursuant to its obligations under the Cape Town Convention as enacted by the International Interests in Mobile Equipment (Cape Belair Holdings Limited v. Etole Holdings limited & Anor 2015 Town Convention) Act 2005 (the “CTC Act 2005”), but this does IEHC 569 – the Irish High Court discharged a non-consensual not serve to notify third parties or perfect any security interest in an interest registered on the International Register under the Cape aircraft. Town Convention. Aircraft mortgages and other “charges” (as defined in the Companies DOTTS published a Request for Tenders in November 2016 for a

Ireland Act 2014 (the “CA2014”) over aircraft granted by Irish companies Review of Future Capacity Needs at Ireland’s State Airports. A key and Irish registered branches of foreign companies) are registrable feature of this review will be the timing and financing of a third with the Companies Registration Office (the “CRO”) in Ireland terminal at Dublin Airport as well as an analysis of future expansion within 21 days of the creation of the charge. The register maintained requirements at the three airports. by the CRO operates as a priority register with priority based on the DOTTS published a policy statement on airport charges in time of filing, not the time of the interest being granted. Under the September 2017 which sets about reforming the prices charged by CA2014, priority interests can be filed up to 21 days prior to the Dublin Airport to airlines, with the purpose of ultimately benefitting date on which the charge is actually granted with a full filing being customers. made upon the charge actually being granted. Parties may elect to In an unreported judgment in 2017, the Irish Commercial Court make a single filing upon the charge actually being entered into. If made an order to discharge a validly created and registered the charge is not registered within 21 days of the date on which it international interest relating to a terminated sub-lease agreement is granted, the charge becomes void against a liquidator and any on the International Register under the Cape Town Convention. creditor of the party granting the charge. The CTC Act 2005 provides for the registration of certain interests in airframes and engines with the International Registry of Mobile 2 Aircraft Trading, Finance and Leasing Assets to ensure priority. Aircraft mortgages are amongst the interests which constitute “International Interests” (as defined in 2.1 Does registration of ownership in the aircraft register the Cape Town Convention) to the extent the mortgage is granted constitute proof of ownership? by an owner in a contracting State or the aircraft is registered in a contracting State. The International Registry is an online register The Irish aircraft register is operated and maintained by the IAA. It but, due to it being located in Dublin, disputes over registrations are is a registry of nationality and not of title. Registration of an aircraft heard or enforced in the Irish High Court regardless of the country in the name of a person does not establish that person’s title to the in which the claim originates. aircraft and it cannot be regarded as giving notice (whether actual or In the English law case of Blue Sky One and Ors v. Mahan Air the constructive) of a person’s interest in an aircraft. court considered the impact on perfection of an English law aircraft In order to register an aircraft in Ireland, the aircraft must have a mortgage when the asset was located outside of England and Wales connection to Ireland and, save in the rare case where the IAA grants at the time the mortgage interest was granted and concluded that a specific exemption, the applicant must demonstrate that the aircraft a mortgage granted in such circumstances would not serve to is either wholly owned by an Irish citizen or EU citizen having a create a right in rem in the aircraft. Although this is an English law place of residence or business in Ireland or owned by a company judgment, unless or until the Irish courts hand down a judgment registered in and having its principal place of business in Ireland or which takes a different position, the decision of the English court the EU with not less than two thirds of the directors also being Irish will be considered as persuasive by the Irish court should the same or EU citizens. Notwithstanding the foregoing, an aircraft may also issue be considered by the Irish courts where an Irish law mortgage be registered in Ireland if it is “chartered by demise, leased or on is involved. hire to, or is in the course of being acquired under a lease-purchase or hire-purchase agreement by a citizen or company” where such 2.3 Are there any particular regulatory requirements charter, lease or hire is to an individual or corporate satisfying the which a lessor or a financier needs to be aware of as requirements set out above with respect to Irish or EU citizenship. regards aircraft operation? When relying on the operator as a connection to Ireland, the IAA may impose any conditions of such registration as it deems fit. Strict liability is imposed on owners under section 21 of the Air The IAA has concluded a number of arrangements with foreign Navigation and Transport Act 1936 (as amended) where material civil aviation authorities which serve to delegate the responsibility damage or loss is caused by any item falling from an aircraft inflight. for regulation and safety oversight for Irish registered aircraft from Lessors and financiers, unless holding an interest akin to an owner, will the IAA to the aviation authority in the operator’s home state. These be unlikely to be held to be liable under section 21 and in any event agreements are entered into pursuant to Article 83bis of the Chicago owners can be indemnified against the risks under section 21 by a third Convention which permits bilateral agreements between two aviation party. Section 21(2) of the Air Navigation and Transport Act 1936 authorities located in the Chicago Convention contracting States. (as amended) also provides that an owner will not be liable where the aircraft is subject to a charter or lease arrangement for 14 days or more and the pilot and crew are not in the employ of the owner. 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the Save as set out above, liability for financiers, owners and lessors is operation of this register? based in negligence and a failure on the part of the relevant party to discharge a duty of care. Thus, lessors, owners and financiers are The IAA does not operate a register of aircraft mortgages or third- unlikely to be held to be responsible for losses resulting from the party rights or interests in aircraft or engines and will not agree to operation of an aircraft, unless they are actually aware of a defect or

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issue and failed to take reasonable action in respect of such defect or 3. The 1956 Geneva Agreements on the Joint Financing of Certain issue in order to prevent loss. Air Navigation Services in Greenland/Iceland – ratified 3 June 1960. 4. The 1962 Rome Protocol Relating to an Amendment to the 2.4 As a matter of local law, is there any concept of title Convention on International Civil Aviation – ratified 14 annexation, whereby ownership or security interests February 1963. in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an 5. The 1971 New York Protocol Relating to an Amendment to the aircraft owned by another party? If so, what are the Convention on International Civil Aviation – ratified 15 June conditions to such title annexation and can owners 1971. and financiers of engines take pre-emptive steps to 6. The 1971 Vienna Protocol relating to an amendment to the mitigate the risks? Convention on International Civil Aviation – ratified 11 July Ireland 1972. Under Irish law, there is no concept of title annexation, therefore 7. The 1963 Tokyo Convention on Offences and Certain Other title to an engine remains with the engine owner, even where such Acts Committed on Board Aircraft – ratified 14 November engine is installed temporarily or otherwise on another aircraft. 1975. Title to such engine needs to be expressly transferred by the owner. 8. The 1970 Hague Convention for the Suppression of Unlawful Seizure of Aircraft – ratified 24 November 1975. 2.5 What (if any) are the tax implications in your 9. The 1999 Montreal Convention for the Unification of Certain jurisdiction for aircraft trading as regards a) value- Rules for International Carriage by Air – ratified 29 April 2004. added tax (VAT) and/or goods and services tax (GST), 10. The 2001 Cape Town Convention on International Interests in and b) documentary taxes such as stamp duty; and Mobile Equipment – ratified 29 July 2005. (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of 11. The 2001 Protocol to the Convention on International Interests aircraft and/or particular aircraft types or operations? in Mobile Equipment on matters specific to Aircraft Equipment – ratified 23 August 2005. Ireland is an EU Member State and, as such, EU VAT rules are Ireland has also signed, but has not yet ratified, the 1948 Geneva relevant to the sale/purchase and leasing of aircraft. The VAT Convention on the International Recognition of Rights in Aircraft. treatment of the sale of an aircraft will depend on the location of the aircraft at the time of sale and the intended use. If the aircraft were 2.7 How are the Conventions applied in your jurisdiction? supplied while within the territory of Ireland, Irish VAT the standard rate (23%) would apply. However, the supply of aircraft can be The Cape Town Convention became law in Ireland on 1 March 2006, zero rated for VAT purposes where either (i) the aircraft is used following the passing of the CTC Act 2005. The application of the by an airline operating for reward chiefly on international routes, Cape Town Convention was further extended to introduce a bespoke or (ii) the aircraft is used and enjoyed outside the EU. VAT could insolvency regime for assets covered by the Cape Town Convention arise in another EU jurisdiction if the aircraft was imported into that following the granting of an order in May 2017 pursuant to the jurisdiction by an Irish purchaser. State Airports (Shannon Group) Act 2014. The court system, and in Where an Irish-based lessor is leasing aircraft to an entity outside particular the Commercial Court in Ireland, is the appropriate means Ireland, no Irish VAT should arise on the basis that the place of of enforcing the Cape Town Convention. The Commercial Court supply under a lease arrangement is the jurisdiction where the lessee has exclusive jurisdiction to hear any proceedings in connection is located. VAT may be chargeable in the jurisdiction of the lessee. with any function of the International Registrar under the Cape Where the lessee is located in Ireland, the supply may be zero Town Convention or the Aircraft Protocol as defined in the 2005 Act rated for Irish VAT purposes where the lessee is operating chiefly and the State Airport (Shannon Group) Act 2014. on international routes. Where the supply is zero rated, the lessor The Montreal Convention was implemented in Ireland by the Air should be entitled to a credit for any VAT incurred on the acquisition Navigation and Transport (International Convention) Act 2004. of the aircraft and any related costs. The court system in Ireland is the suitable forum for enforcement of Irish stamp duty generally applies to the transfer or sale of immovable the Montreal Convention. CAR, which has a significant consumer property, intangible assets and shares in Irish companies. However, protection role, is the national enforcement body tasked with the transfers of direct ownership in an aircraft or part of an aircraft are monitoring and regulation of EU legislation covering air passenger expressly exempt from stamp duty and this exemption extends, on rights and the provision of assistance to passengers with reduced a concessionary basis, to transfers of shares in a company which mobility. owns aircraft.

2.8 Does your jurisdiction make use of any taxation 2.6 Is your jurisdiction a signatory to the main benefits which enhance aircraft trading and leasing international Conventions (Montreal, Geneva and (either in-bound or out-bound leasing), for example Cape Town)? access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal of aircraft? Ireland is a signatory to the following conventions (as amended and updated) in relation to international airline operations: Ireland has a significant double tax treaty network which continues 1. The 1929 Warsaw Convention for the Unification of Certain to grow every year. There are currently 74 agreements in place, of Rules Relating to International Carriage by Air, as amended by the Hague Protocol of 28 September 1955 – ratified 20 which 73 are in force. September 1935 and 12 October 1959. The majority of Ireland’s double tax treaties provide for reduced 2. The 1944 Chicago Convention on International Civil Aviation withholding tax rates on payments such as lease rental and interest – ratified 31 October 1946. payments and aircraft leasing is a focus when treaties are being

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negotiated. In terms of particular treaties and jurisdictions, the rate for the same. Standard default remedies under leasing and security of withholding tax between Ireland and China can be reduced to agreements often include powers to take possession or control of as little as 5% under the relevant treaty which compares well with the aircraft in order to: sell or grant a new lease of the aircraft; most other countries where the lowest rate achievable is between receive income or profits that result from the management or use of 10% and 15%. The treaties with the US and India also offer the aircraft; and/or procure the deregistration, export and physical reduced withholding rates of between 0% and 15%. The terms of transfer of the aircraft from the territory in which it is located. In Irish domestic tax law and relevant double taxation agreements also Ireland, provided the requirements of the Convention are met, it is generally provide credit relief to Irish lessors for foreign tax paid. not necessary to make an application to the High Court for leave to exercise that remedy unless the terms agreed between the parties expressly require the creditor to make such an application. Ireland 3 Litigation and Dispute Resolution While self-help remedies may be available, there are risks for the lessor associated with non-consensual repossession without 3.1 What rights of detention are available in relation to ancillary judicial relief, such as a lessee claiming breach of lease aircraft and unpaid debts? terms for quiet enjoyment and use of the aircraft. It is often considered prudent for the lessor to institute recovery proceedings Irish law recognises certain liens and rights of detention for unpaid where the lessee is considered uncooperative, or where a liquidator debts or charges. The rights may arise in law, equity, under contract or examiner has been appointed to the lessee. or statute. As a member of the EU, the relevant Declaration pursuant to Article At common law, the third-party liens available are similar to other 55 of the Convention and the application of Council Regulation common law jurisdictions such as England and Wales. An unpaid (EC) No 1215/2012 on jurisdiction and enforcement of judgments seller may seek to exercise a seller’s lien although typical aircraft applies to interim relief under the Convention. finance structures mean that aircraft manufacturers are not ina Ireland is a signatory of and has ratified the Cape Town Convention position (and in most instances do not need) to exercise such rights. and has given effect to the Aircraft Protocol. In May 2017, the Irish A possessory lien may be exercised, for example, where aircraft are Government made an order giving immediate effect to Article XI subject to a claim for unpaid repairs. In order to exercise such a (Alternative A) of the Aircraft Protocol, which further enhances lien, the aircraft must be, and remain, in the possession of the party Ireland’s position as a leading jurisdiction for aircraft finance as it who carried out the repairs, and the specific aircraft over which the allows creditors to gain access to their aircraft assets in the event of lien is sought to be exercised, must have been improved through the insolvency of a debtor after a 60-day waiting period. labour of that party, with the knowledge and authorisation of the owner (note maintenance is probably insufficient) resulting in an unpaid debt. Such a lien would only extend to the cost of unpaid 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For repairs to the specific aircraft in question, and would not allow for a example, is there a distinction in your jurisdiction right of sale without court intervention. Contractual liens can also regarding the courts in which civil and criminal cases be created, and if provided for in the agreement between the airport are brought? user and the owner or operator of an airport, aircraft can be detained, and sold, for non-payment of certain airport charges. Aviation disputes in Ireland will typically be dealt with in the civil The Air Navigation and Transport (Amendment) Act 1998 (section courts, in particular the Commercial Court division of the High 40) affords certain airports operated by specified Airport Authorities Court which deals with commercial disputes where, amongst other the right to detain and, if necessary, to sell aircraft in respect of things, the quantum of the claim exceeds €1 million, and enjoys certain unpaid airport charges. This power to detain extends beyond enhanced case management procedures. This Court also deals the particular aircraft in respect of which the charges were incurred exclusively with proceedings in connection with any function of the to any other aircraft of the operator or registered owner. This can Registrar under the Cape Town Convention or the Aircraft Protocol. cause problems for new operators assuming liability for pre-existing debts. If the owner or operator disputes the charges and offers 3.4 What service requirements apply for the service of sufficient security pending determination of the dispute, the power court proceedings, and do these differ for domestic to detain is limited. As regards the power of sale, it can only be airlines/parties and non-domestic airlines/parties? exercised with leave of the Irish High Court. Parties in possession of judgments may also be entitled to exercise As most disputes will invoke the High Court jurisdiction, the Rules certain rights against an aircraft or shares in an aircraft holding of the Superior Courts prescribe the relevant methods of service. company, provided appropriate judgment enforcement procedures Personal service on individuals may be effected in the State. Service have been followed, but an Irish court will have regard to prior and on a company in the State must be effected in accordance with superior interests in granting any such reliefs. section 51 of the Companies Act 2014, by leaving the proceedings at or sending it by prepaid post to the registered office of the Company. Where the company has not notified the Registrar of Companies of 3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire its registered office, the documents may be served on the Registrar. possession of the aircraft or enforce any of its rights For parties located outside the State but within the EU, Council under the lease/finance agreement? Regulations (EC) 1215/2012 on jurisdiction and 1348/2000 on effecting service may apply. For parties outside the EU, leave of Ireland is generally seen as a creditor-friendly jurisdiction, allowing the Irish Court to issue and serve proceedings may be required, self-help repossession and interim relief and other self-help remedies with service thereafter effected pursuant to the Hague Service provided the contractual arrangements between the parties provide Convention.

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will not block them unless in the specific instance it will lead to a 3.5 What types of remedy are available from the courts substantial lessening of competition in Ireland. or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis? 4.2 How do the competition authorities in your In general, the Irish courts have jurisdiction to order and direct the jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? full range of common law and equitable remedies to include making orders providing for interim and interlocutory relief, together with final orders including declaratory orders, injunctions and associated The relevant body is the CCPC (www.ccpc.ie). damages and costs awards. There is no statutory definition of “relevant market” and the market The Arbitration Act 2010, which adopted the UNCITRAL Model may be defined broadly or narrowly in the context of the particular Ireland Law, as amended in 2006 (the “Model Law”), with some minimal case. amendments, applies to all arbitrations, both domestic and international, Market sectors used in EU case law such as origin and destination commenced in Ireland after 8 June 2010. Unlike England and Wales, city pairs, premium and non-premium passengers, non-stop and Ireland deliberately avoided wholesale amendments and additions to one-stop flights and airport substitution will equally be considered the Model Law. Therefore, Articles 9 and 17 in respect of interim by the CCPC in Ireland. measures apply. 4.3 Does your jurisdiction have a notification system 3.6 Are there any rights of appeal to the courts from the whereby parties to an agreement can obtain decision of a court or arbitral tribunal and, if so, in regulatory clearance/anti-trust immunity from what circumstances do these rights arise? regulatory agencies?

Appeals of High Court decisions as the court of first instance may All mergers and acquisitions of legal entities, including airlines, that be made to the Court of Appeal, and thereafter, on certain limited fall within the remit of the Competition Act 2002 (as amended) and grounds, to the Irish Supreme Court. satisfy certain financial thresholds, require mandatory pre-clearance by submitting a notification to the CCPC. Ireland ratified the New York Convention in 1981 and no reservations have been entered. The relevant legislation is now the Arbitration Act 2010, which does not provide for a right of appeal against an 4.4 How does your jurisdiction approach mergers, arbitral award. acquisition mergers and full-function joint ventures? The grounds for challenging an arbitral award before the High Court under the 2010 Act are limited to those expressly enumerated under Ireland’s competition policy is closely aligned with EU principles Article 34(2) of the Model Law (which mirrors the grounds on of competition law. The test is whether the merger, acquisition or which recognition and enforcement might be refused under the New joint venture will substantially lessen competition in the market for York Convention as per Article 36 of the Model Law). Challenges consumers in Ireland. must be brought within three months from the date of receipt of The CCPC is responsible for enforcing Irish and European the award. Section 12 of the 2010 Act, however, requires that any competition law in Ireland. They can enforce by way of criminal or challenge on the basis of public policy must be brought within 56 civil proceedings with heavy fines and prison sentences available. days of the date from which the circumstances giving rise to the However, the CCPC applies these sparingly. In the case of a application became known or ought reasonably to have become merger or acquisition, the transaction does not become effective known. The jurisprudence suggests Irish courts will construe the until the CCPC has either cleared the transaction, refused to clear ground of public policy as extending only to breaches of the most it or imposed conditions to the merger or acquisition, the aim of fundamental notions of morality and justice. which will be to prevent a substantial lessening of competition in the market as a result of the merger or acquisition. 4 Commercial and Regulatory 4.5 Please provide details of the procedure, including time frames for clearance and any costs of 4.1 How does your jurisdiction approach and regulate notifications. joint ventures between airline competitors? A notification is lodged by the parties involved in the relevant Joint ventures between airlines are subject to Irish competition law transaction to the CCPC in relation to the merger, acquisition or which implements and is fully compliant with EU competition law. joint venture. The CCPC then has 30 working days to give a Phase Therefore, joint ventures are subject to Sections 4 and 5 of the Irish I clearance or to determine that the issues are sufficiently complex Competition Act 2002 (as amended) which implement Articles to require a Phase II clearance for which the CCPC has 120 working 101 (anti-competitive agreements) and 102 (abuse of a dominant days. These timelines can be extended by the CCPC by requesting position) of the Treaty on the Functioning of the European Union. further information. If it does this, the clock stops ticking until such Mergers and acquisitions are subject to a merger notification regime time as the CCPC has received satisfactory replies to all questions, to the Irish Consumer and Competition Protection Commission at which point time starts to run from the start again i.e. it has 30 (“CCPC”). The financial thresholds at which the notification of a working days. merger or acquisition to the CCPC is required are set to increase as In general, however, the CCPC deals with the majority of cases of 1 January 2019. in Phase I without extending the timeline so the system works There are no particular Irish rules on highly integrated airline efficiently. The CCPC will try to agree conditions or changes with alliances, codeshare agreements or similar arrangements. The the proposed parties to the merger rather than refuse to clear it. CCPC follows EU in relation to such alliances and The fee charged by the CCPC for a Merger Notification is €8,000.

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basis that these services are considered necessary for the economic 4.6 Are there any sector-specific rules which govern the development of their regions and that they would not be provided on aviation sector in relation to financial support for air a commercial basis. Contracts are in place for air services between operators and airports, including (without limitation) Dublin and the regional airports in Kerry and Donegal and will run state aid? until 31 January 2022.

Ireland applies EU law on State Aid. In the aviation sector in particular, it applies the EU Commission 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, Guidelines on State Aid to airports and airlines (2014/C 99/03). and what rights do passengers have in respect of These Aviation Guidelines set out the conditions under which their data which is held by airlines and airports? Ireland Member States can grant State Aid to airports and airlines. Key features are: The Data Protection Act 2018 came into force in Ireland on 25 May ■ State Aid for investment in airport infrastructure is allowed 2018. That Act and the directly effective EU General Data Protection if there is a genuine transport need and the public support is Regulation (2016/679) (“GDPR”) are currently the primary pieces necessary to ensure the accessibility of a region. The guidelines of legislation governing data protection in Irish law. In keeping define maximum permissible aid intensities depending on the with the relevant EU principles, data collectors and processors in size of an airport, in order to ensure the right mix between the airline industry must adhere to the core requirements of: fairly public and private investment. The possibilities to grant aid obtaining and fairly processing personal data; keeping collected are therefore higher for smaller airports than for larger ones. data only for one or more specified lawful purposes; processing ■ Operating aid to regional airports (with fewer than 3 such data only in ways compatible with the purpose for which it was million passengers a year) will be allowed for a transitional given; as well as keeping the data safe and secure; and ensuring that period of 10 years under certain conditions, in order to give airports time to adjust their business model. To receive it is kept accurate and up to date. operating aid, airports need to work out a business plan The GDPR has far reaching extra-territoriality; non-EU carriers will paving the way towards full coverage of operating costs at the be subject to the GDPR, if their marketing is targeted at travellers end of the transitional period. As under the current market within the EU or where they engage in monitoring the behaviour conditions, airports with an annual passenger traffic of below of data subjects in the EU. Data processors will also be directly 700,000 may face increased difficulties in achieving full caught by specific obligations under GDPR.SI 336/2011 European cost coverage during the transitional period, the guidelines Communities (Electronic Communications Networks and Services) include a special regime for those airports, with higher aid (Privacy and Electronic Communications) Regulations 2011, giving intensities and a reassessment of the situation after five years. effect to Directive 2002/58 (the “E-Privacy Directive”), also apply ■ Start-up aid to airlines to launch a new air route is permitted to the airline industry, and in particular, the collection and use of provided it remains limited in time. The compatibility conditions for start-up aid to airlines have been streamlined passenger data in electronic marketing. and adapted to recent market developments. It was intended to replace the E-Privacy Directive sometime in 2018 The Irish Government supports Ireland’s regional airports (Donegal, with a new E-Privacy Regulation which will bring more GDPR- Ireland West Airport Knock (“IWAK”), Kerry and Waterford) type privacy obligations (e.g. similar fines) to this area of regulation; through the Regional Airports Programme 2015–2019. That financial however, this now looks more likely to take place in 2019. support is administered by DOTTS through three separate schemes: The EU PNR Directive (2016/681) was transposed into Irish ■ A Regional Airports Capital Expenditure Grant (“CAPEX”) legislation 25 May 2018 (the same date as GDPR became effective) Scheme. by Statutory Instrument S.I.177 2918. That Directive provides for ■ A Core Airport Management Operational Expenditure the collection by air carriers of PNR data for all extra-EU flights Subvention (“OPEX”) Scheme. entering or departing from the EU, as well as the transfer of such ■ A Public Service Obligation (“PSO”) Air Services Scheme. data to EU Member States and sharing mechanisms across borders. Note under Article 2 it can be extended in the future to intra-EU All funding of regional airports by the State must comply with the flights. Aviation Guidelines on State Aid to airports and airlines referred to above. Following on from the Schrems case (which successfully challenged Safe Harbor, the predecessor to Privacy Shield), the Irish High Court, Support under the CAPEX Scheme is only paid to the regional at the request of the Data Protection Commission, has referred a airports for essential safety and security work with an associated legal challenge to the validity of the EU Standard Contractual economic activity. Clauses (“SCCs”) to the Court of Justice of the European Union OPEX subvention is paid to compensate the regional airports for (“CJEU”) to determine a number of questions regarding the use of costs incurred in providing core airport services, insofar as these SCCs and their validity under EU law. The outcome of that case costs cannot be fully met by prudent commercial management and may have significant implications for data transfers beyond the EU. from any surpluses generated by non-core activities such as car parking and catering. 4.9 In the event of a data loss by a carrier, what Two services operate from regional airports under the PSO Air obligations are there on the airline which has lost the Services Scheme – Kerry/Dublin and Donegal/Dublin. data and are there any applicable sanctions?

4.7 Are state subsidies available in respect of particular Irish data protection law includes obligations to notify affected data routes? What criteria apply to obtaining these subjects in the event of a data breach and a requirement to report subsidies? breaches to the Data Protection Commission. The notification and reporting requirements vary based upon the specific circumstances As set out at question 4.6 above, two PSO services from two of the data loss/breach. The Irish Data Protection Commission airports in Ireland are supported by the Irish Government on the has approved a personal data security breach Code of Practice as a

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guide to organisations dealing with breaches of security involving ■ Information: the air carrier shall provide a written notice customer or employee personal information. The timeframes setting out the rules for assistance in line with Regulation for reporting and notification are extremely limited (24 hours in 261/2004. In addition, a sign must be displayed at the check- certain instances), and a failure to adhere to the required reporting in area referring to air passenger rights under Regulation requirements can lead to regulatory sanction. Irish law also includes 261/2004. a requirement to notify the Irish police where the data breach ■ Passengers shall be offered the choice between reimbursement potentially involves the commission of a crime, i.e. a cybersecurity of the cost of their ticket if they decide not to travel; and attack or fraud. The Data Protection Commission is still in the rerouting to their final destination at the earliest opportunity. Passengers may choose to travel at a later date at their process of updating its website to cater for GDPR and there could convenience, subject to the availability of seats. be changes to this Code of Practice as a result. ■ Meals and refreshments shall be offered free of charge and in Ireland reasonable relation to the waiting time. 4.10 What are the mechanisms available for the protection ■ Hotel accommodation shall be provided where a stay of of intellectual property (e.g. trademarks) and other one or more nights becomes necessary, as well as transport assets and data of a proprietary nature? between the hotel and the place of accommodation. ■ Two free telephone calls, telex or fax messages, or emails Registration of intellectual property in Ireland is carried out at the shall be offered. Irish Patents Office. ■ Compensation as set out in the table (below). The amount Registration of trademarks is governed by the Trade Marks Act of compensation payable may be reduced by 50% if the 1996 (as amended). A trademark is usually registered for an initial rerouting offered allows the passenger to arrive at his/her 10-year period but can be renewed indefinitely. Unregistered final destination close to the original planned arrival time. trademarks may also be protected by the common law tort of Compensation amounts related to denied boarding passing-off. ■ For flights with a distance of 1,500km or less: €250. Applications for an EU-wide trademark can be made through the ■ For intra-Community flights of more than 1,500km and all EU Intellectual Property Office (“EUIPO”). Applications for other flights between 1,500km and 3,500km: €400. international trademarks can be made under the Madrid Protocol ■ For all flights with a distance of 3,500km or more: €600. and are administered by WIPO. Patent registration is governed by the Patents Act 1992 (as 4.12 What powers do the relevant authorities have in amended). Irish patents are protected for a maximum of 20 years. relation to the late arrival and departure of flights? Short-term, 10-year patents can also be obtained. Protection can be sought for other countries in Europe by an application for a Ireland complies with Regulation No 261/2004 in relation to late European Patent through the European Patent Office which includes arrival and departure of flights. 40 countries, or throughout the world under the Patent Cooperation Treaty administered by WIPO which covers 145 countries. Whether a delay comes within the terms of Regulation 261/2004 depends upon the distance of the route involved and the delay itself Registration of designs is governed by the Industrial Designs Act must be at least two hours. The Regulation shall apply to: 2001 (as amended). Protection is granted initially for five years, which can be renewed four times, giving a maximum protection of (a) delays of two hours or more in the case of flights of 1,500km or less; 25 years. Protection throughout the EU can be obtained by applying for a Community Design through EUIPO. Protection in additional (b) delays of three hours or more in the case of all Intra- countries can be obtained under the Hague Convention operated by Community flights of more than 1,500km, and of all other flights between 1,500km and 3,500km; and WIPO. Protection is also available for unregistered designs for up to a maximum of three years. (c) delays of four hours or more in the case of all other flights. Copyright protection in Ireland is governed by the Copyright The operating air carrier must provide care and assistance in the and Related Rights Act 2000 (as amended). There is no system event of such delays. This must consist of the following: of registration. Copyright protection for literary works lasts for ■ Information: the air carrier shall provide a written notice 70 years after the death of the author. Copyright protection for setting out the rules for assistance in line with the Regulation. computer-generated works lasts for 70 years after the date they are In addition, a sign must be displayed at the check-in area referring to air passenger rights under the Regulation. first made available to the public. ■ Meals and refreshments shall be offered free of charge and in Other non-registrable intellectual property such as confidential reasonable relation to the waiting time. information, trade secrets, knowhow and the like are normally ■ Hotel accommodation shall be provided where a stay of protected by non-disclosure agreements or other forms of contract. one or more nights becomes necessary, as well as transport between the hotel and the place of accommodation. 4.11 Is there any legislation governing the denial of ■ Communications: passengers shall be offered free of charge boarding rights and/or cancelled flights? two telephone calls, telex or fax messages, or emails. ■ Reimbursement: where the flight delay is at least five hours, Ireland complies with Regulation (EC) No 261/2004 in relation to passengers shall be offered reimbursement within seven denied boarding rights. days of the full cost of the ticket at the price at which it was Where a flight is overbooked and an air carrier reasonably expects bought for the part or parts of the journey not completed. If, however, the purpose of the journey is no longer attainable, to deny boarding, it shall first call for volunteers in exchange for then reimbursement must be offered for the part of the benefits to be agreed. If there is an insufficient number of volunteers, journey already made, e.g., a flight from Cork to Dublin will the airline may deny boarding to passengers against their will but be reimbursed if the purpose of the flight was to travel on a must compensate them and offer the following assistance: connecting flight to London for a function at which attendance is no longer possible due to the delay. In addition, there is

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a right to a return flight to the original point of departure The Package Holidays and Travel Trade Act 1995 also regulates the where relevant. The right to reimbursement applies where travel contract between travel operator and consumer. the passenger decides not to travel as a result of the delay – it is not possible to travel and also claim reimbursement under the Regulation. 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? If the airline is unable to provide the above provisions free of charge, the airline should reimburse passengers for expenses incurred. Many of the major GDSs operate in Ireland, including Amadeus, Compensation Sabre, Travelport, etc. Although the Regulation itself does not expressly state that

Ireland compensation is payable in cases of delay, the ruling delivered by 4.16 Are there any ownership requirements pertaining to the European Court of Justice in the cases of Sturgeon v. Condor GDSs operating in your jurisdiction? Flugdienst GmbH and Bock and Others v. Air France SA maintains that compensation may be payable to passengers who arrive at their No, there are no ownership requirements specific to GDSs operating destinations three hours or more after the scheduled arrival time. in Ireland. The amount of compensation which may be payable in the aforementioned circumstances depends on the distance of the flight, the reason for the delay and, in the case of point (c) above, it may be 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? reduced by 50% where the delay on arrival was less than four hours. If an airline can prove that the delay was caused by an extraordinary There is no particular prohibition on vertical integration between circumstance which could not have been avoided even if all air operators and airports, though competition law will be relevant. reasonable measures were taken, no compensation will be payable. The amount of compensation payable depends on the distance of the flight. If the flight is classed as: 4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your ■ short haul, the amount payable is €250 per person; jurisdiction or operators of aircraft generally into and ■ medium haul, the amount payable is €400 per person; and out of your jurisdiction? ■ long haul, the amount payable is €600 per person. Currently, there are no nationality requirements imposed by the IAA CAR is the designated enforcement body in Ireland. Section 45 of for entities applying for an Air Operator’s Certificate. the Aviation Act 2001 (as amended) gives CAR the right to issue a direction to any airline in breach of Regulation 261/2004 requiring However, Regulation EC 1008/2008 is enforced and implemented compliance. If the airline fails to comply it is guilty of an offence. in Ireland by Statutory Instrument 426 of 2008. This requires an Whilst an airline can make representations to CAR during the applicant for an Air Carrier Operating Licence to have its principal process, it can only challenge its decision by way of place of business and registered office in Ireland. It also requires in the High Court. that the applicant is owned and controlled by EU Member States or EU nationals.

4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, 5 In Future are imposed on the airport authorities?

The airport authority for Dublin and Cork Airports is the daa plc. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments The airport authority for Shannon Airport is the Shannon Airport affecting the aviation industry more generally in Authority Limited. your jurisdiction, are likely to feature or be worthy of The relevant legislation is the State Airports Act 2004 and the State attention in the next two years or so? Airports (Shannon Group) Act 2014. This legislation dictates that the airports are owned by the State and 1. The Irish Government’s expressed and continued support for the wider aviation industry contained in “A National the policy position is that this will not change in the foreseeable Aviation Policy for Ireland” policy document will ensure future. Governance and structure of the airport authorities is set that, when enacting new legislation in Ireland, aviation and out in the legislation as well as detailed provision on operation of the significance of the industry to the Irish economy will be the airports. at the forefront of the legislators’ considerations, whilst the Airport operators are subject to law such as consumer law, health implementation of the “Alternative A” insolvency regime in and safety, employment, etc. Ireland, further strengthens the country’s appeal as a hub for owning, leasing and financing aircraft, as well as its position as a global centre for aviation. 4.14 To what extent does general consumer protection 2. The ongoing OECD/G20 Base Erosion and Profit Shifting legislation apply to the relationship between the Project (“BEPS”) is likely to result in changes to international airport operator and the passenger? tax treatment of certain tax practices. On 7 June 2017, Ireland and over 70 countries signed up to a multilateral convention Ireland implements EU consumer law. The general legislation (the “MLI”) that is intended to implement a number of applicable in Ireland is the Sale of Goods and Supply of Services BEPS-related measures swiftly. The effect of the MLI is that Act 1980 (as amended). This applies to aviation-related matters countries (including Ireland) will transpose certain provisions also. relating to the BEPS project into their existing networks of bilateral tax treaties without the requirement to re-negotiate The CCPC is responsible for the enforcement of consumer each treaty individually. The MLI will implement a series of protection laws. measures to update Ireland’s existing network of bilateral tax

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treaties with the intention of reducing opportunities for tax beneficiary; however, in these circumstances it may be avoidance by multinational enterprises. However, the impact possible to rely on an exemption to the requirement and to on the Irish aviation industry is expected to be minimal due simply list the company directors and executive officerin lieu to the robust legislative framework already in place in Ireland of the beneficiaries such that these structures can continue to and the tax treatment of the aviation industry in Ireland. In be used. fact, the OECD’s recommendation may well serve to enhance 4. DOTTS is carrying out a review of the role of CAR and IAA the appeal of Ireland as an attractive jurisdiction for the in light of SES regulation, which may change the role of these owning, financing and leasing of aircraft as compared to two bodies and necessitate legislation. competing jurisdictions. Ireland will also be required to adopt certain measures

introduced by the Anti-Tax Avoidance Directive (Directive Acknowledgment Ireland (EU) 2016/1164) in relation to limitation of interest The authors are grateful to Brian Clarke for his invaluable deductibility and Council Directive (EU) 2017/952 which amended Directive (EU) 2016/1164 as regards hybrid contribution to this chapter. Brian is a partner in The Maples mismatches. These changes are unlikely to have a significant Group’s Litigation and Dispute resolution group. He advises both impact on the aviation industry in Ireland. domestic and international clients on domestic and multinational 3. On 15 November 2016, Ireland formerly enacted the European commercial disputes and enforcement proceedings. He is experienced Union (Anti-Money Laundering Beneficial Ownership of in acting in both ad hoc and institutional forms of arbitration. Brian Corporate Entities) Regulations 2016 by the introduction of joined The Maples Group in 2009. (Tel: +353 1 619 2042 / Email: SI/560/2016. The statutory instrument provides for every [email protected].) Irish-incorporated entity (other than those listed on regulated The authors are also grateful to Lynn Cramer for her contribution markets and subject to EU (or equivalent) disclosure to this chapter from a tax law perspective. Lynn is an associate requirements) to take steps to obtain and disclose information in The Maples Group’s Tax team and advises both domestic and in respect of its beneficial interest holders. In terms of aviation, this may cause an issue where a company and its international clients on Irish tax matters. (Tel: +353 1 619 2066 / assets are held in trust structures and there is no discernible Email: [email protected].)

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Donna Ager Mary Dunne The Maples Group The Maples Group 11th Floor 75 St. Stephen’s Green 200 Aldersgate Street Dublin 2 London, EC1A 4HD Ireland United Kingdom Tel: +353 1 619 2021 Tel: +44 20 7466 1712 Email: [email protected] Email: [email protected] URL: www.maples.com URL: www.maples.com Ireland Donna is Head of the European Aviation practice at The Maples Group, Mary joined The Maples Group in 2012. Prior to this she was a partner advising on tax-efficient leasing and financing structures, in addition to with a leading Irish law firm, from 2007 to 2012. Mary also worked platform establishments and transportation business acquisitions and as Head of Legal at the NDFA and the Strategic Investment Board in disposals, all from an Irish law perspective. Belfast. She has been highly regarded in independent legal directories such as Chambers Global and The Legal 500. Having worked on the acquisition, finance, leasing and disposal of transportation assets for more than 17 years, Donna has extensive Mary’s areas of expertise include: industry and structuring knowledge, notably in the aviation sector where ■■ Infrastructure projects and project finance in the energy, road, rail, she specialises. Regarded by her clients as practical and commercial, education, water, waste health, nursing home and housing sectors, Donna’s expertise extends across all transportation assets and her with particular expertise in PPPs. London city training provides for a unique and refreshing approach to the role of Irish counsel. ■■ Construction law: Mary advises on all forms of Irish and international construction and engineering documentation. Donna joined The Maples Group in 2015, following time spent as a partner in the asset finance team of Simmons & Simmons, London. ■■ Public Procurement and Competition law: Mary acts as an Prior to that, Donna worked for nine years at Clifford Chance, expert to the OECD and World Bank on public procurement and London, having started her career with Freshfields before moving project finance and has drafted laws and procedures for many to Airbus S.A.S. in Toulouse, France where she gained sought-after governments seeking to do business with the EU, such as Croatia, manufacturer’s experience as well as technical and commercial Macedonia, Jamaica and Morocco. knowledge of maintenance, repair and operations. Donna has been described by The Legal 500 as being part of a “new generation of partners” who focus on finding innovative solutions to ensure the spirit of the deal remains paramount. She has been ranked by Chambers Global and listed as a leading lawyer in her field byIFLR 1000.

Established in 1968, the leading international legal services team of The Maples Group advises global financial, institutional, business and private clients on the laws of the British Virgin Islands, the Cayman Islands, Ireland, Jersey and Luxembourg. With offices in key jurisdictions around the world, The Maples Group has specific strengths in areas of corporate commercial, finance, investment funds, litigation and trusts. Maintaining relationships with leading legal counsel in each business centre, the Group leverages this local expertise to deliver an integrated service offering for global business initiatives. For more information, please visit: maples.com.

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Israel

Gross Orad Schlimoff & Co. (GOS) Omer Shalev

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

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proceedings under this law and under the Aviation Law. The CAAI 1.3 What are the principal pieces of legislation in publishes on its website the details of representatives of foreign your jurisdiction which govern air safety, and who operators. administers air safety?

The principal legislation in Israel which governs air safety is the 1.7 Are airports state or privately owned? Aviation Law – 2011. Israel has adopted the Chicago Convention to ensure that air The airports in Israel are state-owned. The IAA is the governmental navigation equipment and operations comply with the standards of company which is in charge of operation of the airports.

Israel the International Civil Aviation Organization (ICAO). The CAAI supervises aviation operations regarding safety. 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? The air carrier must prove its maintenance and technical ability and provide an operational and technical manual for the approval of the Yes – there are requirements in respect of the hours of operation of CAAI. The carrier must also have an approved safety management the airports, i.e. the closure of Ben Gurion International Airport to system. take-offs for several hours during the night (“night curfew”). The CAAI issues and renews airworthiness certificates and air operator certificates, approves the maintenance programmes and carries out inspections of aircraft operated within Israel. 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular The air carrier must prove its professional and technical ability, rules, regulations, systems and procedures in place appoint relevant officers (including the safety officer), provide an which need to be adhered to? operational and technical manual for the approval of the CAAI and provide a safety management system. The relevant legislation which applies to air accidents is as follows: Specific regulations apply to maintenance facilities, which also ■ Aviation Law – 2011. require relevant licences. ■ Air Transportation Law – 1980 (Montreal Convention – Recently, an amendment to the Aviation Regulations (Operating 1999). Aircraft and Flight Guidelines) – 2016 came into effect, regarding ■ Aviation Regulations (Aircraft Accident and Incident flight and duty time limitations and a rest scheme for crew members, Investigation) – 1984. in order to ensure that pilot fatigue does not endanger flight ■ Chicago Convention – 1944. safety. This amendment is in accordance with the US Flight Time ■ Civil Aviation Authority Law. Limitations (FTL) regulations and it applies only to commercial operation of large aircraft. According to the Aviation Law, the Minister of Transportation will appoint the Chief Investigator within the Ministry of Transportation to investigate. 1.4 Is air safety regulated separately for commercial, The Chief Investigator is responsible for: cargo and private carriers? ■ collection, documentation and analysis of all relevant information regarding safety incidents or accidents; No. The CAAI regulates all aspects of the aviation industry. Though the same regulator is in charge for commercial, cargo and ■ determining the reasons for an incident or accident; private carriers, there are different regulations and standards which ■ preparation of the final accident report with recommendations; have to be adhered to. and ■ follow-up on the fulfilment of recommendations and drawing conclusions. 1.5 Are air charters regulated separately for commercial, cargo and private carriers? The Aviation Law and the Aviation Regulations (Aircraft Accident and Incident Investigation) set out the following main subjects: No. The CAAI regulates all aviation activity. ■ Procedures in case of an accident. ■ The Chief Investigator’s authority, which includes his right to visit any relevant place and act in any manner to preserve the 1.6 As regards international air carriers operating in your site of the accident for the completion of the investigation. jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ ■ The possibility of the CAAI manager to suspend the licence or local operators? By way of example only, of a person involved in an accident until the investigation is restrictions and taxes which apply to international but finalised, for reasons of flight safety. not domestic carriers. 1.10 Have there been any recent cases of note or other In principle, there are no particular limitations for international air notable developments in your jurisdiction involving carriers operating in Israel in comparison to local carriers. air operators and/or airports? As Israel has adopted many international aviation agreements, including the EU-Israel Open Skies Agreement, the US-Israel Open The Aviation Law, which was enacted in 2011 after many years Skies Agreement and various bilateral agreements, most of the of drafting and discussions, sets out a new and modern regulatory above agreements are based on the principle of reciprocity. regime for aviation services in Israel. An example of a requirement from a foreign carrier is the Aviation The Open Skies Agreement signed between Israel and the European Services Licensing Law – 1963, which states that for the purpose Union influenced Israel’s aviation sector by strengthening competition of obtaining an operating permit, the foreign operator must appoint and prompting many new airlines to begin operation in Israel. a representative in Israel who is authorised to act on its behalf in

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Recently, an amendment to the Aviation Regulations (Operating Aircraft and Flight Guidelines) – 2016 came into effect, regarding 2.4 As a matter of local law, is there any concept of title flight and duty time limitations and a rest scheme for crew members, annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or in order to ensure that pilot fatigue does not endanger flight other prejudice when installed ‘on-wing’ on an aircraft safety. This amendment is in accordance with the US Flight Time owned by another party? If so, what are the conditions Limitations (FTL) regulations and it applies only on commercial to such title annexation and can owners and financiers operation of large aircraft. of engines take pre-emptive steps to mitigate the risks?

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

In general, the local law should ratify the Conventions and apply 2.3 Are there any particular regulatory requirements them to local legislation. For example, the Air Transport Law which a lessor or a financier needs to be aware of as adopted the Montreal Convention (and before that, the Warsaw regards aircraft operation? Convention) into the local legislation. There are no specific regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation in Israel. 2.8 Does your jurisdiction make use of any taxation benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal of aircraft?

There are no taxation benefits, which enhance aircraft trading and leasing.

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have jurisdiction in matters involving up to NIS 2.5 million. These 3 Litigation and Dispute Resolution courts also have jurisdiction over the use and possession of real property. Magistrates Courts also act as traffic courts, municipal 3.1 What rights of detention are available in relation to courts, family courts and small claims courts. aircraft and unpaid debts? Generally, a single Judge presides in each case unless the President of the Magistrates Court directs that the case will be heard by a Israeli law acknowledges detention as a legal right of possession in panel of three judges. There are 29 Magistrates Courts in Israel. goods until payment of debt. The right of detention will be provided The jurisdiction of a Magistrates Court extends to the locality in only in specific matters which are stated in the law or agreed upon which it sits and the district where it is situated. Israel by the parties. District Courts In theory, detention is a self-remedy without the requirement to District Courts are the middle-level courts of the Israeli judiciary approach legal instances, and carries with it the exemption from tort system. The District Courts have jurisdiction in any matter that liability for damages incurred by the operation of a detention. is not within the sole jurisdiction of another court. In criminal Israeli law does not state when such right is applicable, but requires a matters, District Courts have jurisdiction for cases where the few conditions for its exercise. Such conditions include, inter alia: that potential punishment is more than seven years’ imprisonment. In the debt should be from a specific transaction, on which date payment civil cases, District Courts have jurisdiction in matters where the arrived; and that the exercise of detention should be made bona fide. amount of claim exceeds NIS 2.5 million. District Courts also have Although a creditor may seize the aircraft according to the said legal unique jurisdiction over several issues – the economic division of right, the practical exercise of such right may be difficult due to the District Court in Tel Aviv, which was established in 2010, is a several reasons (such as the fact that the aircraft is located in a place good example of special jurisdiction for financial and capital market that the owner of the detention right cannot independently reach). In matters. The District Courts also handle appeals against judgments such case, the creditor will have to apply to court. of the Magistrates Courts. Generally, a single Judge presides in trials; however, a panel of three Judges is established when the court hears an appeal of a 3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire Magistrates Court’s judgment, when the accused is charged with an possession of the aircraft or enforce any of its rights offence punishable by imprisonment of 10 years or more, or when under the lease/finance agreement? the President or Deputy President of the District Court so directs. There are six District Courts in Israel: in Jerusalem; Tel Aviv; Haifa; A regime of self-help may be available to a lessor or a financier of Lod (Central District); Beersheba; and Nazareth. an aircraft in case it needs to reacquire possession of the aircraft or The Supreme Court enforce its rights under the lease agreement. In practice, the lessor The Supreme Court has jurisdiction to hear criminal and civil or financier will ask for a De-Registration Power of Attorney which appeals from judgments of the District Courts. Cases that begin in will provide them with the option for self-remedy. the District Court are appealable, as of right, to the Supreme Court. In the case that the self-remedy may not be exercised and an Other matters may be appealed only with the Supreme Court’s application to court has to be made, it is a relatively fast procedure, permission. as a declarative injunction will usually suffice for the lessor or The Supreme Court is also the High Court of Justice (BAGATZ) for financier, and this does not require a long procedure. special motions against the State of Israel and government bodies. The Supreme Court also has special jurisdiction for various other 3.3 Which courts are appropriate for aviation disputes? matters such as the elections to the Parliament (Knesset), civil rights Does this depend on the value of the dispute? For matters and others. example, is there a distinction in your jurisdiction The Supreme Court serves as an appellate court for rulings of the regarding the courts in which civil and criminal cases are brought? District Court. The Supreme Court is based in Jerusalem. Israel is a unitary state with a single system of general law courts. In general, the Judiciary system in Israel establishes three levels 3.4 What service requirements apply for the service of of courts: the Magistrates Court (first instance); the District Court court proceedings, and do these differ for domestic (second instance); and the Supreme Court (third instance). airlines/parties and non-domestic airlines/parties? All of these courts are appropriate for aviation disputes and therefore the matter will be handled at the relevant court, based on Pursuant to the Regulations of Civil Procedures, service of the distinctions specified hereunder. documents within the jurisdiction of Israel may be processed by The Magistrates Court is a trial court; the District Court serves as various methods including personal service, postal delivery, service a trial court as well as an appellate court; and the Supreme Court is to the defendant’s lawyer (if known), by facsimile or other electronic essentially an appellate court, which also operates as the High Court communication. of Justice. According to the above Regulations, the address for service shall There are no in Israel and the courts are served by professional be the place of residence or place of business of a person who was Judges. nominated to accept service of court proceedings. Magistrates Courts Service of documents to a defendant which is an entity shall be done to the company’s formal office address. The Magistrates Court is the basic trial court of the Israeli system. These courts have jurisdiction in criminal matters where the accused The court may approve service of court proceedings outside the is charged with an offence that carries with it a potential punishment jurisdiction of Israel in several cases, and for these matters, the of up to seven years’ imprisonment. In civil matters, these courts claimant must file a request for court.

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These requirements do not differ for domestic airlines/parties and issue declarative orders, including to the monopoly owner, as well non-domestic airlines/parties. as to define terms for mergers and exemptions. For joint ventures, each case will be decided in accordance with the 3.5 What types of remedy are available from the courts Israeli competition rules, which will take into account, inter alia, the or arbitral tribunals in your jurisdiction, both on i) an market share and the turnover of the parties. interim basis, and ii) a final basis? The specific legislation for joint ventures between air carriers in Israel is the Antitrust Rules for Agreements between Air Carriers There are various remedies, which depend on the nature of the – 2008, which set out the types of arrangements that are exempted dispute. In general terms, there are both (for historical reasons) from the prior approval of the Antitrust Commissioner and therefore legal and “equitable” remedies, and the following may be available: shall not be regarded as restrictive arrangements. Israel ■ On an interim basis, the remedies may be an injunction order In general, code-sharing agreements and air carrier joint ventures are to prevent the other party from an action until final judgment subject to the prior approval of the Antitrust Commissioner, although is given and also damages may be applied. some code-sharing agreements may not require the Commissioner’s ■ On a final basis, the remedies may be damages, an injunction approval and may be approved after self-assessment of the parties and preventing a certain action or stating that the other party notification to the Commissioner, as specified in the Antitrust Rules should undertake a certain action. The final judgment may for Arrangements Regarding Marketing Flights between Air Carriers also include orders (based on the original requests) for sale, register or possession of an asset. in Destinations Governed by Open Skies Agreements – 2012. Recently, the Antitrust Commissioner published its intention to propose an amendment to the Antitrust Rules for Agreements 3.6 Are there any rights of appeal to the courts from the between Air Carriers, by extending its period an additional five decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? years and amending it by cancellation of the Antitrust Rules (type exemption for arrangements regarding marketing flights between air carriers in destinations governed by Open Skies Agreements). Such There are rights to appeal to the courts from the decision of a amendment, if it comes into force, will enable approval of any Code “lower” court. Therefore, the Supreme Court is essentially an Sharing Agreement after self-assessment and no prior approval of appellate court for the District Courts for criminal and civil appeals the Antitrust Commissioner will be required. from judgments of the District Courts. The Supreme Court has special jurisdiction to hear appeals in matters of Knesset elections, rulings of the Civil Service Commission, and 4.2 How do the competition authorities in your disciplinary rulings of the Israel Bar Association. jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? District Courts hear appeals of judgments of the Magistrates Courts. If an appeal was heard by the District Court (on a Magistrates Court The Israel Antitrust Authority will define the relevant market for the judgment), there is an option to file a request for another appeal purposes of mergers and acquisitions based on the specific matter. to the Supreme Court, which will be heard only after the Supreme The Antitrust Authority will look specifically at the aviation sector Court’s special approval (such method is also relevant for appeals and even more narrowly at the specific type of aviation sector in for small claims courts which may be filed to the District Courts). which the transaction occurred (passenger or cargo transportation). In respect of arbitration, in general, there should be no appeal In recent aviation cases (mostly for code-sharing agreements), the against an arbitrator’s ruling. However, the Arbitration Law notes Antitrust Authority has defined the relevant market regarding the that there are several causes for annulment of an arbitrator’s ruling, aviation sectors as Origin and Destination (O&D) City Pairs. and also enables an appeal before an arbitrator if such condition was agreed within the arbitration agreement. This evaluation considers a demand-side perspective, whereby customers consider all possible alternatives of travelling from a city of origin to a city of destination, for business and leisure passengers 4 Commercial and Regulatory (time-sensitive and price-sensitive). The above also considers direct (non-stop) flights and one-stop flights (subject to a certain period of connection time). 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? The relevant tribunal for competition matters is the special Antitrust Court which is part of the District Court in Jerusalem. Hearings are held in front of a tribunal of three persons: a Judge (of the District Joint ventures between airline competitors are subject to the Court); and two representatives of the public. Appeals against the Antitrust Commissioner’s approval. judgments of this court are made to the Supreme Court. The Israel Antitrust Authority is the authority which is responsible for promoting competition in Israel and for preserving existing competition in the economy. 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain The Antitrust Authority is authorised to enforce different rules, regulatory clearance/anti-trust immunity from which it does in accordance with the policies that it has formulated regulatory agencies? over the years and with the guidelines that it publishes. The Antitrust Authority uses criminal enforcement tools to According to the Israeli Antitrust Law, agreements which may investigate and prosecute cartel crimes and tender coordination. include restrictive arrangements are required to be approved, The Antitrust Authority was also granted the authority to in advance, by the Israel Antitrust Authority. There are several impose monetary sanctions, which it uses in accordance with its exceptions, which are usually governed by a specific exemption or manifesto that emphasises how violation of the law interferes with “type exemption”, where no pre-approval is required (there might competition. In addition to these tools, the Antitrust Authority may be reporting and notification duties after signing the agreement).

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4.4 How does your jurisdiction approach mergers, 4.6 Are there any sector-specific rules which govern the acquisition mergers and full-function joint ventures? aviation sector in relation to financial support for air operators and airports, including (without limitation) All mergers and acquisitions of legal entities, including airlines, state aid? that fall within the conditions of the Israeli Antitrust Law and satisfy certain financial thresholds, require mandatory pre-approval In Israel, there are no sector-specific rules which govern the aviation by submitting a “Notification of a Merger” to the Israel Antitrust sector in relation to financial support for air operators and airports. Authority. The only matter which may be considered state aid is the Israeli

Israel The financial thresholds may include the joint share of the parties Government’s decision to participate in a specific portion of the after the merger, a minimum amount of the annual turnover of the security expenses of the Israeli carriers, which was notified in companies, and whether one of the entities is a monopoly. accordance with the signing of the Israel–EU Open Skies Agreement.

4.5 Please provide details of the procedure, including 4.7 Are state subsidies available in respect of particular time frames for clearance and any costs of routes? What criteria apply to obtaining these notifications. subsidies?

According to the Israeli Antitrust Law, companies may not merge In general, there are no state subsidies available for particular routes. unless a pre-merger notification has first been filed and the consent However, the Israel Ministry of Tourism issued a directive detailing of the Antitrust Commissioner to the merger has been obtained and of the criteria for its participation in the costs of operating direct – if such consent is conditional – in accordance with the conditions flights to the city of Eilat (in south Israel), as it wishes to encourage stipulated. direct flights between different countries and Eilat, in order to Each of the companies intending to merge shall give the notice increase the number of foreign tourists arriving in the city. thereof, providing all details as shall be determined by the Among the criteria, undertaking by the flight operator to comply Regulations. The Commissioner may request further information if with all of the CAAI’s directives for operating flights to Israel, to he deems it necessary for the examination of the application. operate direct flights from a destination outside of Israel to Ovda Within 30 days of the date on which the Commissioner receives a airport (near Eilat) and that the flights are operated in a series of at pre-merger notification from all of the companies seeking to merge, least 16 rotations (round trips) from each destination. the Commissioner shall notify the companies as to whether he The directive is for a limited period and subject to the approval of consents or objects to the merger, or stipulate conditions for it, as the Ministry of Tourism. shall be provided in such notification; failure to give such notification within the 30 days provided shall be deemed to constitute a notice of 4.8 What are the main regulatory instruments governing consent, unless the period is extended. the acquisition, retention and use of passenger data, Submitting a pre-merger notification to the Commissioner is and what rights do passengers have in respect of conditioned upon the payment of a fee, as determined in the their data which is held by airlines and airports? Regulations. The Commissioner shall object to a merger of companies or stipulate The Protection of Privacy Law includes rules for the safety of conditions for it if, in his opinion, there is a reasonable risk that, as personal data, which are also relevant in respect of passenger data. a result of the merger as proposed, the competition in that sector The Privacy Protection Authority is the Israeli regulatory and would be significantly harmed or the public would be harmed in one enforcing authority for personal digital information, in accordance of the following regards: with the Privacy Protection Law. The Privacy Protection Authority (1) The price level of an asset or a service. is responsible for the protection of all personal information held in digital databases. (2) The low quality of an asset or of a service. (3) The quantity of the asset or the scope of the service supplied, According to the Privacy Protection Law, the duties of the data or the constancy and conditions of such supply. holder are: The Commissioner shall publish a notice of his decision to consent ■ Prohibition from using data other than for the purpose for which the information is intended. The Law further prohibits to a merger of companies, to object to it or to stipulate conditions for the use of information about a person’s private affairs for it, in the Official Gazette and in two daily newspapers. purposes other than the purpose for which the information Should the Commissioner object to a merger of companies or was provided. stipulate conditions for it, each of the companies seeking to merge ■ Duty of information safety – the database owner, database may appeal to the Tribunal (Antitrust Court, which is part of the holder and database administrator are obligated to ensure the District Court in Jerusalem) within 30 days of the date on which the security of the data contained in the database. Commissioner’s decision is received. ■ Duty of secrecy – the owner of the database and whoever Should the Commissioner consent to a merger of companies, holds it must preserve the confidentiality of the information whether conditionally or unconditionally, any person who is to which they are exposed while performing their work. liable to be harmed by the merger, any trade association and any ■ Obligation to give notice – notice must be given to the subject consumers’ association, may appeal to the Tribunal against the of the information (the person to whom the information Commissioner’s decision, within 30 days of the date on which pertains). Such notice will include whether the information notice of the Commissioner’s decision was published in two daily owner has a legal duty to provide the information, the purpose for which the information is requested, to whom the newspapers. information will be provided, and for what purposes. The Tribunal may affirm the Commissioner’s decision, revoke it or amend it.

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The Law further requires a database owner to register the database before it is used. The registration requirements apply to databases 4.11 Is there any legislation governing the denial of meeting one of the following criteria: boarding rights and/or cancelled flights? ■ The number of subjects of information which is found in the database exceeds 10,000. The Aviation Services Law – 2012 is the legislation governing the denial of boarding rights. The law offers assistance, reimbursement ■ The database contains sensitive information. and compensation for flight delays and cancellations, as well as ■ The database includes information that was not provided by denial of boarding for flights to and from Israel. the subjects of the information. The Law is based on EU Regulation 261/2004, with adaptations ■ The database is owned by a public body.

made specifically for Israel. Israel ■ The database is used for direct mail services. The law provides passengers with remedies for delays of more than In May 2018 the General Data Protection Regulation (GDPR) came two hours, flight cancellations and denied boarding. into effect and applied enhanced obligations as to the retention and use of data of passengers in the EU. As a result, airlines and airports have In case of overbooking or any other case of denial of boarding, to adhere to the GDPR with regards to data of passengers in the EU. passengers are entitled to the following benefits: ■ Assistance services without payment, which include meals and refreshments in reasonable relation to the waiting time; 4.9 In the event of a data loss by a carrier, what hotel accommodation if an overnight stay (or longer) is obligations are there on the airline which has lost the required; transportation between the airport and the hotel; data and are there any applicable sanctions? and two telephone calls and the sending of a fax or email, at the election of the passenger. Generally, air carriers in Israel, similar to other entities which collect ■ Reimbursement of the cost of the flight ticket if the passenger data, are required by law to protect the data. The relevant law is the decides not to travel, or a replacement flight ticket to the final Privacy Protection Law – 1981. destination. The Privacy Protection Authority is the Israeli regulatory and ■ Compensation as detailed in the schedule to the Law. enforcing authority for personal digital information, in accordance The Law further authorises the court to award exemplary damages in with the Privacy Protection Law. The Privacy Protection Authority an amount that shall not exceed NIS 10,270 in several cases, including is responsible for the protection of all personal information held in where the operator has not given the required benefits to a passenger. digital databases. The legislation includes administrative and criminal enforcement, 4.12 What powers do the relevant authorities have in and applies to all entities in Israel – private, business and public – relation to the late arrival and departure of flights? that hold or process personal digital information. The Aviation Services Law states the rules for compensation and 4.10 What are the mechanisms available for the protection assistance to be given to passengers in case of late arrival or departure of intellectual property (e.g. trademarks) and other of flights. Under the said Law, the Minister of Transportation is assets and data of a proprietary nature? responsible for the execution of the Law. In addition, the Aviation Services Licensing Law enables the CAAI In Israel, intellectual property rights are protected under several not to grant an operating licence unless the applicant has undertaken laws which apply to patents, trademarks and other IP rights. to appoint a representative to assist passengers to realise their rights The Israel Patent Office (ILPO) is the authority in Israel which under the Aviation Services Law on any flight which is operated by provides legal protection of industrial intellectual property, through the applicant. the registration of Patents, Designs and Trademarks. The office is part of the Ministry of Justice. 4.13 Are the airport authorities governed by particular The granting of a right is subject to the examination of an application, legislation? If so, what obligations, broadly speaking, which ensures that the exclusivity of the protection will not harm the are imposed on the airport authorities? legal rights of the general public. The ILPO provides free bilingual databases, both in Hebrew and in Yes. The Israel Airport Authority Law – 1977 is a specific law English, regarding patents, trademarks and designs: which applies to the operation of airports in Israel. According to ■ The Patents Department handles the examination of national this Law, the obligations imposed on the airport authorities are as and international patent applications, using E-filing capabilities. follows: The ILPO receives international patent applications according ■ to hold, manage and operate Israel’s airports; and to the Patent Cooperation Treaty (PCT). ■ to act as necessary to maintain the security of the airports, ■ The Trademarks Department handles national and passengers, equipment, buildings and aircraft within airport international trademark registration applications under its premises. capacity as a Receiving Office and an Office of Origin The Law further clarifies that while fulfilling its duties, the IAA will in accordance with the Madrid Protocol, using E-filing be governed by the principles of development of air transportation, capabilities. efficiency of operation of the airports, as well as providing and ■ The Designs Department handles the registration of national maintaining the proper level of flight safety. design applications following a formal and substantive examination. It should be noted that the IAA has the authority to cease the operation of an airport for a period to be determined in advance The courts which deal with these matters are the ordinary courts or until the conditions and dates to be determined by IAA are in Israel; there are no special courts established to deal with these fulfilled, all of which is subject to the approval of the Minister of issues. Transportation.

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person who is a permanent resident in Israel and does not have a 4.14 To what extent does general consumer protection major place of business outside of Israel or an Israeli citizen who legislation apply to the relationship between the has major place of business in Israel; or (b) a corporation which airport operator and the passenger? was established in Israel, has no other main business place outside of Israel and the control of such corporation is within the hands of The Consumer Protection Law – 1981 also applies to aviation- an Israeli citizen or permanent resident in Israel. “Control” shall related matters. The Consumer Protection Law sets out the duties mean at least 50% of the control measures, equity or voting rights. of a merchant, mainly in respect of prohibition of deception, prohibition of acting using unfair influence, disclosure duties, and more. 5 In Future Israel The Consumer Protection Law states the duties in case of cancellation of a transaction (distinguishing between the different 5.1 In your opinion, which pending legislative or types of transactions). regulatory changes (if any), or potential developments The Consumer Protection Law provides the Consumer Protection affecting the aviation industry more generally in and Fair Trade Authority with powers of enforcement in relation to your jurisdiction, are likely to feature or be worthy of consumer legislation, which include, inter alia, financial sanctions attention in the next two years or so? and criminal sanctions in various matters. In the near future, there is expected to be a focus on amendments to current regulations, following lessons learned by the industry. 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? We expect an amendment to the Aviation Services Law (Compensation and Assistance due to Cancellation of a Flight) to enter into force, as there is a pending proposal for changes in the above law in front All the major GDSs operate in Israel. of the Parliament. In addition, the developments in data protection for general matters 4.16 Are there any ownership requirements pertaining to may affect the specific issues relating to passengers’ personal data. GDSs operating in your jurisdiction? As shown in recent years, consumer rights legislation will continue No, there are no ownership requirements specific to GDSs operating to be a part of many proposals for new laws and regulations, in Israel. including the consumer programmes, duties of call centres for prompt reply, and possible changes to consumer rights in case of The regular rules and requirements relating to non-Israeli companies cancellation of a transaction. which operate in Israel shall apply to GDSs, i.e. the requirement to have a registered address (office or local representative) in Israel. The Israeli Antitrust Authority published a draft amendment to No specific requirement for a percentage of local shareholders is the Restrictive Trade Practices Law – 1988 for public comments. required for such operation. The amendment includes granting the Antitrust Authority more enforcement abilities (higher financial penalties), as well as major changes to the law principally regarding restrictive arrangements, 4.17 Is vertical integration permitted between air operators mergers and monopolies. and airports (and, if so, under what conditions)? In addition, the Antitrust Commissioner published its intention to propose an amendment to the Antitrust Rules for Agreements As airports in Israel are owned by the State of Israel, the above between Air Carriers, by extending its period an additional five question of vertical integration between air operators and airports years and amending it by cancellation of the Antitrust Rules (type is not relevant. exemption for arrangements regarding marketing flights between air Legally, there is no prohibition on vertical integration between air carriers in destinations governed by Open Skies Agreements). Such operators and airports; however, the relevant competition rules shall amendment, if it comes into force, will enable the approval of any apply, including prohibition on the abuse of a dominant position and Code Sharing Agreement after self-assessment and no prior approval the monopoly rules (if such party may be considered a monopoly). of the Antitrust Commissioner will be required. As the exemption rules are due for renewal, we may see that this opportunity enables 4.18 Are there any nationality requirements for entities the Antitrust Authority to align with the competition regime in other applying for an Air Operator’s Certificate in your countries, as part of the Antitrust Authority’s intention to reduce the jurisdiction or operators of aircraft generally into and bureaucratic and regulatory burden. out of your jurisdiction?

Under the Aviation Law – 2011, the manager of CAAI shall grant an applicant an Air Operator’s Certificate only to: (a) a natural

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Omer Shalev Gross Orad Schlimoff & Co. (GOS) 7 Menachem Begin Rd. Ramat Gan 5268102 Israel

Tel: +972 3 612 2233 Email: [email protected] URL: www.goslaw.co.il Israel

Omer Shalev is the Managing Partner of Gross Orad Schlimoff & Co. (GOS). Mr. Shalev joined GOS as a Senior Partner in 2016 after a 10-year term as V.P., General Counsel & Corporate Secretary of EL AL Israel Airlines, and five years in a similar position with Arkia Israeli Airlines. Having practised law for 24 years and served for 17 years in the aviation industry, Mr. Shalev is highly specialised in aviation law. With his deep in-house experience of Israel’s largest airlines, and a broad perspective on how airlines work from the inside, Mr. Shalev brings a unique insight and legal perspective on the challenging airline sector in Israel. Mr. Shalev also specialises in directors and officers’ liability (D&O) insurance claims and various corporate and commercial matters. Mr. Shalev served as a member of the Legal Committee of the International Air Transport Association (IATA) for several years, and also served as Vice Chairman of the Legal Committee, and thus has in-depth experience in international aviation and the ability to understand key issues for the industry.

Gross Orad Schlimoff & Co. (GOS) is a boutique law firm specialising in insurance/reinsurance, aviation and commercial law. GOS has a solid reputation in representing foreign companies doing business in Israel, as well as local companies operating internationally. Apart from GOS’s best known practice for insurance and reinsurance matters (mostly Directors & Officers, Financial Institutions, Professional Indemnity & Cyber Insurances), for which GOS was rated by The Legal 500 as a “Top Tier Insurance Firm in Israel”, GOS has expertise and reputation in aviation law and also represents international pharmaceutical companies in Israel. GOS provides legal services to airlines and companies in matters relating to aviation and tourism law, which include, inter alia, legal consulting on various aviation law, aviation security and aviation regulatory issues. GOS also specialises in aviation litigation, and represents airlines and insurers of air carriers in claims (litigation) filed in the relevant courts in Israel.

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Italy Laura Pierallini

Studio Pierallini Francesco Grassetti

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

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

either operated for private or commercial flights. Air traffic control of non-scheduled services). Most of those rules, especially the ones Italy is entrusted to ENAV. concerning charter flights within the EU, have been superseded by Italy applies the international rules issued by the International EU regulations, international conventions and treaties, as well as Civil Aviation Organization (ICAO), the European Aviation Safety national laws (see below). Agency (EASA), EU-OPS as provided by article 2 of EC Regulation In particular, with regard to air charters within the EU, the same are no. 1899/2006 amending Council EC Regulation no. 3922/1991 on operated in the “open skies” regime (i.e. relevant authorisation is the harmonisation of technical requirements and administrative granted to EU air carriers subject to slot availability). procedures in the field of civil aviation, as well as all the European According to article 787 of the Italian Navigation Code (headed regulations. “Non-scheduled air services ungoverned by international ENAC issues its own circulars and regulations to implement and agreements”), extra-EU non-scheduled air services are authorised further clarify the international rules mentioned above. ENAC is by ENAC, on a reciprocal basis, to carriers holding an EU air also responsible for the regulation of crew skills assessments. transport licence and to carriers of the country to/from which the Italy has implemented all the EU rules related to air safety (in flight operations are performed. Then the last paragraph ofthe particular, EC Regulation no. 216/2008, EU Regulation no. 965/2012, subject article defers to ENAC the ruling of these air services, which EU Regulation no. 748/2012, EU Regulation no. 1321/2014, EU are indeed governed by the ENAC Regulation named “Discipline Regulation no. 800/2013 and EU Regulation no. 1199/2016). of extra-EU non-scheduled air services” of 24 April 2007. Article 3 thereof specifies that “non-scheduled” flights include: ITC (i.e. inclusive tour charter flights); those related to special events; private 1.4 Is air safety regulated separately for commercial, use; transport of mail or freight; transport of dangerous goods; taxi cargo and private carriers? services; and emergency and humanitarian aid.

In general, safety requirements governing commercial and private A right of objection for charter flights operated in the so-called “fifth flights are the same. They cover the technical requirements of aircraft, freedom regime” is granted to Italian air carriers. air traffic control and public safety requirements. The differences relate to administrative, organisational and financial regulations. 1.6 As regards international air carriers operating in your On 31 October 2011, ENAC issued Circular Nav. 70-C on the jurisdiction, are there any particular limitations to be continuing airworthiness management organisation approval aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, certificate (CAMO) for commercial air transport operations. With restrictions and taxes which apply to international but respect to private operations, ENAC Circular Nav. 71-B provided not domestic carriers. that operators which do not perform commercial air transport must obtain the continuing CAMO when the aircraft have a weight of more No restrictions are provided for EU air carriers to operate to than 5,700 kg or meet certain other specifications. Subsequently, and from Italy, provided that they submit an application to the ENAC has cancelled the said Circulars as the relevant contents are local coordinator in charge of the allocation of slots according to now covered by EU Regulation no. 965/2012 and EU Regulation international rules provided by IATA conferences (clearance), EEC no. 1321/2014. Regulation no. 95/93, as amended by EC Regulation no. 793/04, as The criteria to determine whether the operations constitute well as Circular EAL-18 issued by ENAC on 24 August 2009. commercial operations rather than private operations are outlined Furthermore, domestic cabotage is allowed to EU carriers subject by the ENAC Regulation dated 21 October 2003 (and following to slot availability and compliance with the requirements set out amendments) and ENAC Regulation dated 30 June 2003. Such by EC Regulation no. 1008/2008 (Air Operator Certificate and Air regulations provide, in relation to aircraft use, a general distinction Transport Licence), as well as with article 38 of Law Decree no. between: 179/2012 (converted into law by Law no. 221/2012). Licensed EU ■ commercial air transport operations, which include scheduled, carriers are entitled to apply to ENAC for the designation on extra- charter and taxi flights, both passenger and cargo; EU routes to/from Italy provided that they hold a stable organisation ■ aerial work operations, which include, among others, aerial within the Italian territory pursuant to article 7 of ENAC Circular photography, advertisement, surveillance, fire prevention and EAL-14B (see question 1.10 below). emergency services; and Extra-EU air carriers wishing to operate flights to and from Italy ■ general aviation operations, which include private aircraft according to traffic rights set out in either bilateral or multilateral air use and activities carried out by, among others, flying clubs services agreements, have to be designated by the state holding the and flying schools. traffic rights. If no air services agreement is in force, the schedule can The private use of aircraft must correspond to the statement rendered be authorised only upon prior request submitted by the Civil Aviation by the aircraft’s captain to ENAC on landing. Such statement is Authority of the country of origin of the extra-EU air carrier. subject to control by ENAC. The private use of aircraft must be free of charge.

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International air carriers are authorised to operate to/from Italy – on a to immediately provide relevant rescue and assistance, whilst also reciprocal basis – under certain “open skies” air transport agreements requesting the cooperation of other authorities, if appropriate. in place between the relevant countries, such as the agreements signed ENAC has also issued Circular APT-18A, regulating the airport by the European Union with the United States (2007), Morocco emergency plan in case of air accidents. (2006), Israel (effective from 2018) and Ukraine (effective from 2015). ENAC is also responsible for verifying that any air carriers – either Any change to existing authorisations (including but not limited EU or extra-EU and providing either commercial or private services to any change to the Air Operator Certificate) has to be notified to – operating to and from Italy comply with the EC Regulation no. ENAC for assessment and consequent actions pursuant to ENAC 785/2004 on insurance requirements for air carriers and aircraft rules (Circular EAL-15A dated 5 December 2016). operators. Italy There are no taxes applied exclusively to international air carriers but not to domestic air carriers. 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving 1.7 Are airports state or privately owned? air operators and/or airports?

Most of the Italian commercial airports are state-owned and managed On 16 July 2015, ENAC issued a new Regulation on remotely piloted under concessions granted by the state to private companies, according aerial vehicles (RPAVs, also called “drones”), which supersedes the to article 2 of Ministerial Decree no. 521 dated 12 November 1997. previous Regulation of 2013 on the same matter. Such airport managing companies can be public entities, such as The preliminary distinction made by ENAC is between “remotely regional, provincial, municipal or other local public entities (e.g. the piloted aircraft systems” (RPAS, highly regulated and subject to the chamber of commerce). A notable exception is Aeroporti di Roma applicable provisions of the Italian Navigation Code) and “model S.p.A., the managing company of Rome Airports (FCO and CIA), aircraft” (so-called aeromodelli, exclusively used for recreational which is entirely owned by private shareholders. There are many and sport purposes and exempted from the Code provisions). private airports devoted to activities such as general aviation, flying RPAS are classified on the basis of the maximum take-off weight schools, parachuting, etc. (MTOW less than 25 kg / MTOW equal to, or more than 25 kg) and can be used for special operations or research and development activities. 1.8 Do the airports impose requirements on carriers Furthermore, flight operations are distinguished in VLOS (“visual flying to and from the airports in your jurisdiction? line of sight”, i.e. operations within vertical and horizontal distances which allow the remote pilot to keep a continuing view of the RPAS, Air carriers, either EU or extra-EU, must comply with the specific without the assistance of visual instruments) and BLOS (“beyond rules (the so-called Regolamento di Scalo) provided by the airports line of sight”, i.e. operations beyond certain distances which do not to and from where they decide to operate. The airports set out such allow a continuing view of the RPAS by the remote pilot). All RPAS rules in accordance with the general guidelines provided by ENAC must have a flight manual (or equivalent) and their pilots must be under Circular APT-19. certified by ENAC. The Regulation also establishes a mandatory third-party insurance for any kind of flight operations performed Moreover, air carriers must fulfil airport duties, as well as landing with RPAS (in compliance with EC Regulation no. 785/2004) and and take-off charges imposed by the relevant airport under ENAC subordinates the treatment of personal data collected by means of surveillance. In that respect, according to article 802 of the Italian RPAS to the Italian Data Protection Code (Legislative Decree no. Navigation Code, ENAC is entitled, upon the request of the airport 196/2003). Particular provisions are also established on the basis authorities and/or ENAV, to deny authorisation to aircraft taking off of the MTOW. from Italian airports as long as airport taxes and duties, as well as air navigation charges, are outstanding. 2 Aircraft Trading, Finance and Leasing 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place 2.1 Does registration of ownership in the aircraft register which need to be adhered to? constitute proof of ownership?

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

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ENAC. The mortgage is then recorded by ENAC on both the the transfer of title has occurred; and the importation of an aircraft is National Aircraft Registry and the Certificate of Registration of the VAT-exempt if the same is made by an airline operating chiefly for relevant aircraft. rewards on international routes. There are no public registries of aircraft charges; neither are these recorded with the Italian Aircraft Registry. 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)? 2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation? Italy is party to the Montreal Convention dated 28 May 1999 (Convention for the Unification of Certain Rules for International Italy Aircraft operation in Italy is subject to the surveillance of ENAC, Carriage by Air), which has been ratified by Italian Law no. 12 dated th regardless of where relevant aircraft are registered and whether or January 2004 and entered into force on the 60 day (28 June 2004) th not they are owned by the operator. If an aircraft operated in Italy is after the 30 ratification. registered with a foreign registry, the Civil Aviation Authority of the Italy is also party to the Geneva Convention of 19 June 1948 on state of registration shall delegate surveillance of the aircraft to ENAC. the International Recognition of Rights in Aircraft and has signed, In compliance with article 83bis of the ICAO Convention, ENAC but not yet ratified, the Cape Town Convention on International grants Italian carriers authorisation to operate aircraft registered in Interests in Mobile Equipment together with the relevant Aircraft a foreign registry, subject to the existence of an agreement between Equipment Protocol. Italy and the state of registration, regulating the of Due to the fact that the Cape Town Convention has not yet been functions and duties of surveillance over the operations, crews and ratified in Italy, the interests on aircraft are regulated by the Italian continuing airworthiness of such foreign aircraft. To date, ENAC Civil Code, the Italian Navigation Code and the Geneva Convention. has executed such agreements with the following states: Austria; Denmark; Germany; Ireland; Lithuania; Luxembourg; Malta; 2.7 How are the Conventions applied in your jurisdiction? Poland; Portugal; Slovenia; Spain; Sweden; and Switzerland. In the absence of an agreement, the authorisation can be granted on a case- Conventions are applicable in Italy subject to ratification by way by-case basis. of a national law. Upon ratification, conventions are applied under Please refer to question 3.1 below with regard to rights of detention Italian jurisdiction equally to national laws. available under the Italian system in relation to aircraft.

2.8 Does your jurisdiction make use of any taxation 2.4 As a matter of local law, is there any concept of title benefits which enhance aircraft trading and leasing annexation, whereby ownership or security interests (either in-bound or out-bound leasing), for example in a single engine are at risk of automatic transfer access to an extensive network of Double Tax Treaties or other prejudice when installed ‘on-wing’ on an or similar, or favourable tax treatment on the disposal aircraft owned by another party? If so, what are the of aircraft? conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks? Italy has entered into Double Taxation Treaties providing for reduced rates or exemption for withholding taxes on lease rents. For instance the DTT with the United States establishes a reduced rate at 5%; Under Italian law, if an engine is installed “on-wing” on an aircraft under the DTT with the United Kingdom the rate is reduced at 8%; that is owned by a different entity, the engine does not cease to be the DTTs with Ireland and Austria recognise a full exemption; in all the property of the titleholder and the latter maintains the right to instances under the condition that the lessor is not a resident in Italy require the separation of the engine from the aircraft. The title in the for tax purposes and is the actual beneficiary of the payments. engine can be enforced against third parties (including the owner of the host aircraft) only when they result from a formal legal document (e.g. purchase agreement or lease agreement) bearing data certa (i.e. 3 Litigation and Dispute Resolution undisputable date – an Italian legal concept – which can be obtained, for example, through a notarisation or a post seal on the document) or from the registration certificate of the aircraft. 3.1 What rights of detention are available in relation to aircraft and unpaid debts?

2.5 What (if any) are the tax implications in your The Italian courts may order the detention of any Italian or foreign jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), aircraft for unpaid charges provided under article 6 of Law no. 324 and b) documentary taxes such as stamp duty; and dated 5 May 1976, which states that the owner of the aircraft and (to the extent applicable) do exemptions exist as its operator are jointly liable for the payment of rights, taxes and regards non-domestic purchasers and sellers of interests to airports. aircraft and/or particular aircraft types or operations? An aircraft can also be detained pursuant to article 1023 of the Italian Navigation Code, which provides certain statutory preferred Generally speaking, the transfer of an aircraft title may attract liens on aircraft by cause of their operation. Italian taxes if: (i) the seller and/or the buyer are tax resident in Italy; (ii) the relevant aircraft is registered in the Italian Aircraft Moreover, according to article 802 of the Italian Navigation Code, Registry; and/or (iii) the aircraft is located in Italy at the time of ENAC is entitled, upon request of airport authorities and/or ENAV, the transfer. Having said so, specific exemptions may apply on a to deny authorisation to aircraft taking off from Italian airports as case-by-case basis, for instance: the transaction is VAT-exempt if long as airport taxes and duties, as well as air navigation charges, an aircraft is exported from the Italian territory within 90 days after are outstanding.

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

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The three levels of jurisdiction are: 4.3 Does your jurisdiction have a notification system First Instance whereby parties to an agreement can obtain , who is competent for civil disputes of a value regulatory clearance/anti-trust immunity from below EUR 5,000, and Tribunale, where the deciding body is a regulatory agencies? single professional judge. Appeal Article 16 of the Italian Competition Act provides for a mandatory pre-merger notification of concentrations meeting the turnover Court of Appeal, where the deciding body is a panel of three judges: thresholds (see question 4.4 below). the Court of Appeal reviews the first instance decision by reference to points of fact and law. The notification must be filed with the Italian Competition Authority Italy before the transaction takes place (that is, before the acquiring entity Supreme Court can substantially influence the target entity’s behaviour). The Corte Suprema di Cassazione is based in Rome, with The notification must be submitted after the parties to the transaction jurisdiction over the whole territory. This is the highest court of have reached an agreement on the essential aspects of the transaction. the judicial system and ensures the precise application and uniform interpretation of the law. It decides conflicts of competence between For acquisitions of control of an undertaking, the requirement to the lower courts, and conflicts of jurisdiction. It also has the power file before the transaction takes place is considered fulfilled if the to re-examine decisions on appeal from the lower courts, but only implementation of the agreement is made conditionally on the on points of law. It is a collegial body and decides with a college of Italian Competition Authority’s approval. five judges. It has three civil divisions and hears cases of particular importance in joint session. 4.4 How does your jurisdiction approach mergers, Under the Italian system, a dispute can also be deferred by the acquisition mergers and full-function joint ventures? relevant parties to an arbitration procedure (unless the arbitration is expressly excluded by law for the specific topic of the dispute), Mergers, acquisition mergers and full-function joint ventures are governed by articles 806 to 840 of the Italian Civil Procedure Code. subject to compulsory notification if the turnover thresholds – The parties can either choose arbitration by a written agreement established by Law no. 287/1990 and subject to yearly indexation once the event giving rise to the dispute has already occurred (so- – are met. Generally speaking, a concentration that does not have a called compromesso) or, alternatively, provide a general arbitration Community dimension under article 1 of the EU Merger Regulation clause under any agreement they enter into. must be filed with the Italian Competition Authority when the Pursuant to article 818 of the Code, arbitrators cannot grant interim following turnover thresholds are met: (i) the aggregate Italian and precautionary measures (e.g. seizures), which stay with the turnover of all the involved undertakings exceeds EUR 492 million; competence of the ordinary courts. and (ii) the Italian turnover of one of the involved undertakings exceeds EUR 30 million (such thresholds are amended on a yearly Final awards can be appealed before the ordinary judge (Court of basis by resolution of the Italian Competition Authority). Upon Appeal), except when it is expressly excluded by the agreement such filing, the Italian Competition Authority is called to grant between the parties. clearance of the specific operation assessing whether or not it may cause potential detriment or a decrease in competition within the 4 Commercial and Regulatory relevant business field.

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

Joint ventures between airline competitors are subject to the general The procedure which the Italian Competition Authority follows for competition rules applied by the regular competition authority, evaluating concentrations consists of two separate phases. namely the Autorità Garante della Concorrenza e del Mercato. First phase: under article 16(4) of the Italian Competition Act, The regulatory framework is provided for by Italian Law no. 287 of within 30 days of receiving the notification (or of being informed of 10 October 1990 (the Italian Competition Act), which is the main the concentration by any other means where the parties have failed reference since it establishes the Italian Competition Authority. The to notify), the Italian Competition Authority must either: (i) clear Italian Competition Act specifies that its substantive provisions the transaction if an investigation is not necessary, and immediately must be interpreted in accordance with the principles of the EU. inform the notifying parties; or (ii) commence a second-phase investigation, if the transaction raises competition concerns. 4.2 How do the competition authorities in your The 30-day time limit is reduced to 15 days in the case of public jurisdiction determine the “relevant market” for the takeover bids. If the information provided in the notification is purposes of mergers and acquisitions? inaccurate, incomplete or untrue, the Italian Competition Authority can request clarification of the information provided and suspend In the aviation sector, the Italian Competition Authority has the 30-day time limit until the parties respond to that request. distinguished between the charter and scheduled flight markets. Second phase: under articles 16(8) and 18 of the Italian Competition For charter flights, the geographical market is divided into long- Act, if the Italian Competition Authority decides to open an haul routes and medium- or short-haul routes that are then divided investigation, it must notify the undertakings concerned, within 45 between European countries and the Mediterranean Sea. The days of commencing that investigation, whether it has decided to: (i) relevant market for scheduled flights is defined on the basis of the prohibit the concentration; (ii) clear the concentration unconditionally; single routes operated point-to-point or city-pair by air carriers (iii) clear the concentration subject to commitments offered by the involved in a competition assessment. undertakings which remove any aspects of the concentration that

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were initially deemed likely to distort competition; or (iv) clear the concentration subject to measures prescribed by the Italian 4.8 What are the main regulatory instruments governing Competition Authority to prevent the creation or strengthening of the acquisition, retention and use of passenger data, and what rights do passengers have in respect of a dominant position. their data which is held by airlines and airports? The 45-day period can be extended during the course of the investigation, for a further period of no more than 30 days, in cases The acquisition, retention and use of passenger data are governed by where the undertakings concerned fail to provide information and the provisions set forth by Legislative Decree no. 196/2003 (Data data in their possession upon request. Protection Code) and by Regulation (EU) 2016/679 (General Data As far as costs of notification are concerned, the amount of the Protection Regulation). Italy notification depends on the total value of the transaction, which Pursuant to article 13 of the General Data Protection Regulation is adjusted to take into account the ratio between the Italian and the data subject shall have the right to obtain from the controller the worldwide turnover of the target. At present, the notification confirmation as to whether or not personal data concerning him or fee has been set by the Italian Competition Authority at 1.2% of her are being processed, and, where that is the case, access to the the transaction value, with a minimum limit of EUR 3,000 and a personal data and the following information: (a) the purposes of the maximum of EUR 60,000. processing; (b) the categories of personal data concerned; (c) the recipients to whom the personal data have been or will be disclosed; 4.6 Are there any sector-specific rules which govern the (d) where possible, the envisaged period for which the personal data aviation sector in relation to financial support for air will be stored, or, if not possible, the criteria used to determine that operators and airports, including (without limitation) period; (e) the existence of the right to request from the controller state aid? rectification or erasure of personal data or restriction of processing of personal data concerning the data subject or to object to such General state aid rules provided by the EC Treaty apply to the processing; (f) the right to lodge a complaint with a supervisory aviation sector in Italy. No sector-specific provisions regulating authority; (g) where the personal data are not collected from the direct or indirect financial support to individual companies by the data subject, any available information as to their source; and (h) government or government-controlled agencies or companies exist. the existence of automated decision-making, including profiling, The main principles of the state aid rules are contained in article 107 and meaningful information about the logic involved, as well as the of the Treaty on the Functioning of the European Union (TFEU). significance and the envisaged consequences of such processing for Pursuant to article 107, any aid granted by the state or through state the data subject. resources in any form whatsoever is incompatible with the common market when it distorts or threatens to distort competition by 4.9 In the event of a data loss by a carrier, what favouring certain undertakings or the production of certain goods. obligations are there on the airline which has lost the Most of Italy’s local airports are controlled by public entities and, data and are there any applicable sanctions? therefore, their management and financing is subject to EU state aid rules as outlined under: (i) Communication 2005/C 312/01 of the Article 15 of the Data Protection Code – combined with article 2050 Community (guidelines on financing of airports and start-up aid to of the Italian Civil Code – provides a strict liability, and relevant airlines departing from regional airports) and subsequent European indemnity obligation, for anyone (including air carriers) causing Commission Communication 2014/C 99/03; and (ii) the guidelines damages through the treatment of personal data (including the event published by the Italian Ministry of Transport on 2 October 2014 of data loss), except if satisfactory evidence is given that all suitable in respect of support for air carriers in starting up and developing measures to avoid such damages have been taken. air routes. 4.10 What are the mechanisms available for the protection 4.7 Are state subsidies available in respect of particular of intellectual property (e.g. trademarks) and other routes? What criteria apply to obtaining these assets and data of a proprietary nature? subsidies? Intellectual property rights are protected under the Italian Intellectual According to article 782 of Italian Navigation Code, the Italian Property Code (Legislative Decree no. 30/2005). The Public Body government may impose public service obligations to guarantee the with authority over intellectual property rights is the Italian Patents right of mobility provided by article 16 of the Italian constitution. and Trademarks Office (Ufficio Italiano Brevetti e Marchi), which The Italian government may impose public service obligations in holds public registries for, inter alia, trademarks, patents and utility respect of domestic scheduled air services serving a peripheral or models. developing region or on a thin route to any regional airport, when As far as the judicial protection of intellectual property rights is such route is considered vital for the economic development of concerned, a specialised division of the Tribunal (the so-called the region in which the airport is located. Such rules imposed Sezione Specializzata Proprietà Industriale ed Intellettuale) by the Italian government are consistent with the European legal has been established by Legislative Decree no. 168/2003, as framework established by articles 16, 17 and 18 of EC Regulation subsequently amended and updated. no. 1008/2008 for public service obligations, the related public tender procedures and the examination by the authorities on how such obligations are performed by the awarded carriers. 4.11 Is there any legislation governing the denial of boarding rights and/or cancelled flights?

The provisions set forth by EC Regulation no. 261/2004 are directly applicable and enforceable in the Italian jurisdiction.

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The Italian Parliament has issued Legislative Decree no. 69/2006, implementing fines for breach of the mentioned EC Regulation no. 4.18 Are there any nationality requirements for entities 261/2004. applying for an Air Operator’s Certificate in your jurisdiction or operators of aircraft generally into and out of your jurisdiction? 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? Yes, holding an Air Operator Certificate is among the requirements to obtain an Operating Licence. Pursuant to article 4 of Regulation (EC) Italian Legislative Decree no. 69/2006 of 27 January 2006 empowers 1008/2008 an entity can be granted an Operating Licence provided ENAC to issue fines towards national and European air carriers that, inter alia, Member States and/or nationals of Member States Italy which are in breach of rules under EC Regulation no. 261/2004 rules own more than 50% of the same entity and effectively control it, relating to assistance to passengers in case of, inter alia, late arrival whether directly or indirectly through one or more intermediate entity. and departure of flights. 5 In Future 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments The airport authorities are governed by the provisions set forth affecting the aviation industry more generally in in the Italian Administrative Procedure Act (Law no. 241 dated your jurisdiction, are likely to feature or be worthy of 7 August 1990), applicable to the Italian administration bodies. attention in the next two years or so? Consequently, the airport authorities are required to ensure that their actions conform to the principles of transparency and participation Recently the Italian Supreme Court rendered a decision (no. 9912) and to the equal protection opportunities provided for therein. to affirm that Alitalia shall be entitled to have sight of the contracts entered into between Ryanair and the managing companies of four Italian airports in 2009 and 2014, namely Alghero, Bari, Trapani and 4.14 To what extent does general consumer protection Verona. The long-awaited ruling, which essentially overturned the legislation apply to the relationship between the previous judgments given by the Italian Administrative Courts to airport operator and the passenger? deny the Alitalia’s claims, established important case-law in relation to the contracting activity of airports’ management companies with General consumer protection applies to the relationship between low-cost carriers and, in particular, with Ryanair, being the first the airport operator and the passenger to the extent that the airport airline operating in Italy in terms of carried passengers on national operator directly provides goods/services to the passenger against and international routes (36 million in 2017). Indeed the Irish carrier consideration. In that respect, each year the managing company is believed to benefit from significant aid from local airports, which of any Italian airport must issue an updated list of the services are attributable to considerable financing from the local entities to (so-called carta dei servizi) provided within the respective airport the carrier. In return, on the one hand the airports took advantages facilities, which sets out the mandatory quality standards to be from advertisement campaigns and promotional activities and, on complied with in rendering those services. the other hand, the involved regions can enjoy a huge increase of tourism and business connections in their territories. 4.15 What global distribution suppliers (GDSs) operate in The relationship between local airports and low-cost carriers is your jurisdiction? estimated to value more than €100 million per year. In this respect, Alitalia had argued that the disputed practice would affect the The following global distribution suppliers (GDSs) operate in Italy: playing field between competitors, conferring a ‘non-commercial’ Abacus; Amadeus; Galileo; KIU; Patheo; Sabre; and Worldspan by benefit to the low-cost carriers, which, due to such aids, could offer Travelport. lower fares to customers. On the other hand, the Italian airports’ line of argumentation was entirely based on the fact that such agreements 4.16 Are there any ownership requirements pertaining to have become common practice for mid-size and small local airports GDSs operating in your jurisdiction? throughout Europe, and they would fall within the broader structure of the so-called ‘co-marketing’ agreements. However, according to The operations of GDSs in Italy are governed by the provisions set the Supreme Court these contracts are not private agreements, but, forth in EC Regulation no. 80/2009. instead, even if entered into between private operators they must be considered as public documents relating to commercial interests of the administrative local entities. As a result, accepting Alitalia’s 4.17 Is vertical integration permitted between air operators arguments, the Court found that the claimant shall be permitted to and airports (and, if so, under what conditions)? have full and unconditioned access to the agreements concluded by the mentioned airports with Ryanair. Generally speaking, vertical integration between air operators and The decision at hand represents an important turning point for the airports is permitted under the Italian system, always provided that, fierce competition between carriers in regional markets, as well as a when the airport is state-owned, the relevant purchase transaction significant precedent to be used for having access to contracts with shall be carried out via a public tender procedure (regulated by other low-cost carriers. Legislative Decree no. 50/2016, which implemented European Directives no. 2014/24/UE and no. 2014/25/UE).

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

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

Laura Pierallini, founder and named partner of the Firm, spent Francesco Grassetti is a senior lawyer in the aviation team and has several years in the legal and tax department of the Arthur Andersen a significant experience in the whole range of regulatory and legal Worldwide Organisation and, from 2001 to 2005, was the managing advice. Francesco is enrolled at the Bar Association of Rome and, partner of the international law firm Coudert Brothers in Rome. before joining Studio Pierallini in 2011, he worked for reputable commercial law firms in the US and Italy. She is a professor of Commercial Law and Air Law at the LUISS University of Rome. He assists clients in connection with purchase, sale, leasing and financing transactions of commercial aircraft and helicopters, including Ms. Pierallini has practised aviation law since 1988, providing expert single aircraft and multi-aircraft portfolios. He also focuses his practice advice to clients across the whole of the international aviation sector, on the business and private jet market, providing a full range of including aircraft finance and leasing, litigation and dispute resolution, assistance to the industry (mainly to banks, lessors, owners, operators employment and corporate issues. Her clientele include Italian and and manufacturers), such as structuring and finalising cross-border foreign airlines, manufacturers, lessors, financiers, airports, handlers deals, perfection of securities over aircraft objects, filings with civil and travel agents. She also assists her clients in regulatory matters, aviation authorities and the international registry under the Cape Town including advisory services and representation before governmental Convention, aircraft operation and management, enforcement issues agencies, having continuous contact with the Civil Aviation Authorities, and local taxes. mainly in Italy and the European Union, but also abroad. In addition, Francesco provides airlines, business operators and other Ms. Pierallini regularly attends and organises conferences on aviation, players of the aviation sector with a variety of support services, dealing presenting speeches and moderating panels at various Italian and on a regular basis with the negotiation and finalisation of sector international symposia (in particular organised by the International contracts (transport, charter, dry-lease and wet-lease, management, Air Transport Association (IATA), the European Air Law Association maintenance, ground handling, supply, licensing, consulting) and (EALA), the European Aviation Club (EAC), the International Bar regulatory advice in respect of the Italian jurisdiction and the European Association (IBA) and Assaereo). Ms. Pierallini is also a committee Union (authorisations and licences, traffic rights, slots, competition, member of the European Air Law Association (EALA), and a member data privacy, consumer protection). of the International Aviation Women’s Association (IAWA) and the European Aviation Club (EAC). Furthermore, Mr. Grassetti advises clients in all aspects of corporate and commercial law, including relations with customers, suppliers She is named as a leading lawyer by several guides, including: Expert and business partners, legal compliance, corporate governance, Guides – Aviation Lawyers; Expert Guides – Women in Business Law; intellectual property protection, preparation of all types of commercial Who’s Who Legal – Transport (Aviation Finance; Aviation Regulatory; agreements, acquisition and management of assets, production and Aviation Contentious); and The Legal 500 EMEA. distribution issues. Ms. Pierallini was shortlisted as “Best Aviation Lawyer” for the Europe He is a regular attendee at aviation conferences worldwide and Women in Business Law Awards in 2015, 2016, 2017 and 2018 and contributes to international publications on aviation law. recognised as Thought Leader of Aviation by Who’s Who Legal Expert Guide of 2018.

Studio Pierallini is a multidisciplinary law firm based in Rome and Milan. The Firm has acquired a global and recognised reputation in aviation for over 20 years, providing expert advice to clients across the whole of the international aviation sector, including aircraft finance and leasing, litigation and dispute resolution, employment and corporate issues. The Firm also assists clients in regulatory matters, including advisory services, assistance and planning in connection with representation before governmental agencies, having continuous contact with the Civil Aviation Authorities, mainly in Italy and the European Union, but also abroad. Our clientele includes Italian and foreign airlines, manufacturers, lessors, financiers, airports, handlers and travel agents. In the context of the most important transactions involving airlines ever carried out in the Italian market, the Firm has recently advised the leading carrier Qatar Airways in connection with the purchase of a 49% stake in the Italian airline Meridiana. Moreover, the Firm has extensive experience in corporate and commercial law. It offers integrated teams of professionals focused on drafting and negotiating across all areas of commercial contracts, as well as on structuring and completing joint ventures, strategic alliances, spin-offs and corporate restructuring. In M&A transactions, the Firm is competent to deal principally with the following issues: performing pre- and post-acquisition due diligence works; advising on corporate, employment, IP, tax and litigation issues; setting up the structure of companies; pre- and post-merger notification with the Italian Antitrust Authority; and all other legal and regulatory issues. Studio Pierallini has also advised Italian airlines and airport handlers in bankruptcy and insolvency procedures. The Firm has been named for many years as aviation law firm of the year in Italy by the most important publications focused on the aviation sector. The Firm is also a member of the European Business Aviation Association (EBAA).

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Japan

Mori Hamada & Matsumoto Hiromi Hayashi

and do not include airport terminals and car parks. A unique 1 General aspect in Japan is that, in many airports, airport terminals and car parks were constructed and are owned and managed by a private entity or a “third sector” entity, i.e., a company jointly 1.1 Please list and briefly describe the principal owned by a local government and private entities. This is legislation and regulatory bodies which apply to and/ one reason for the enactment of the Airport Concession Act. or regulate aviation in your jurisdiction. Please also see question 1.10. The airport operator (kuukou kanrisha) under the Airport Act The principal regulator of aviation is the Ministry of Land, is essentially the national government or local government Infrastructure, Transport and Tourism (the “MLIT”). Separate which owns and manages airports. It must submit to MLIT bureaus regulate specific areas relating to transportation, such the MLIT prior notification of the landing fees and other as by air, road, railway, and water. The MLIT bureau regulating fees to use the runways or relevant facilities. If the MLIT aviation is the civil aviation bureau (koukuu kyoku). determines that such fees are (i) discriminatory, or (ii) The principal laws regulating aviation in Japan are described below. extremely inappropriate, and the use of the airport is likely to be extremely limited, the MLIT may issue an order to the A. The Civil Aeronautics Act (Koukuu Hou) airport manager to change the fees (Airport Act, Article 13). The purpose of the Civil Aeronautics Act is to ensure the C. The Aircraft Mortgage Act (Koukuki Tetitou Hou) safety of aircraft and develop aviation by establishing order in the aviation business. This law is based on the Convention Under the Aircraft Mortgage Act, certain aircraft registered on International Civil Aviation (Chicago Convention) and its pursuant to the Civil Aeronautics Act can be subject to Annexes. security interests. Please see question 2.2. The Civil Aeronautics Act comprises 11 chapters. Chapters 1 D. The Aircraft Manufacturing Industry Act (Koukuki to 6 and 9 to 11 apply to both commercial aviation and general Seizou Jigyou Hou) aviation. Their provisions include: aircraft registration The Aircraft Manufacturing Industry Act provides that (Chapter 2); aviation safety such as airworthiness (Chapter 3); the manufacture and repair of certain aircraft and aircraft qualifications of airmen (Chapter 4); designation, permission apparatuses requires a permit for each factory from the and management of airways and establishment of airports Ministry of Economy, Trade and Industry (“METI”), and and air navigation facilities (Chapter 5); requirements for must be carried out by methods approved by the METI. operating aircraft (Chapter 6); requirements for operating E. Others unmanned aircraft vehicles (Chapter 9); and penalties for The Act for the Establishment of the Japan Transport Safety violations of this law (Chapter 11). Chapter 7 regulates Board (Unyu Anzen Iinkai Secchi Hou) established the said commercial aviation such as the aviation transport business board to investigate aircraft accidents, including their causes. and businesses using aircraft (please see question 1.2 below). The board also implements measures necessary to prevent Chapter 8 regulates aircraft registered outside Japan and such accidents. Please see question 1.9. businesses conducted by foreign entities. The Act on the Prevention of Damage caused by Aircraft Certain provisions of the Civil Aeronautics Act do not apply Noise in Areas around Public Airports regulates noise to aircraft used by, airmen employed by, and airports and air problems caused by aircraft. navigation facilities established by the Japan Self Defence Forces (Jieitai) (Act on Self Defence Forces, Article 107). Similarly, there is an exception for U.S. forces stationed in 1.2 What are the steps which air carriers need to take in Japan (Agreement Under Article VI of the Treaty for Mutual order to obtain an operating licence? Cooperation and Security between Japan and the United States of America, regarding Facilities and Areas and the A. Aviation Transport Business (Koukuu Unsou Jigyo) Status of United States Armed Forces in Japan). The aviation transport business is the business of transporting B. The Airport Act (Kukouu Hou) persons or cargo by aircraft for a fee (Civil Aeronautics Act, Under the Airport Act, the MLIT is in charge of policy- Article 2, Item 18). making for establishing and managing airports in Japan. With A permit from the MLIT is required to start an aviation a few exceptions, airports in Japan were built and are owned transport business (Id., Article 100, Paragraph 1). The and managed directly by either the national government or application for a permit must state the applicant’s name and the local governments. Airports mean basic aeronautical address, the name of its representative director, items to be facilities such as runways, aprons and navigation facilities, transported by aircraft, maintenance, and the total amount and

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details of funding and financing (Id., Article 100, Paragraph ii. Requirements regarding the aviation business 2). The MLIT will examine whether the business plan is In addition to permits to start an aviation transport suitable to ensure transport safety, whether the applicant is business or a business using aircraft, the conduct of competent to conduct the aviation transport business, and an aviation business is subject to requirements. Any whether the applicant is disqualified on grounds listed in the domestic air carrier and any operator of a business using Civil Aeronautics Act (Id., Article 101, Paragraph 1). This aircraft must pass the MLIT’s inspections on facilities to business is closed to foreign entities and persons. Please see ensure the safety of aircraft operation, including facilities question 1.6. to manage, operate, and maintain aircraft (Id., Articles The application fee is JPY 150,000 and the standard 102 and 124). Any domestic air carrier must have a processing period is two to four months after the MLIT has manual regarding the operation and maintenance of its Japan received all necessary documents. aircraft, which manual must stipulate the matters specified The holder of an aviation transport business permit is referred by applicable MLIT ordinances and be approved by the to as a domestic air carrier (honpou koukuu unsou jigyosha). It MLIT (Id., Article 104). is subject to mandatory inspection by the MLIT in connection iii. Enforcements with its facilities to control, operate and maintain its aircraft The MLIT may: (i) request persons engaging in the and air transport business, and cannot operate or maintain the manufacture or maintenance of aircraft, airmen, domestic aircraft if it fails the inspection (Id., Article 102, Paragraph 1). air carriers and operators of businesses using aircraft, As regards international carriers, please see question 1.6 below. to submit reports; and (ii) enter aircraft, airports, places B. Business to Use Aircraft (Koukuuki Shiyou Jigyo) where aircraft are located, and business offices when it deems it necessary for the enforcement of the Civil A “business to use aircraft” to provide services other than Aeronautics Act (Id., Article 134). transporting persons or cargo by aircraft for a fee, is also regulated (Id., Article 2, Item 21). An example of this business Violation of the Civil Aeronautics Act is subject to is enabling the taking of photographs by using an aircraft. criminal penalties. A person engaging in an aviation transport business without the MLIT’s permission may A permit from the MLIT is necessary to start a business using be imprisoned for up to three years or fined up to JPY aircraft (Id., Article 123, Paragraph 1). The application for the 3,000,000, or both. permit must state the applicant’s name and address, the name of its representative director, and the total amount and details Other than the Civil Aeronautics Act, there are other of funding and financing (Id., Article 123, Paragraph 2). The laws such as: (i) the Act on the Punishment of Acts that MLIT will examine whether the business plan is suitable to Cause Danger in the Air, which penalises any person who ensure safety, whether the applicant is competent to conduct damages airports or air navigation facilities, destroys the business, and whether the applicant is disqualified on aircraft or causes aircraft to crash; and (ii) the Act on the grounds set forth in the Civil Aeronautics Act (Id., Article Punishment of an Unlawful Seizure of Aircraft, which 123, Paragraph 2). penalises any person who hijacks or plans to hijack any aircraft while in operation. The application fee is JPY 90,000 and the standard processing period is two months after the MLIT has received all B. Administrator necessary documents. The civil aviation bureau of the MLIT administers air safety. The business operator is subject to inspection by the MLIT in It established an aviation safety programme which became connection with its facilities to control, operate and maintain effective on April 1, 2014 pursuant to ICAO’s policy to its aircraft, and operate or maintain the aircraft if it fails the introduce State Safety Programmes. The programme applies inspection (Id., Article 124). to general aviation and commercial aviation by a person or a company. It has also started to operate VOICES (Voluntary Information Contributory to the Enhancement of Safety), 1.3 What are the principal pieces of legislation in through which any person may voluntarily report any incident your jurisdiction which govern air safety, and who which could have caused accidents by an aircraft, in order to administers air safety? prevent the occurrence of actual accidents.

A. Legislation 1.4 Is air safety regulated separately for commercial, The principal legislation governing air safety is the Civil cargo and private carriers? Aeronautics Act, which is primarily based on the Chicago Convention. Air safety is regulated by the Civil Aeronautics Act, which regulates i. Requirements regarding aircraft and the operation of aviation generally; however, Chapter 7 regulates only commercial aircraft aviation such as the aviation transport business and businesses using The law imposes requirements to ensure the safety of aircraft. Please see question 1.1. aircraft and their operation. These include verification of airworthiness before an aircraft may be used, and restricting the use of aircraft to the purpose and scope stated 1.5 Are air charters regulated separately for commercial, in the verification of airworthiness. The task of verifying cargo and private carriers? the airworthiness of aircraft registered in Japan falls on the MLIT (Civil Aeronautics Act, Articles 10 and 11). The Yes, as discussed in question 1.2 on aviation transport businesses. MLIT also issues certificates of competency which are Regulations on aviation transport businesses do not distinguish required by anyone to fly an aircraft. Only persons with between cargo and persons. such a certificate can operate an aircraft, and must do so within the scope of the certificate (Id., Articles 22, 28, 65 and 67). Other requirements under the law cover restricted fly zones, minimum safety altitudes and speed limits.

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those accidents; and for requesting the MLIT or relevant parties to 1.6 As regards international air carriers operating in your implement necessary measures in response. This law is based on jurisdiction, are there any particular limitations to be Annex 19 of the Chicago Convention. The Board’s investigative aware of, in particular when compared with ‘domestic’ powers must meet the standards, methods and procedures set by the or local operators? By way of example only, restrictions and taxes which apply to international but Chicago Convention and Annex 19 (Act for the Establishment of the not domestic carriers. Japan Transport Safety Board, Article 18, Paragraph 1).

A foreign entity or person cannot be a domestic air carrier (honpou 1.10 Have there been any recent cases of note or other koukuu unsou jigyosha) (please see question 1.2). However, it may notable developments in your jurisdiction involving obtain the MLIT’s permission to conduct an international aviation air operators and/or airports? Japan transport business (Civil Aeronautics Act, Articles 129 and 126). A foreign entity or person who invests in Japan is subject to the Act There are two notable developments in connection with regulations on of Foreign Exchange and Foreign Trade. Under that law, a foreign flights by unmanned aircraft vehicles (“UAVs”) and the privatisation entity which wants to invest in the business of manufacturing of airports in Japan. aircraft, conducting air transport or using aircraft, must give prior A. Regulations on flights by UAVs – Amendment of the Civil notification, through the Bank of Japan, to the Ministry of Finance Aeronautics Act as well as the ministry with specific jurisdiction over the business The Japanese public and government turned their attention to (i.e. the METI or the MLIT). The foreign entity must wait for 30 drones after a drone landed on the roof of the Prime Minister’s days before making the investments; however, the period may office on April 22, 2015. The Civil Aeronautics Act was generally be shortened to two weeks. amended to introduce safety rules for unmanned aircraft vehicles, and the amended Act took effect on December 10, 2015. 1.7 Are airports state or privately owned? The amended Act introduces restrictions on (i) areas for flight, and (ii) operation. Violations will be penalised with a As described in question 1.1, with a few exceptions, airports in fine of up to JPY 500,000. Japan were constructed and are owned and managed directly by (i) Prohibited airspaces for flight either the national government or local governments. As of April The amended Civil Aeronautics Act requires a person 1, 2016, airports in Japan are classified as: (i) national airports who intends to operate a UAV in the following airspaces established and managed by the national government (19 airports); to obtain the MLIT’s permission: (ii) special regional airports established by the national government (a) airspace which is likely to affect the safe operation of but managed by local governments (five airports); (iii) incorporated aircraft; and airports established and managed by corporations under special (b) airspace which is above densely populated areas. laws (Narita, Kansai, Itami, and Chubu airports) (four airports); (iv) An “airspace which is likely to affect the safe operation of regional airports established and managed by local governments (54 aircraft” refers to airspaces above airports and their vicinity, airports); (v) airports for joint use managed by either the Japan Self and airspaces 150 metres above ground level or water surface Defence Forces or the US forces stationed in Japan jointly with the level. A “densely populated area” is defined as a densely national government (eight airports); and (vi) other minor airports. inhabited district (jinko shuchu chiku) (“DID”), designated Among those airports, Sendai Airport, Kansai International Airport based on the results of the national census. A DID is, in and the Osaka (Itami) International Airport are currently being principle, an area with a population density of 5,000 people operated by private companies through the concession. Please see or more per square kilometre. question 1.10. (ii) Operational limitations The amended Civil Aeronautics Act lists the following 1.8 Do the airports impose requirements on carriers operational conditions. flying to and from the airports in your jurisdiction? Unless approved by the MLIT, an operator of UAVs must: (a) operate UAVs only in the daytime; An airport operator must establish rules for the operation of the (b) operate UAVs within the visual line of sight of the airport and publish them through the internet or other appropriate operator; methods (Airport Act, Article 12). The rules must cover the airport’s (c) maintain a certain operating distance (30 metres) operating hours, other services it is providing, landing and parking between UAVs and persons or properties on the fees, and requirements for airport users, among other things. ground or water surface; (d) not operate UAVs over event sites where many people 1.9 What legislative and/or regulatory regime applies to gather; air accidents? For example, are there any particular (e) not transport hazardous materials specified in the rules, regulations, systems and procedures in place Ordinance by UAVs; and which need to be adhered to? (f) not drop any object from UAVs except for the goods specified in the Ordinance. The Act for the Establishment of the Japan Transport Safety Board With the MLIT’s permission or approval, it is possible to operate created the Japan Transport Safety Board (Unyu Anzen Iinkai). The UAVs in prohibited airspaces or without meeting operational Board is one of the MLIT’s administrative organs, although the conditions. An operator must submit the application for National Government Organization Act gave it some independence permission or approval, in general, 10 business days before the from the MLIT. flight of a UAV. The Board is responsible for investigating: accidents involving UAV technology continues to advance rapidly. Hence, although aircraft, railroads and vessels; any situation which is likely to cause the new regulations were created as an urgent response to the those accidents; the causes and extent of damage surrounding landing of a drone on the roof of the Prime Minister’s office,

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government regulations will continue to evolve to ensure the the acquisition or transfer (Id., Article 3–3). However, if the sound development of the UAV business in Japan, as affirmed registration is false and there is a true owner who is not registered in a supplemental provision of the amended Civil Aeronautics in the Aircraft Register, the buyer cannot acquire ownership. In this Act. sense, the Aircraft Register is a very important piece of evidence to B. Introduction of concessions for operating airports prove ownership, but it does not protect a third party who relies on The Act for the Operation of Government Controlled Airports a false registration. by Private Sector Entities (the “Airport Concession Act”), As for other types of aircraft such as gliders or airships, even if which took effect on July 25, 2013, allows the private sector they are registered, the mere delivery of the aircraft to the buyer or to operate airports through concessions under the Act on transferee enables the said buyer or transferee to assert ownership. the Promotion of Private Finance Initiative (the “PFI Act Japan Concession”). The need to reform airport management efficiently led to the 2.2 Is there a register of aircraft mortgages and charges? PFI Act Concession. Under the current system, income from Broadly speaking, what are the rules around the airport charges such as landing fees at all national airports operation of this register? is managed within a single national pool (i.e., the airport development sub-account under the social infrastructure There is a register of aircraft mortgages under the Aircraft Mortgage development special account). In principle, airport charges Act (Koukuuki Teitou Hou). are the same in all national airports in Japan, and each airport cannot set its own airport charges. Under the Airport Aircraft mortgages shall be made in the Aircraft Register in which Concession Act, however, the airport concessionaire of a the ownership is registered (please see question 2.1). To register specific airport may set its own airport charges and collect an aircraft mortgage, the mortgagee and the mortgagor must jointly them as income. apply for registration and submit the document verifying the existence Further, the separation between aeronautical and non- of the mortgage, such as the mortgage agreement, and other necessary aeronautical operations in terms of ownership and documents. The aircraft mortgage registration fee is JPY 0.003 management has also been criticised as being inefficient. multiplied by the loan amount. It is customary to make a provisional As mentioned above, in many airports in Japan, the registration of the mortgage and pay only JPY 2,000 as registration government owns and operates basic aeronautical facilities, fee. As for the enforcement of the mortgage, please see question 3.1. such as runways, aprons and navigation facilities, while private or third sector entities own and operate non- aeronautical facilities such as airport terminals and car 2.3 Are there any particular regulatory requirements parking facilities. Accordingly, the government cannot which a lessor or a financier needs to be aware of as offer lower airport charges to airlines by generating income regards aircraft operation? from non-aeronautical operations. By introducing the Airport Concession Act, the government aims to have Please see question 2.4. one concessionaire manage both aeronautical and non- aeronautical operations under its concession. A concession under the Airport Concession Act covers: (i) 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests national airports; (ii) regional airports; (iii) civil aviation in a single engine are at risk of automatic transfer facilities at airports for joint use; and (iv) other minor airports or other prejudice when installed ‘on-wing’ on an established and managed by local governments. In 2014, the aircraft owned by another party? If so, what are the government started the bid process to select the concessionaire conditions to such title annexation and can owners who will operate Sendai Airport, one of Japan’s national and financiers of engines take pre-emptive steps to airports. The operation of Sendai Airport by private companies mitigate the risks? through the concession started in July 2016. Incorporated airports are not subject to the Airport Concession The Civil Act has a concept similar to title annexation. Under this Act. However, the government has enacted another special concept, if a property (whether real property or moveable property) law for the concession to operate Kansai International Airport is attached to another property such that it is impossible to separate and Osaka (Itami) International Airport. The operation of both airports by private companies, which include Vinci them without damage, the owner of the primary property acquires Airports and Orix Corporation, through the concession, ownership of the non-primary property. In that case, the owner of started in April 2016. the minor property loses ownership of and any other right on that property. However, because an engine can be generally separated from the aircraft without damaging either the engine or the aircraft, 2 Aircraft Trading, Finance and Leasing then the ownership or security interests on the engine would not be at risk of annexation. In addition, in a precedent case regarding the annexation of buildings, the court decided that security interests on 2.1 Does registration of ownership in the aircraft register the annexed buildings continue to exist on each annexed building constitute proof of ownership? pro rata based on the value of each building. At the owner’s application, the MLIT will register its ownership of an aircraft in the Aircraft Register (Civil Aeronautics Act, Article 2.5 What (if any) are the tax implications in your 3). The registration fee is JPY 30,000 multiplied by the weight (in jurisdiction for aircraft trading as regards a) value- tons) of the aircraft. added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and Any third party may request to see or have a copy of the Aircraft (to the extent applicable) do exemptions exist as Register. Hence, the buyer of an aircraft can check whether the regards non-domestic purchasers and sellers of seller is registered as the aircraft’s owner. Further, as for a registered aircraft and/or particular aircraft types or operations? aeroplane (hikouki) or rotorcraft (kaitenyoku koukuuki), the buyer or transferee of that aircraft may assert its ownership by registering If a business provider transfers or lends any property or provides

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services to a third party for consideration within Japan, a The execution of a provisional seizure is done by (i) making an consumption tax will be basically levied on the transaction. entry of the provisional seizure in the registration, or (ii) getting The current rate of consumption tax is 8%. If the transaction is what is necessary to fly the aircraft, including the verification of the considered an export under the Consumption Tax Law (Shouhizei aircraft’s nationality (Civil Provisional Remedies Law, Article 48, Hou) and the business provider has an export permit, the transaction and Civil Provisional Remedies Rules, Article 34). may be exempt from consumption tax. In the case of an aircraft Because aircraft without any registration certification cannot be which delivers people or cargoes outside Japan, the transfer of used for aviation, they will be detained through the procedures for that aircraft may be exempted if certain requirements under the compulsory execution and execution of provisional seizure. Consumption Tax Law are met. If it is likely that a compulsory execution will become significantly The Stamp Tax Law (Inshizei Hou) requires that stamps be affixed unfeasible unless the aircraft is in detention, a party may file Japan to certain documents, including an agreement to sell and purchase an application with the district court with jurisdiction over the an aircraft. The amount of the stamp depends on the purchase price. aircraft’s homebase (teichijyo), before starting the compulsory For example, if the price is more than JPY 100,000,000 but not more execution procedures to request a court order for the delivery of than JPY 500,000,000, the amount is JPY 100,000; and if the price is the registration certification. If there are pressing circumstances, a more than JPY 5,000,000,000, the amount is JPY 600,000. party may file the application with the district court with jurisdiction over where the aircraft is located (Civil Execution Law, Article 115, 2.6 Is your jurisdiction a signatory to the main and Civil Execution Rules, Article 84). Even if the certification of international Conventions (Montreal, Geneva and registration is delivered, the possession of the aircraft is not deemed Cape Town)? delivered to the party or the court. The party may file an application to appoint a custodian to maintain the aircraft until the compulsory Japan is a signatory to (i) the Hague Convention, and (ii) the execution starts (Civil Execution Law, Article 116). Montreal Convention, but is not a signatory to the ICAO Geneva Convention or the Convention on International Interest in Mobile 3.2 Is there a regime of self-help available to a lessor Equipment, Cape Town, 2001. or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement? 2.7 How are the Conventions applied in your jurisdiction?

A lessor or a financier of aircraft is basically required to doa Japan essentially applied the Hague Convention through the Law compulsory execution, which needs to be filed with the court, on the Punishment of the Unlawful Seizure of an Aircraft. Japan to reacquire the possession of the aircraft or enforce any of its essentially applied the Montreal Convention through the Law on the rights under the lease/finance agreement. If a lessor or financier Punishment of Acts that Endanger Aviation. has security interests on the aircraft or lease receivables, and the agreement has a provision that it may exercise the security interests 2.8 Does your jurisdiction make use of any taxation against a debtor upon the occurrence of an event of default, it may benefits which enhance aircraft trading and leasing enforce the rights without a court filing unless the provision is (either in-bound or out-bound leasing), for example terminated upon the filing of bankruptcy. access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal of aircraft? 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For Yes. For example, if a Japanese company leases an aircraft from a example, is there a distinction in your jurisdiction company established in the U.S., generally, under the tax treaty regarding the courts in which civil and criminal cases are brought? between Japan and the U.S., there is no withholding tax on the lease payments which the Japanese company will make to the U.S. company. A. Civil Cases Applications for compulsory execution and the execution of 3 Litigation and Dispute Resolution provisional seizure of aircraft must be filed with the district court with jurisdiction over where the aircraft is located when the procedures of such executions start (Civil Aeronautics 3.1 What rights of detention are available in relation to Act, Article 8–4, Paragraph 2). This district court is not aircraft and unpaid debts? necessarily the same as the district court with jurisdiction over the aircraft’s homebase. Under the Civil Aeronautics Act, the compulsory execution and the A contractually agreed court to settle disputes between an execution of provisional seizure of registered aircraft are governed aircraft financier and the borrower is valid (Civil Procedure by rules issued by the Supreme Court (Civil Aeronautics Act, Article Law, Article 11) and the court will be determined pursuant 8–4, Paragraph 2), and the Civil Execution Rules (Minji Shikkou to such provision. If no jurisdiction has been agreed, the Kisoku) and Civil Provisional Remedies Rules (Minji Hozen Kisoku) competent court will be determined pursuant to the Civil Procedure Law. Depending on the kind of lawsuit, the apply to the compulsory execution, and the execution of provisional competent court may be one with jurisdiction over the seizure, of registered aircraft (Civil Execution Rules, Article 84 and defendant’s address, where the defendant should perform its Civil Provisional Remedies Rules, Article 34). obligation, or where the aircraft exists (Id., Articles 4 and 5). If a court starts the procedures for a compulsory execution, it must B. Criminal Cases order a public auction of the aircraft, get the documents which are The jurisdiction over criminal cases is where the crime was necessary to fly the aircraft, including verification of the aircraft’s committed or where the criminal resides ( nationality, and prohibit the aircraft’s departure (Civil Execution Law, Article 2, Paragraph 1). However, if the crime was Law, Article 114, and Civil Execution Rules, Article 84).

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committed in an aircraft registered in Japan at a time when high court’s decision violates the Constitution or other laws (Id., it was outside Japan, the jurisdiction, in addition to the place Articles 311 and 312). where the crime was committed and the criminal’s residence, As to the arbitration procedure, the award is binding on the parties could be the place where the aircraft lands (including on water) after the crime (Id., Paragraph 3). and an appeal is basically unavailable. C. Summary Court If (i) a plaintiff seeks damages of up to JPY 1,400,000 and 4 Commercial and Regulatory (ii) the crime is punishable by fines or lighter penalties, the lawsuit can be filed with the Summary Court (Kani Saibansho) (Court Law, Article 33, Paragraph 1). 4.1 How does your jurisdiction approach and regulate Japan joint ventures between airline competitors?

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

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

4.4 How does your jurisdiction approach mergers, 4.8 What are the main regulatory instruments governing acquisition mergers and full-function joint ventures? the acquisition, retention and use of passenger data, and what rights do passengers have in respect of Please see questions 4.1 and 4.2. their data which is held by airlines and airports?

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

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the MLIT gathers and publishes information on the frequency of 4.10 What are the mechanisms available for the protection late arrivals and flight cancellations. Further, the MLIT may issue of intellectual property (e.g. trademarks) and other an order to improve the operation of aircraft or the business of air assets and data of a proprietary nature? carriers if, for example, the technical ability of the airmen or pilots does not meet the standards of the Civil Aeronautics Act (Articles The Basic Act on Intellectual Property provides the framework for 20, 29 and 72). promoting measures for the creation, protection and exploitation of intellectual property. This Act defines intellectual property as a patent right, a utility model right, a plant breeder’s right, a design 4.13 Are the airport authorities governed by particular right, a copyright, a trademark right, a right that is stipulated by laws legislation? If so, what obligations, broadly speaking, Japan are imposed on the airport authorities? and regulations on other intellectual property, or a right pertaining to an interest that is protected by acts. Each of (i) a patent right, (ii) a utility model right, (iii) a plant breeder’s right, (iv) a design right, Please see questions 1.1 and 1.10. (v) a copyright, and (vi) a trademark right, is protected under (i) the Patent Act, (ii) the Utility , (iii) the Plant Variety Protection 4.14 To what extent does general consumer protection and Seed Act, (iv) the Design Act, (v) the Copyright Act, and (vi) legislation apply to the relationship between the the Trademark Act. Each law has its own mechanism to protect airport operator and the passenger? intellectual property, although each basically protects registered intellectual property. For example, under the Trademark Act, a The Consumer Contract Act provides for the protection of consumers person holding a trademark may register it and such registration who enter into contracts with business operators. For example, any is effective for 10 years and is renewable. A trademark holder contractual provision which requires a consumer to pay a cancellation basically has an exclusive right to use the registered trademark in fee at an amount which exceeds the average amount of damages that connection with the designated goods or services. a business operator would suffer in connection with the cancellation, The unfair acquisition or use of know-how or trade secrets, and is null and void (Consumer Contract Act, Article 9). the unfair creation or use of trademarks or trade names which are similar or identical to others that are well-known by consumers, is 4.15 What global distribution suppliers (GDSs) operate in prohibited by the Unfair Competition Prevention Act. your jurisdiction?

4.11 Is there any legislation governing the denial of Japanese companies and foreign companies such as Fedex, DHL boarding rights and/or cancelled flights? and UPS operate in Japan as global forwarders. Further, Japan has an association which includes international freight forwarders as The MLIT issued a guideline on the necessary measures to prevent members (Japan International Freight Forwarders Association Inc.). acts which may make passengers uncomfortable, embarrassed or unsafe, and in 2002 requested air operators to comply with 4.16 Are there any ownership requirements pertaining to the guideline. Under the guideline, air operators must not allow GDSs operating in your jurisdiction? passengers who are drunk to excess to board. Air operators generally lay down their terms and conditions which As a general rule, a foreign person, a foreign entity (whether passengers of domestic and international flights are required to follow. private or governmental), or an entity of which one-third or more Such terms and conditions typically provide that the operator may of the directors are foreigners or one-third or more of the voting deny boarding if a passenger is late. Further, the operator may deny rights are held by foreign persons or entities, is prohibited from boarding to passengers or may make passengers disembark if the engaging in the freight forwarding business in Japan (Consigned operator finds it necessary to ensure air safety, to comply with laws Freight Forwarding Business Act, Articles 6 and 22), unless they are and requests from administrative bodies, to deal with any act which registered with or permitted by the MLIT (Id., Articles 35 and 45). is making other passengers uncomfortable, embarrassed or unsafe, or to deal with any mental or physical conditions. In addition, the 4.17 Is vertical integration permitted between air operators terms and conditions typically provide that the operator may cancel and airports (and, if so, under what conditions)? flights based on certain reasonable grounds and must take appropriate measures for passengers whose flights were cancelled. The JFTC will consider whether the vertical integration is an Further, a pilot of the aircraft may, during taxiing, order a passenger issue with regard to fair trade in the aviation business pursuant to to disembark if he has reasonable grounds to believe that the the Antitrust Law. There is no precedent regarding such vertical passenger has committed or will commit an act that may impede integration. The government has set certain standards for airport safety, to the extent that it is necessary to ensure the safety of the concessionaires, such as the disqualification of an aviation transport aircraft, to protect other passengers and property, and to keep order business operator, and any of its parent companies, subsidiaries and and discipline inside the aircraft (Civil Aeronautics Act, Article 73– other affiliates, from being an airport concessionaire. 4, Paragraph 1). The Civil Aeronautics Act does not explicitly deal with cancellation of flights. 4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your 4.12 What powers do the relevant authorities have in jurisdiction or operators of aircraft generally into and relation to the late arrival and departure of flights? out of your jurisdiction?

The Civil Aeronautics Act does not explicitly impose sanctions Please see questions 1.2 and 1.6. directly due to the late arrival and departure of flights. However,

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C. Increase of Flights to and from Haneda 5 In Future The desirability of increasing flights to and from Haneda, which is closer to Tokyo than Narita, is under discussion. According 5.1 In your opinion, which pending legislative or to the MLIT’s website, if the flights are increased as planned, regulatory changes (if any), or potential developments the number of international flights will increase from 60,000 affecting the aviation industry more generally in per year (2015) to 99,000 per year (2020). The increase will be your jurisdiction, are likely to feature or be worthy of accompanied by changes in flight routes. In any case, the MLIT attention in the next two years or so? plans to continue discussions with residents near Haneda airport and the flight routes, and other concerned people. It plans to implement suitable methods to properly deal with effects that

Attention should be given to three possible changes or developments: Japan the increase may have on the environment. A. Development of a Business Using UAVs According to the roadmap published in April 2016 at a conference on UAV business attended by governmental Acknowledgment authorities and private companies, the goal is to be able to The author would like to thank Koji Toshima and Atsushi Okada deliver goods to scarcely populated areas (e.g., mountainous for their assistance in preparing this chapter. Koji and Atsushi are regions and isolated islands) around 2018, and to urban areas in the 2020s. To achieve this goal, discussions on better partners at Mori Hamada & Matsumoto, where their main field of regulations, such as certification of UAVs and licences to practice is aviation law. operate UAVs, are going on. In September 2017, the MLIT Email: [email protected] / Tel: +81 3 5223 7789. and the METI jointly established the Study Group on the Email: [email protected] / Tel: +81 3 5220 1821. Flying of Unmanned Aircraft (Drones) Beyond Visual Line of Sight and Over Third Parties. It is this Study Group’s goal to finalise the guidelines for the use of UAVs for the delivery business by the end of March 2018. Hiromi Hayashi B. Possible Expansion of Concession of Airports Mori Hamada & Matsumoto Marunouchi Park Building, 2-6-1 In the wake of the privatisation of Sendai, Kansai and Marunouchi Chiyoda-ku Itami airports, the privatisations of other airports through Tokyo 100-8222 concessions are proceeding. On October 1, 2017, the Japan concession agreement for Takamatsu Airport was executed between the MLIT and the special purpose vehicle jointly Tel: +81 3 5220 1811 Email: [email protected] established by private companies. Further, the process for URL: www.mhmjapan.com the selection of private companies in the privatisation of Fukuoka Airport is going on and the concession agreement is expected to be signed in the summer of 2018. Further, Hiromi Hayashi is a partner at Mori Hamada & Matsumoto, which she joined in 2001. Her areas of practice are international and domestic one national airport (Hiroshima) and six regional airports transactions, corporate restructuring, and regulatory matters, including are being considered for privatisation using the concession regulations on the telecommunications industry and radio frequencies. scheme. Hiromi has been a member of the firm’s Robotics Group since 2015 and a member of the Logistics Subcommittee of the Study Group on the Flying of Unmanned Aircraft (Drones) Beyond Visual Line of Sight and Over Third Parties established jointly by the Ministry of Land, Infrastructure, Transport and Tourism and the Ministry of Economy, Trade and Industry (2017). Hiromi was admitted to the Bar in 2001 in Japan and in 2007 in New York. She worked at Mizuho Corporate Bank from 1989 to 1994, and at Davis Polk & Wardwell in New York from 2006 to 2007.

Mori Hamada & Matsumoto is a full-service international law firm based in Tokyo, with offices in Fukuoka, Nagoya, Osaka, Beijing, Shanghai, Singapore, Yangon Bangkok and Ho Chi Minh, and a Jakarta desk. The firm has over 450 attorneys and a support staff of approximately 450, including legal assistants, translators and secretaries. The firm is one of the largest law firms in Japan and is particularly well-known in the areas of mergers and acquisitions, finance, litigation, insolvency, telecommunications, broadcasting and intellectual property, as well as domestic litigation, bankruptcy, restructuring and multi-jurisdictional litigation and arbitration. The firm regularly advises on some of the largest and most prominent cross-border transactions representing both Japanese and foreign clients. In particular, the firm has extensive practice in, exposure to and expertise on, telecommunications, broadcasting, the Internet, information technology and related areas, and provides legal advice and other legal services regarding the corporate, regulatory, financing and transactional requirements of clients in these areas.

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Malaysia Norhisham Abd Bahrin

Azmi & Associates Nazran Arvind Bin Nahdan Rengganathan

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

1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ In order to obtain an operating licence the following steps must be or regulate aviation in your jurisdiction. taken: 1. Any person intending to undertake carriage by air or use any The principal regulating civil aviation in Malaysia are as aircraft for the carriage of passengers, mail or cargo for hire follows: or reward for any journey between two or more places, of which at least one place is in Malaysia, is required to apply 1. Acts for an operating licence from MAVCOM as follows: (a) Civil Aviation Act 1969. (a) Air Service Licence (“ASL”) – for fixed, scheduled (b) Aviation Offences Act 1984. journeys; or (c) Carriage by Air Act 1974 (“CBAA 1974”). (b) Air Service Permit (“ASP”) – for unscheduled journeys. (d) International Interests in Mobile Equipment (Aircraft) Act 2. An air carrier who wishes to apply for an ASL or ASP may 2006. make an application to MAVCOM using appropriate forms (e) Malaysian Aviation Commission Act 2015 (“MAVCOM which are publicly available. MAVCOM will conduct an Act 2015”). evaluation of the applicant and, upon satisfactory conclusion, issue a Conditional Approval. (f) Civil Aviation Authority of Malaysia Act 2017. 3. The applicant is then required to apply for an Air Operator 2. Subsidiary Legislations/Regulations/Code/Directives Certificate (“AOC”) from the CAAM, supported by the (a) Civil Aviation Regulations 2016. Conditional Approval issued by MAVCOM. An AOC certifies (b) Malaysian Aviation Consumer Protection Code 2016 that the holder is competent to operate flights, and that the (“Consumer Protection Code”). aircraft operated by him on such flights is operated safely. (c) Civil Aviation (Aerodrome Operations) Regulations 2016. 4. An ASL or ASP will then be issued to the applicant, subject to (d) Civil Aviation (Fees and Charges) Regulations 2016. the applicant having obtained a valid AOC from the CAAM. (e) Malaysian Aviation Commission (Aviation Services Charges) 5. Documents to be submitted to MAVCOM on application Regulations 2016. for an ASL or ASP include details of the company, shareholding structure, organisational structure, financial (f) Malaysian Aviation Commission (Regulatory Services status and projections, details of the applicant’s aircraft, Charges) Regulations 2018. aircraft certificate(s) of airworthiness, aircraft maintenance (g) Minister of Transport Directives 2016. programme, and complaints management procedure. 3. Regulatory Bodies 6. Flights across Malaysia by air carriers from contracting (a) Ministry of Transport states to the International Air Services Transit Agreement are exempted from having an ASP or an ASL. Principal policymaker for the aviation industry in Malaysia. (b) Civil Aviation Authority of Malaysia (“CAAM”) Technical regulator overseeing safety, maintenance, security 1.3 What are the principal pieces of legislation in and the development of the civil aviation industry. your jurisdiction which govern air safety, and who administers air safety? (c) Malaysian Aviation Commission (“MAVCOM”) Economic regulator overseeing commercial, consumer and economic The principal pieces of legislation which govern air safety are as matters related to civil aviation matters in Malaysia. MAVCOM is follows: also an independent adviser to the Ministry of Transport on economic 1. Civil Aviation Act 1969 matters pertaining to civil aviation. This Act prescribes or supplements requirements relating to, among others, maintenance of aircraft and components, certification of airworthiness of types of aircraft and components, training organisations, and licences for maintenance engineers.

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2. Civil Aviation Regulations 2016 parking charges, etc. are regulated by MAVCOM. Apart from the This Regulation sets out general rules relating to matters such as preceding, airports may impose other requirements on carriers airworthiness of aircraft, environmental standards, maintenance such as the requirement for the provision of financial security via of aircraft, aircraft crew and licensing, operation of aircraft, a security deposit or bank guarantee and having valid aviation conduct of operations, air traffic control, carriage of munitions liability and/or other relevant insurances with appropriate coverage. of war and dangerous goods, unmanned aircraft system, and investigation of aircraft accidents and serious incidents. 1.9 What legislative and/or regulatory regime applies to 3. Aviation Offences Act 1984 air accidents? For example, are there any particular The Montreal Convention 1971 for the Suppression of rules, regulations, systems and procedures in place Unlawful Acts Against the Safety of Civil Aviation Certain has which need to be adhered to?

been given force of law via the Aviation Offences Act 1984. Malaysia 4. Civil Aviation Authority Act 2017 The following regimes apply to air accidents: The main regulatory body that governs air safety is the Applicable Laws CAAM and its establishment, functions and powers are 1. Part XXVI Investigation of Accidents, Civil Aviation statutorily provided for under this Act. Regulations 2016. 2. ICAO Annex 13 Aircraft Accident and Incident Investigation. 1.4 Is air safety regulated separately for commercial, 3. ICAO Manual of Aircraft Accident and Incident Investigation. cargo and private carriers? Procedures Air safety is not regulated separately for commercial, cargo and (a) All accidents involving aircraft issued with Certificates private carriers. of Airworthiness will be investigated by Inspectors of Air Accidents, who are appointed by the Ministry of Transport to carry out investigations into the circumstances and causes of 1.5 Are air charters regulated separately for commercial, air accidents. cargo and private carriers? (b) The Chief Inspector of Air Accidents shall have authority to appoint any other persons as experts to assist in the Air charters are not regulated separately for commercial, cargo and investigation. He may lead the investigation or appoint an private carriers. inspector to be the investigator-in-charge. (c) The , owner, operator or hirer of an aircraft involved in an incident/accident is legally required to 1.6 As regards international air carriers operating in your immediately notify any incident/accident to the investigator- jurisdiction, are there any particular limitations to be in-charge and shall also disclose to the Chief Inspector of aware of, in particular when compared with ‘domestic’ Air Accidents and the Director General of Civil Aviation or local operators? By way of example only, restrictions and taxes which apply to international but (“DGCA”) of the presence of dangerous goods on the not domestic carriers. affected aircraft.

There are a number of restrictions or requirements imposed on 1.10 Have there been any recent cases of note or other international air carriers with respect to non-scheduled services as notable developments in your jurisdiction involving follows: air operators and/or airports? (a) International air carriers are prohibited from carrying out the following operations: The following are the recent notable developments in Malaysia (i) carrying out any passenger, cargo and/or mail from involving air operators and airports: Malaysia that differs from the passenger/cargo manifest; 1. Establishment of CAAM: Effective on 19 February 2018, (ii) uplifting any passenger, cargo and/or mail within points in the CAAM was established in place of the Department Malaysia; and of Civil Aviation to meet the ICAO’s requirement for the establishment of an autonomous civil aviation authority. (iii) uplifting any passenger, cargo and/or mail on the positioning sector. 2. Proposed Amendments to the Consumer Protection Code: MAVCOM has published a consultation paper pertaining to (b) International air carriers are prohibited from uplifting any the Consumer Protection Code outlining proposed changes cargo and/or mail from Malaysia to any points beyond and enhancements to the said code to address certain Malaysia unless they are able to provide no-objection letters loopholes/gaps and issues which among others include air from Malaysian ASL and ASP (cargo) operators. fare transparency, prohibition on charging processing fees for passenger service charge refunds, etc. to ensure that the rights 1.7 Are airports state or privately owned? of consumers are safeguarded. 3. Issuance of Guidelines on Competition:

Airports in Malaysia may be state-owned and/or privately owned. Fig. Guidelines Date Published Objective To provide clarification on 1.8 Do the airports impose requirements on carriers Guidelines the manner in flying to and from the airports in your jurisdiction? on Aviation 19 January (a) which ‘relevant Service Market 2018 aviation service Definition A number of charges typically imposed by airports on air carriers market’ is such as landing charges, passenger service charges, security charges, determined.

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Fig. Guidelines Date Published Objective will issue a Certificate of Registration for aircraft registered in To provide Malaysia and the said certificate will state the brief details of the clarification on owner and the operator of the aircraft, respectively. the prohibition Guidelines of anti- on Anti- 19 January competitive 2.2 Is there a register of aircraft mortgages and charges? (b) Competitive 2018 and relief Broadly speaking, what are the rules around the Agreements of liability operation of this register? provision under the MAVCOM Act 2015. Yes. Any mortgage of a Malaysian registered aircraft may be To provide entered into the Aircraft Register. Once a mortgage is registered, Malaysia clarification on ownership of the aircraft cannot be transferred until the mortgage is Guidelines the prohibition discharged with the consent of the mortgagee. on Abuse of 19 January of abuse of (c) Dominant 2018 dominant Position position under 2.3 Are there any particular regulatory requirements the MAVCOM which a lessor or a financier needs to be aware of as Act 2015. regards aircraft operation? To provide clarification on Guidelines on how mergers Aircraft may be registered and operated for commercial air transport Substantive are assessed or aerial work in Malaysia if the said aircraft is registered in the (d) 20 April 2018 Assessment of by MAVCOM name of a qualified person, i.e. the Government of Malaysia, a Mergers in light of citizen of Malaysia or a company incorporated in Malaysia. competition concerns. If a foreign citizen or a foreign company having a place of residence To provide or business in Malaysia holds a legal or beneficial interest by way of Guidelines on clarification on ownership or a share in an aircraft, the aircraft may be registered by Notification the procedures the DGCA in that person’s name. However, the said aircraft cannot and Application relating to the be operated for commercial air transport or aerial work in Malaysia (e) Procedures for 20 April 2018 notification of an Anticipated an anticipated unless the aircraft is leased to and operated by a Malaysian entity. Merger or a merger and the Merger notification of a merger. 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests To provide in a single engine are at risk of automatic transfer or clarification on the financial other prejudice when installed ‘on-wing’ on an aircraft penalties owned by another party? If so, what are the conditions that may be to such title annexation and can owners and financiers Guidelines imposed by of engines take pre-emptive steps to mitigate the risks? on the MAVCOM (f) Determination 22 June 2018 and the factors of Financial Malaysia recognises that aircraft engines and other ancillary items that may be Penalties considered by may have separate ‘titles’, though these are not reflected in the MAVCOM Certificate of Registration, which reflects ownership of the aircraft in imposing as a whole rather than the individual title of ownership of other such financial components of an aircraft. penalty. To provide Notwithstanding the above, Malaysian law recognises that engines clarification on and other accessories of aircraft may be charged by a company in Guidelines the leniency favour of a financier, per the Companies Act 2016. In performing (g) on Leniency 22 June 2018 regime under a company search, the charge will show the specific assets charged Regime Section 60 of by the company in favour of a third party, including the engines and the MAVCOM Act. other accessories. Additionally, the owners and financiers of engines and other ancillary parts can enter into an aircraft mortgage by including 2 Aircraft Trading, Finance and Leasing circumstances where the mortgage must be released before the transfer of ownership of the entire aircraft can be effected. This will allow protective measures to be incorporated to prevent the 2.1 Does registration of ownership in the aircraft register owner of the engines and accessories from being ‘dragged along’ constitute proof of ownership? to deal with new owners until the relevant and necessary measures (i.e. redemption, removal of such engines and accessories from Registration of ownership of aircraft in the Aircraft Register said aircraft, among others) have been made. Engine owners constitutes proof of ownership of a particular aircraft. The CAAM and financiers may also register an international interest inthe International Registry of Mobile Assets.

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(d) Warsaw-Hague Convention via the First Schedule to the 2.5 What (if any) are the tax implications in your CBAA 1974. jurisdiction for aircraft trading as regards a) value- (e) Warsaw-Hague Convention further amended by Montreal added tax (VAT) and/or goods and services tax (GST), Protocol No. 4 via the Fifth Schedule to the CBAA 1974. and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as (f) Convention on the Privileges and Immunities of the Specialized regards non-domestic purchasers and sellers of Agencies via the International Organizations (Privileges and aircraft and/or particular aircraft types or operations? Immunities) Act 1992. (g) Guadalajara Convention 1961 via the Second Schedule to the The sale and purchase of aircraft will be subject to Sales and Services CBAA 1974. Tax (“SST”) if the aircraft is supplied in Malaysia (including to a Malaysia place outside Malaysia) and SST will not be applicable if the aircraft 2.8 Does your jurisdiction make use of any taxation is supplied from a place outside Malaysia to a place in Malaysia. benefits which enhance aircraft trading and leasing The transfer of ownership of aircraft will also be subject to stamp (either in-bound or out-bound leasing), for example duty which is chargeable up to a rate of 3% of the market value of access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal the aircraft or the purchase price (whichever is higher). Section 4A of aircraft? of the Stamp Act 1949 further states that stamp duty is still payable even if the bill of sale is executed outside of Malaysia, provided that Companies incorporated under the Labuan Companies Act 1990 the aircraft is still in Malaysia. in Labuan, a mid-shore asset leasing jurisdiction, are subject to a If the transfer of the aircraft is effected within Malaysian territory, favourable tax framework which among others provides for low ad valorem stamp duty will be liable to be paid by the purchaser. corporate tax, access to the Malaysian Double Taxation Network Exemption from stamp duty is only applicable in the case of and exemption from stamp duties on financing, leasing, acquisition reconstructions or amalgamations of companies and in cases of or disposal of assets which are otherwise applicable to companies transfer of property between associated companies. It is therefore incorporated in Malaysia under the Companies Act 2016. advisable, for tax efficiency purposes that the aircraft is transferred and a bill of sale is executed while the aircraft is over international waters (not governed under any jurisdiction), to allow the bill of sale 3 Litigation and Dispute Resolution not to be stamped. This is especially so in the case where the aircraft is to be sold and transferred out of Malaysia. 3.1 What rights of detention are available in relation to aircraft and unpaid debts? 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and (a) CAAM Cape Town)? Under the Civil Aviation Regulations 2016, detention of aircraft may be made by the CAAM if a person defaults in Malaysia is a signatory to the following international Conventions: payment of any fees or charges to the CAAM. (a) Chicago Convention 1944: Malaysia deposited its notification Upon detention, details of detention such as amount due, date of adherence on 7 April 1958. and time of detention, and date and time of the entry made (b) Montreal Convention 1999: Malaysia ratified this Convention should be recorded in the Aircraft Register and an aircraft lien on 29 February 2008. shall be vested in the CAAM upon such entry in the Aircraft (c) Cape Town Convention 2001: Malaysia submitted its Register. A notice of detention must be given to the owner, instrument of accession on 2 November 2005 and the operator, lessee, hirer, charterer or pilot-in-command of the Convention entered into force on 1 March 2006. aircraft or the person who has security interest in the aircraft. Other aviation-related Conventions signed and/or ratified by The DGCA may deregister the Malaysian aircraft if the outstanding amount is unpaid at the end of six months after the Malaysia include: date of the aircraft lien, or may sell the aircraft with the leave of (a) Warsaw-Hague Convention 1929, as amended at The Hague the High Court if the outstanding amount is unpaid at the end of 1955 (Warsaw-Hague Convention). one month after the date of the aircraft lien. The DGCA shall (b) Convention on the Privileges and Immunities of the also have right to recovery by civil action of any fees or charges. Specialized Agencies. (b) Unpaid Seller (c) Warsaw-Hague Convention further amended by Montreal An unpaid seller in possession of the aircraft may retain Protocol No. 4. possession of the aircraft until payment is received under the (d) Guadalajara Convention 1961. Sale of Goods Act 1957. (c) Income Tax Authorities 2.7 How are the Conventions applied in your jurisdiction? The customs authorities may refuse clearance of any aircraft from any aerodrome or airport in Malaysia until the income tax is paid by the operator of the aircraft under Section 105 of The Conventions referred to in question 2.6 above are given legal the Income Tax Act 1967. effect in Malaysia through the following statutes: (d) Creditor (a) Chicago Convention 1944 via the Civil Aviation Act 1969. A creditor may obtain an injunction restraining an aircraft (b) Montreal Convention 1999 via the Sixth Schedule of the pending judgment and execution of the judgment debt. This CBAA 1974. remedy is equitable and discretionary in nature. (c) Cape Town Convention 2001 via the International Interests in Mobile Equipment (Aircraft) Act 2006.

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Disputes between Air Service Providers 3.2 Is there a regime of self-help available to a lessor Disputes between air service providers may be referred to MAVCOM or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights by virtue of Section 75 of the MAVCOM Act 2015 upon fulfilling under the lease/finance agreement? the following prerequisites: (i) the dispute must be on any matter under the MAVCOM Act Pursuant to the International Interests in Mobile Equipment 2015; and (Aircraft) Act 2006, enforcement action to reacquire possession of (ii) the parties must have first attempted to resolve their dispute the aircraft may be carried out without court action. This self-help via mediation and it failed to be resolved. Parties must notify remedy must be exercised in a commercially reasonable manner MAVCOM on the commencement date of mediation and pursuant to the provisions of the lease or financing documents. parties will be told to resolve their disputes within 30 days Malaysia or such longer period as MAVCOM may approve, but it shall Further, it is strongly advisable that an Irrevocable Deregistration not be more than 60 days. and Export Request Authorization (“IDERA”) is entered into by the lessor/financier to allow self-help proceedings. It is also In the event that the parties fail to resolve their dispute through advisable to enter into a Deregistration Power of Attorney in mediation within the stipulated period, MAVCOM will commence addition to the IDERA, to allow the lender/financier to deregister deciding on the matter. Decisions made by MAVCOM will the aircraft in the event that a repossession action is challenged in be published and the parties will be provided with a copy of the the Malaysian courts. decision. MAVCOM’s decisions may be registered as judgments of the High Court and the High Court may make an order requiring the In addition, under the International Interests in Mobile Equipment parties to comply with its decision if any party fails to do so. (Aircraft) Act 2006, a chargee or lessor is allowed to take possession or control of the aircraft upon breach by the chargor or lessee. A chargee may also sell or grant a lease, or collect or receive any 3.4 What service requirements apply for the service of income from the management or use of the aircraft, without a court court proceedings, and do these differ for domestic order. Before the selling or grant of a lease on an object, a chargee airlines/parties and non-domestic airlines/parties? is required to give prior notice of the proposed sale or lease to the interested person. Court proceedings in Malaysia may be initiated by a writ or originating summons. Under Order 10 of the Rules of Court 2012, a writ and originating summons must be served on each defendant 3.3 Which courts are appropriate for aviation disputes? to the proceeding personally or by pre-paid A.R. registered post. Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction For non-domestic parties which do not reside in Malaysia, the court regarding the courts in which civil and criminal cases may permit a writ or originating summons to be served on the defendant are brought? out of jurisdiction under Order 11 of the Rules of Court 2010.

The relevant court for aviation disputes would depend on the subject 3.5 What types of remedy are available from the courts matter of the dispute and its monetary value. There is no specific or arbitral tribunals in your jurisdiction, both on i) an court for aviation disputes. Proceedings in relation to aviation interim basis, and ii) a final basis? disputes may be tried in the courts or be referred to an alternative dispute resolution medium available in Malaysia (i.e. via arbitration, Remedies available vary based on the nature of the dispute. mediation, etc.) subject to the parties’ agreement. Generally, the following remedies may be awarded by the Malaysian Courts courts or arbitration: Civil Matters On an interim basis: Criminal Matters (a) damages; and Courts (Value of the claim/Monetary (Trial Jurisdiction) (b) an injunction may be awarded to prevent a party from doing Jurisdiction) something for a specified period or until final judgment is The maximum term reached. of imprisonment provided by the On a final basis: Second Class Not exceeding RM law does not (a) damages; Magistrates’ Court 10,000 exceed 12 months’ imprisonment or (b) injunctions to require another party to do something or which are punishable prevent the other side from doing something; by fine only. (c) orders to take possession of an aircraft and other aviation The maximum term assets; and of imprisonment (d) orders for the sale of an aircraft. provided by the law Not exceeding RM does not exceed 10 Magistrates’ Court 100,000 years’ imprisonment 3.6 Are there any rights of appeal to the courts from the or which are punishable by fine decision of a court or arbitral tribunal and, if so, in only. what circumstances do these rights arise? All cases except Not exceeding RM 1 Session Court those punishable with Courts million death. There are rights to appeal against the decision of a court. Cases All offences heard in the lower courts may be appealed to a higher court. An High Court Unlimited committed within its local jurisdiction. appeal to the Court of Appeal or Federal Court requires the leave of

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the Court of Appeal and Federal Court, respectively. Permission to appeal will be given where the court considers that the appeal would 4.3 Does your jurisdiction have a notification system have a real prospect of success or there is some compelling reason whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from why the appeal should be heard. regulatory agencies? Arbitration As a general rule, an arbitral award is binding. There is no appeal Yes; parties to the proposed merger may notify MAVCOM of against an award made in Malaysia under the Arbitration Act 2005. the anticipated merger or merger and apply to MAVCOM for a The only challenge that can be made is an application to the High decision on whether the anticipated merger or merger may infringe Court to set aside the award, based on the following grounds as or infringes Section 54 of the MAVCOM Act 2015. In the case provided in Section 37 of the Arbitration Act 2005: of anticipated mergers, MAVCOM’s non-infringement decision Malaysia (a) incapacity of the party to the arbitration agreement; may be limited to a period specified by MAVCOM and parties are (b) invalidity of the arbitration agreement; required to complete the merger within the period specified. (c) no proper notice was given of the appointment of an arbitrator With regard to prohibited agreements under Section 49 of the or of the arbitral proceedings or the arbitrator was otherwise MAVCOM Act 2015, the relevant parties may apply for an: unable to present that party’s case; (a) individual exemption from MAVCOM; or (d) the award deals with a dispute not contemplated or not falling (b) a relief of liability for the infringement of Section 49 of within the terms of the submission to arbitration; the MAVCOM Act 2015, and MAVCOM may grant an (e) the award contains decisions on matters beyond the scope of exemption subject to the prohibited agreement fulfilling the the submission to arbitration; criteria under Section 50 of the MAVCOM Act 2015 which (f) the composition of the arbitral tribunal or procedure was not includes: in compliance with the agreement of the parties; or (i) significant identifiable technology, efficiency or social (g) the High Court finds that the dispute was not arbitrable or the benefits directly arising from the agreement; award is in conflict with the public policy of Malaysia. (ii) the benefits could not reasonably have been provided by the parties to the agreement without the agreement having the effect of preventing, restricting or distorting competition; 4 Commercial and Regulatory (iii) the detrimental effect of the agreement on competition is proportionate to the benefits provided; and (iv) the agreement does not allow the enterprise concerned to 4.1 How does your jurisdiction approach and regulate eliminate competition completely in respect of a substantial joint ventures between airline competitors? part of the aviation services.

Joint ventures between airline competitors are mainly regulated by MAVCOM under the MAVCOM Act 2015, Guidelines on 4.4 How does your jurisdiction approach mergers, Substantive Assessment of Mergers and Guidelines on Notification acquisition mergers and full-function joint ventures? and Application Procedure for an Anticipated Merger or a Merger. For the aviation sector, the merger control regime is voluntary. There is currently no merger control regime in Malaysia under the Competition Act 2010. Section 49 of the MAVCOM Act 2015 prohibits any agreement which has the object or effect of significantly preventing, restricting or distorting competition in any aviation service market. In addition, 4.5 Please provide details of the procedure, including Section 54 of the MAVCOM Act 2015 provides that mergers time frames for clearance and any costs of (including joint ventures) that have resulted or may be expected notifications. to result in a substantial lessening of competition in any aviation service market are prohibited. Currently, no fees are charged by MAVCOM for notification of MAVCOM has the power to investigate any aviation industry- mergers or proposed mergers and any applicable fees will be related mergers and is more likely to investigate an anticipated prescribed by MAVCOM via regulations in the future. merger or a merger if (i) the combined turnover of the merger parties Notification of an anticipated merger or merger to MAVCOM in Malaysia in the financial year preceding the anticipated merger or and an application for a decision from MAVCOM on whether an the merger is at least RM 50 million, or (ii) the combined worldwide anticipated merger or merger infringes the competition provisions turnover of the merger parties in the financial year preceding the in the MAVCOM Act 2015 shall be made in the form and manner anticipated merger or the merger is at least RM 500 million. In the determined by MAVCOM. Upon receiving a complete application, event that MAVCOM finds a merger transaction to have the effect of MAVCOM will: substantially lessening competition, MAVCOM can among others (a) determine whether an anticipated merger or merger will order that the merger be dissolved or modified. or has occurred within the meaning of Section 54 of the MAVCOM Act 2015; (b) publish a summary of the application for public consultation; 4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the (c) evaluate the competitive effects of the anticipated merger or purposes of mergers and acquisitions? merger; (d) prepare a proposed decision and procure feedback from the Per the Guidelines on Aviation Service Market Definition published applicant and the public; and by MAVCOM on 19 July 2018, MAVCOM utilises the hypothetical (e) proceed to make its final decision of non-infringement in the monopolist test and among others consider the service market and event that there are no competition concerns. geographic market dimensions in order to identify the relevant In the event that MAVCOM determines that there are competition aviation service market. concerns, MAVCOM may proceed to conduct an extensive

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assessment of the anticipated merger or merger which will entail Patents, trade marks, industrial design and geographical indication detailed discussions between MAVCOM and the merger parties and may be protected by filing an application with the Intellectual procurement of public feedback. Upon completion of MAVCOM’s Property Corporation of Malaysia (“MyIPO”). There is, however, no further assessment, MAVCOM will then make an infringement system of registration for copyright and layout design in Malaysia. decision or make a non-infringement decision or accept an undertaking Protection of copyrightable works and layout design is provided from the merger parties to resolve any foreseeable competition automatically under the Copyright Act 1987 and the Layout Designs concerns (provided that the competition concerns are clear). of Integrated Circuits Act 2000, respectively, based on certain criteria The timeframe for the above assessment will be determined on of eligibility. Nevertheless, copyright owners may be afforded more a case-by-case basis subject to the complexity of the issues and tangible protection by voluntarily notifying and depositing a copy of readiness of any information MAVCOM may require. the work eligible for copyright with the MyIPO. Malaysia

4.6 Are there any sector-specific rules which govern the 4.11 Is there any legislation governing the denial of aviation sector in relation to financial support for air boarding rights and/or cancelled flights? operators and airports, including (without limitation) state aid? Denial of boarding rights and flights cancellation are governed under the Consumer Protection Code as follows: There is no specific rule which governs financial support for the (a) Paragraph 11 (Denied Boarding) of the Consumer Protection aviation sector. Code states that when an operating airline reasonably expects to deny boarding on a flight, it shall first contact passengers to give them the option to volunteer to surrender 4.7 Are state subsidies available in respect of particular their reservations. Passengers who volunteer shall be routes? What criteria apply to obtaining these offered compensation and care in accordance with the First subsidies? Schedule of the Consumer Protection Code. If the number of passengers who volunteer to surrender their reservations Generally, the Malaysian Government does not provide subsidies are insufficient, the operating airline may then deny boarding in respect of particular routes. For non-economic aviation services to any passenger and the airline shall immediately offer conducted for rural communities in East Malaysia, the Malaysian compensation in accordance with the First Schedule of the Government has appointed and grants subsidies including exemption Consumer Protection Code. from the SST to MASwings to provide the said rural air services. (b) Paragraph 12 (Flight Delay and Cancellation) of the Consumer Protection Code states that when an operating airline reasonably expects a flight to be delayed for at least 4.8 What are the main regulatory instruments governing two hours in its scheduled time of departure or where the the acquisition, retention and use of passenger data, flight is cancelled, the operating airline shall offer passengers and what rights do passengers have in respect of the compensation and care as specified in the First Schedule their data which is held by airlines and airports? of the Consumer Protection Code. The airline is liable for damage occasioned by delay in a flight or cancellation and The Personal Data Protection Act 2010 (“PDPA”) is the main such liability is limited to 4,694 Special Drawing Rights for regulatory instrument governing the acquisition, retention and use each passenger unless such delay or cancellation is caused of personal data in Malaysia for commercial purposes. by extraordinary circumstances or the airline has taken reasonable steps to avoid such damage. Passengers have the right, upon request, to obtain information on their personal data, limit the processing of personal data and also to update or make amendments to their personal data held by airlines. 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights?

4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the Late arrival and departure of flights are governed under the Consumer data and are there any applicable sanctions? Protection Code. MAVCOM has the right to impose a financial penalty on air carriers Section 9 of the PDPA provides that when processing personal data, a for an amount not exceeding RM 200,000 for the first non-compliance data user shall take practical steps to protect the personal data, among with provisions of the Consumer Protection Code governing late others, from any loss. There is no specific obligation imposed on the arrival and departure of flights. For subsequent non-compliance(s), airline with regard to the loss of data. However, the contravention MAVCOM may impose a fine of up to 10 times the amount of fine of Section 9 by a data user amounts to an offence which shall, on that was imposed for the first non-compliance. conviction, be liable to a fine not exceeding RM 300,000 or to imprisonment for a term not exceeding two years, or both. 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, 4.10 What are the mechanisms available for the protection are imposed on the airport authorities? of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? The Civil Aviation (Aerodrome Operations) Regulations 2016 governs the establishment, maintenance and operation of aerodromes, The protection of intellectual property in Malaysia covers the including setting out the obligations of an aerodrome operator in protection of patents, trade marks, industrial design, geographical relation to the operation of aerodromes. indication, copyright and layout design which are respectively Among the obligations of an aerodrome operator set out under the governed by the Patents Act 1983, Trade Marks Act 1976, Industrial above regulations are those in relation to the maintenance and Designs Act 1996, Geographical Indications Act 2000, Copyright operation of an aerodrome, safety management systems, the storage Act 1987, and Layout Designs of Integrated Circuits Act 2000. of inflammable goods and dangerous goods, the removal of obstacles

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from aerodromes, environmental management programmes, lighting of obstacles, aerodrome operations and services, aerodromes’ physical 4.17 Is vertical integration permitted between air operators characteristics, and aerodrome emergency planning. and airports (and, if so, under what conditions)?

Please refer to question 4.1 above. 4.14 To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger? 4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your The general consumer protection legislation does not comprehensively jurisdiction or operators of aircraft generally into and out of your jurisdiction? govern the relationship between the airport operator and the passenger. Consumer protection for passengers is more specifically governed Malaysia under the Consumer Protection Code. No, there are no such requirements.

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

The principal GDSs in Malaysia are Amadeus, Mercator (Navitaire), 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments Sabre (Abacus) and Travelport (Galileo). affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? Please refer to question 1.10 above. No, there are no such requirements.

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Norhisham Abd Bahrin Nazran Arvind Bin Nahdan Azmi & Associates Rengganathan th 14 Floor, Menara Keck Seng Azmi & Associates 203 Jalan Bukit Bintang 14th Floor, Menara Keck Seng 55100 Kuala Lumpur 203 Jalan Bukit Bintang Malaysia 55100 Kuala Lumpur Malaysia Tel: +603 2118 5000 Fax: +603 2118 5111 Tel: +603 2118 5000 Email: [email protected] Email: [email protected] URL: www.azmilaw.com URL: www.azmilaw.com

Malaysia Norhisham is a Corporate and Mergers & Acquisitions Partner at Azmi Arvind is a Senior Associate in the Corporate and Mergers & Acquisitions & Associates. His practice areas cover all corporate matters, aviation, group. Arvind obtained his LL.B. (Hons.) from Multimedia University in mergers & acquisitions, private equity and venture capital. 2013, and was admitted as an advocate & of the High Court of Malaysia in May, 2014. Hisham is an Advocate & Solicitor at the High Court of Malaya and graduated from the International Islamic University Malaysia with Arvind is an M&A lawyer with experience in the aviation sector. He an LL.B. (Hons.) in 1999. He also holds an M.B.A. in International advises clients on a broad range of corporate matters including aviation, Business from the Royal Docks Business School of the University of mergers & acquisitions, private equity and venture capital. East London. Over the years, Arvind has assisted and advised Waypoint Leasing in Hisham’s work is recognised in The Legal 500, IFLR 1000 and Asian its leases of rotary wing aircraft to Malaysian entities, with regard to their Legal Business. He is recommended in the fields of Corporate and rights as lessor and the security measures made available to lessors of Mergers & Acquisitions in The Legal 500 Asia-Pacific for 2016 and aircraft leased and operated in Malaysia. He has also assisted a lender 2015. He is also the co-author of the Malaysian chapter in the Mergers in structuring a transaction involving a fleet reduction by the Malaysia & Acquisitions Review for 2015 and 2016 (9th and 10th Editions), Airlines Group in early 2017. published by Law Business Research Ltd, London.

Azmi & Associates is a full-service Malaysian law firm based in Kuala Lumpur with more than 70 lawyers. The Firm undertakes and handles various legal assignments including mergers & acquisitions, the capital debt market, banking transactions (both Islamic and conventional), intellectual property, aviation, employment and labour, conveyancing, civil litigation, alternative dispute resolution, shipping, taxation, cybersecurity and data protection, business process outsourcing, biotechnology, energy, foreign investment, franchising, technology, communication and media, mining and natural resources, and international trade. Azmi & Associates participates actively in the TerraLex network of law firms based in Florida, USA and serves as a member in the Europe-based First Law International. The Firm is also a member of the ASEAN Plus Group, a network of law firms providing seamless access to legal services in ASEAN and North Asia. To cater to the growing demand from the Chinese-speaking markets, its China desk is staffed by Chinese-speaking professionals.

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Malta

Dingli & Dingli Law Firm Dr. Tonio Grech

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

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

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

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

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

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

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

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This is provided, further, that the above does not hinder the Added Tax Act (Chapter 406 of the Laws of Malta), the following registration of a special privilege where the Aircraft Registration supplies are exempt with credit: Act requires registration for its continuing validity and effect. (1) The supply of aircraft destined to be used by airline operators Where it is stated in the instrument of mortgage that it is prohibited for reward chiefly for the international transport of passengers to effect the transfer of the aircraft which is being mortgaged or and/or goods. charged, or of a share therein, without the previous written consent (2) The supply to constructors, owners or operators of aircraft of the mortgagee, the director general shall make a note in the referred to in (1) of equipment incorporated or used therein. National Aircraft Register to such effect, and the director general, (3) The supply of services consisting of the modification, notwithstanding any other provision of the Aircraft Registration Act, maintenance, chartering and hiring of aircraft referred to in shall not record any transfer of such aircraft or of a share therein, (1) or equipment referred to in (2). Malta unless the consent in writing of such mortgagee is produced to him, (4) The supply to the owners or to the operators of aircraft referred except where the transfer is made pursuant to a court order in a sale to in (1) of goods for the fuelling or provisioning thereof. by auction of such an aircraft or pursuant to any other court order; any (5) The supply of services other than those referred to in (3), transfer registered in violation of this provision shall be null and void. carried out for the direct needs of aircraft referred to in (1) and for the direct needs of their cargo such as towage, Where a creditor has registered an international interest in the pilotage, rescue services, valuation, use of the airports, International Registry in accordance with the first schedule of the services provided to aircraft operators by their agents acting Aircraft Registration Act, it shall be lawful for the debtor (being as such, services necessary for the landing, take-off or stay the registrant or the owner of the aircraft, or both) to execute and in airports, and assistance provided to the passengers or the file a prohibitory notice in favour of one or more creditors, in the crew for the account of the airline operators. form prescribed, which shall be entered into the National Aircraft With regard to the depreciation rates in relation to income tax, Register by the director general. according to the Deduction for Wear and Tear of Plant and When a prohibitory notice is entered into the National Aircraft Machinery Rules, the depreciation rate for the airframe, engines and Register, the director general shall not thereafter record any security aircraft engine or airframe overhaul is 16.7% (in a six-year straight interest in the National Aircraft Register in accordance with this line). Insofar as the interiors are concerned, these depreciate by part, until the prohibitory notice is withdrawn by the creditor. 25% (in a four-year straight line). Article 47 of the Duty on Documents and Transfers Act (Chapter 2.3 Are there any particular regulatory requirements 364 of the Laws of Malta) deals with exemptions for certain which a lessor or a financier needs to be aware of as marketable securities acquired or disposed of by persons defined regards aircraft operation? therein. Amongst such persons are companies having more than half of their ordinary share capital, voting rights and rights to profits An international interest registered in the International Registry held by any person who is not resident in Malta and who is not shall not be subordinate to any mortgage registered in the National owned or controlled by, directly or indirectly, nor acts on behalf Aircraft Registry, even if the international interest is registered at a of, an individual or individuals who are ordinarily resident and later date. Consequently, it is advisable for a mortgagee to also have domiciled in Malta. the mortgage registered in the International Registry. With regard to aircraft leasing, the VAT Department has issued guidelines applying the standard rate of VAT of 18% on the 2.4 As a matter of local law, is there any concept of title established percentage of the lease deemed to be related to the use annexation, whereby ownership or security interests of the aircraft in EU airspace. in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft owned by another party? If so, what are the conditions 2.6 Is your jurisdiction a signatory to the main to such title annexation and can owners and financiers international Conventions (Montreal, Geneva and of engines take pre-emptive steps to mitigate the risks? Cape Town)?

Article 26 (4) of the Aircraft Registration Act (Chapter 503 of the Yes, Malta is a signatory to the main international Conventions. Laws of Malta) lays down that where an engine has been attached to an airframe, which is not also owned by the airframe owner, 2.7 How are the Conventions applied in your jurisdiction? each of the owners shall retain the ownership of their part and the engine shall not accede to the airframe. Moreover, any security over The Conventions are applied by the courts of Malta. the aircraft does not extend to any engine attached to the airframe when such engine does not belong to the owner of the airframe who has granted the security, notwithstanding that the engines may be 2.8 Does your jurisdiction make use of any taxation specifically referred to in the instrument of mortgage, the National benefits which enhance aircraft trading and leasing Aircraft Register or elsewhere. (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal 2.5 What (if any) are the tax implications in your of aircraft? jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), Under Maltese tax law, no withholding tax is payable on the lease and b) documentary taxes such as stamp duty; and payments when the lessor is not tax-resident in Malta. The tax (to the extent applicable) do exemptions exist as legislation is very favourable to aircraft operators who are not tax- regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? resident in Malta. Income derived by them from the ownership, leasing or operation of aircraft used in international aviation business is not taxed in Malta if such income is not received in According to Item 7 of Part One of the Fifth Schedule of the Value

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Malta. This is so even if the aircraft is registered in, or operated (e) have the power to receive any payment of the price, lease from, Malta. Moreover, the applicable accelerated tax depreciation payments, and any other income which may be generated rates are six years for the airframe and engines and four years for the from the management of the aircraft. interior of the aircraft. With regard to the value-added tax, leasing of aircraft is chargeable 3.3 Which courts are appropriate for aviation disputes? to VAT, but only on the deemed use of the aircraft within European Does this depend on the value of the dispute? For airspace. For this purpose, the VAT Department has issued a formula example, is there a distinction in your jurisdiction that establishes the percentage of such use taking into account the regarding the courts in which civil and criminal cases are brought? features of the particular aircraft. Through this scheme the lessor

Malta may claim back the original VAT incurred upon acquisition of the aircraft. No VAT is charged in respect of the supply of aircraft The Civil Courts are appropriate for aviation disputes. The Courts destined to be used by airline operators for reward chiefly for of Magistrates, in their civil jurisdiction, take cognisance of cases international transport of passengers or goods. for an amount up to eleven thousand, six hundred and forty-six euros and eighty-seven cents (EUR 11,646.87) and the First Hall of the Civil Court takes cognisance of cases for a higher amount. 3 Litigation and Dispute Resolution In the event of cases before the Courts of Magistrates in their civil jurisdiction, appeals are heard by the Court of Appeal presided over by one judge; and in the case of the First Hall of the Civil Court, 3.1 What rights of detention are available in relation to appeals are heard and decided by the Court of Appeal presided aircraft and unpaid debts? over by three judges. Criminal cases are heard and decided by the Criminal Courts, comprising the Courts of Magistrates in their The detention of aircraft in respect of unpaid charges may be criminal jurisdiction, the Criminal Court and the Criminal Court achieved through a warrant of arrest of the aircraft, as a precautionary of Appeal, presided over by one judge or three judges depending measure and/or as a means of enforcement. As a precautionary on whether the appeal is made from a decision of the Courts of measure, the warrant of arrest may only be sued out by: (a) the Magistrates in their criminal jurisdiction or the Criminal Court, holder of a mortgage or of an international interest, whatever the respectively. amount of the mortgage or the international interest; or (b) any other creditor in security of a claim of seven thousand euros (EUR 7,000) in the case of non-commercial aircraft or one million euros (EUR 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic 1,000,000) in the case of an aircraft being used for public transport. airlines/parties and non-domestic airlines/parties?

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

Under article 33 of the Aircraft Registration Act, without prejudice to any default remedies as may be applicable under the Cape 3.5 What types of remedy are available from the courts Town Convention by virtue of the First Schedule to the Aircraft or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis? Registration Act, the mortgagee shall, in the event of default of any term or condition of a registered mortgage or of any document or agreement referred to therein, and upon giving notice in writing to In respect of unpaid charges, an interim remedy may be achieved the debtor: through a precautionary warrant. The process takes only a couple of days to obtain such a precautionary warrant. In such a case, the (a) be entitled to take possession of the aircraft or share therein in respect of which he is registered; but, except so far as may plaintiff has to institute court proceedings on the merits of the case be necessary for making a secured aircraft or share available within 20 days of the issuance of the precautionary warrant of arrest as a security for the secured debt, the mortgagee shall not, by the court. As a precautionary measure, the warrant of arrest may by reason of the mortgage, be deemed to be the owner of the only be sued out by (a) the holder of a mortgage or of an international aircraft or share, nor shall the mortgagor be deemed to have interest, whatever the amount of the mortgage or the international ceased to be the owner thereof; interest, or (b) any other creditor in security of a claim of seven (b) have the absolute power to sell the aircraft or share in respect thousand euros (EUR 7,000) in the case of non-commercial aircraft, of which he is registered; but where there are more persons or one million euros (EUR 1,000,000) in the case of an aircraft being than one registered as mortgagees of the same aircraft or used for public transport. After obtaining judgment in his favour, the share, a subsequent mortgagee shall not, except under the plaintiff would then be able to request the court to issue an executive order of a court of competent jurisdiction, sell the aircraft or warrant of arrest of the aircraft, and if still not paid, the plaintiff could share without the concurrence of every prior mortgagee; and also institute proceedings for the judicial sale of the aircraft and the if the proceeds of the sale, after discharging the secured debt, ranking of creditors in the case that there are two or more creditors. shows a surplus in his hands, the mortgagee shall hold under trust or deposit the same for the benefit of other creditors and This process will normally be effected within a year. of the mortgagor-debtor; (c) have the power to apply for any extensions, pay fees, receive 3.6 Are there any rights of appeal to the courts from the certificates, and generally do all such things in the name of the decision of a court or arbitral tribunal, and, if so, in owner or registrant as may be required in order to maintain what circumstances do these rights arise? the status and validity of the registration of the aircraft; (d) have the power to lease the aircraft so as to generate income There is a right of appeal from a decision of a court and there is therefrom; and also a right of appeal from an arbitration award, unless the parties

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had renounced such a right in the arbitration agreement. Malta is a signatory to the New York Convention on the enforcement of 4.6 Are there any sector-specific rules which govern the arbitral awards. aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid? 4 Commercial and Regulatory In the case of State aid, which does not fall within the 26 categories of the General Block Exemption Regulation, clearance must be 4.1 How does your jurisdiction approach and regulate obtained from the European Commission. joint ventures between airline competitors? The procedural steps are those that are applicable to Member States of Malta the European Union. The Member State must notify the Commission There are no sector-specific competition rules which apply to of its intention to grant or alter its aid. The Commission will make a aviation in Malta. The general competition rules found in the preliminary examination and decide whether the measure submitted Competition Act apply. The responsibility for the application by the Member State qualifies as State aid and whether it raises serious of competition rules in Malta lies principally with the Office for concerns as to its compatibility, in which case the Commission will Competition, as established by article 13 of the Malta Competition proceed to the formal investigation procedure. and Consumer Affairs Authority Act. The Member State is allowed to submit its observations on a decision of incompatibility of the proposed measure, upon which 4.2 How do the competition authorities in your the Commission will issue another decision. jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? 4.7 Are state subsidies available in respect of particular So far, there has been no competition assessment by the Office for routes? What criteria apply to obtaining these subsidies? Competition regarding the aviation sector. It is therefore not certain that the SSNIP (Small but Significant and Non-transitory Increase in Price) test would be applied in Malta to define the relevant market No, they are not. for the purposes of a competition assessment in the aviation sector. What is certain is that the Office for Competition is bound to apply 4.8 What are the main regulatory instruments governing the decisions of the European Commission. the acquisition, retention and use of passenger data, The criteria for assessing the competitive effect of a transaction are and what rights do passengers have in respect of their data which is held by airlines and airports? those that would be applied by the European Commission in assessing a similar transaction – that is: the welfare effects of the transaction on the consumer; whether the market entry by a new party is commercially Regulation (EC) No. 80/2009, which repealed Regulation (EEC) viable; the market dominance by two or more carriers; and so on. No. 2299/89, protects passengers with regard to computerised reservation systems. In 2007, the Maltese Parliament enacted the Code of Conduct for Computerised Reservation Systems Act 4.3 Does your jurisdiction have a notification system (Chapter 434 of the Laws of Malta), which provides protection for whereby parties to an agreement can obtain passengers in relation to the data submitted by carriers. regulatory clearance/anti-trust immunity from regulatory agencies? 4.9 In the event of a data loss by a carrier, what Traders can obtain advice from the Office for Consumer Affairs obligations are there on the airline which has lost the established under the Malta Competition and Consumer Affairs data and are there any applicable sanctions? Authority Act, Chapter 510 of the Laws of Malta. The Computerised Reservation Systems Board, which is established under the Computerised Reservation Systems Act, may impose 4.4 How does your jurisdiction approach mergers, disciplinary penalties on system vendors, parent carriers, acquisition mergers and full-function joint ventures? participating carriers and/or subscribers for infringements of the provisions of the Act up to a maximum of 10% of the annual turnover Mergers, acquisition mergers and joint ventures are governed of the relevant activity of the undertaking concerned. In fixing the by the Companies Act, Chapter 386 of the Laws of Malta. The amount of the penalty, regard is had both to the seriousness and to amalgamation of two companies may be effected by (a) merger by the duration of the infringement. acquisition, or (b) merger by formation of a new company. The Such decisions imposing disciplinary penalties are not of a penal companies may be owned by foreign shareholders. nature, and any such penalties shall be recoverable as a civil debt by the Director of Civil Aviation by action before the competent court 4.5 Please provide details of the procedure, including of civil jurisdiction. time frames for clearance and any costs of Carriers, whether they are parent or participating carriers, subscribers, notifications. or system vendors, are subject to the jurisdiction and the procedures of, and the administrative penalties imposed by, the Computerised No procedure or time frames for the obtaining of advice are outlined Reservation Systems Board. in the Malta Competition and Consumer Affairs Authority Act, Chapter 510 of the Laws of Malta.

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

There is a register for trademarks and patents at the department The licensing of airports is regulated by the Civil Aviation (Aerodrome of the Comptroller of Industrial Property. Trademarks are filed in Licensing) Regulations. The applicant for an aerodrome licence has accordance with the provisions of the Trademarks Act, Chapter 416 to submit for acceptance by the director general of civil aviation an of the Laws of Malta, and patents are filed in accordance with the aerodrome manual, and amendments thereto as may be required provisions of the Patents and Designs Act, Chapter 417 of the Laws from time to time. The manual shall consist of five parts which shall Malta of Malta. Copyright is protected by the Copyright Act. It enjoys civil contain the information specified in appendix 1 to ICAO Document protection, as well as a criminal sanction in the case of any dealing 9774. with infringed articles, such as the distribution of pirated goods. The The aerodrome manual shall: courts which take cognisance of these matters are the ordinary courts ■ be typewritten or printed, and signed by the aerodrome and there are no special courts established to deal with these issues. operator; ■ be in a format that is easy to revise; 4.11 Is there any legislation governing the denial of ■ have a system for recording the currency of pages and boarding rights and/or cancelled flights? amendments thereto, including a page for logging revisions; and The Denied Boarding (Compensation and Assistance to Air ■ be organised in a manner that will facilitate the preparation, Passengers) Regulations, 2011, implement Regulation (EC) No. review and acceptance and/or approval process. 261/2004 of the European Parliament and the Council of 11 February Furthermore, the operator of an aerodrome used for public transport 2004 establishing common rules on compensation and assistance to purposes shall comply with the Standards and Recommended passengers in the event of denied boarding and of cancellation or Practices of Volume 1 and Volume 2, Annex 14 to the Convention on long delay of flights, and repealing Regulation (EEC) No. 295/91 International Civil Aviation, except for differences filed by Malta, (Text with EEA relevance). and with national regulations, as well as with any conditions that are The Civil Aviation (Rights of Disabled and Persons with Reduced specified in the aerodrome licence. Mobility) Regulation implements Regulation (EC) No. 1107/2006 of the European Parliament and of the Council of 5 July 2006 4.14 To what extent does general consumer protection concerning the rights of disabled persons and persons with reduced legislation apply to the relationship between the mobility when travelling by air and Regulation (EC) No. 2006/2004 airport operator and the passenger? of the European Parliament and of the Council of 27 October 2004 on cooperation between national authorities for the enforcement of By the Civil Aviation (Rights of Disabled Persons and Persons consumer protection laws of the Regulation on Consumer Protection with Reduced Mobility) Regulations, the airport operator must Cooperation. comply with the obligations pertaining to it as specified in The Package Travel, Package Holidays and Package Tours Regulation (EC) No. 1107/2006. Moreover, the airport operator can Regulation, which transposed into Maltese law Council Directive impose airport charges only within the parameters of the Airport 90/314/EEC, grants protection to consumers of package holidays Economic Regulations. Furthermore, by the Civil Aviation Security and tours. Regulations, the airport operator must implement and maintain such airport security programmes as are appropriate to meet the 4.12 What powers do the relevant authorities have in requirements of the national civil aviation security programme. relation to the late arrival and departure of flights? 4.15 What global distribution suppliers (GDSs) operate in Under Regulation 5 of the Denied Boarding (Compensation and your jurisdiction? Assistance to Air Passengers) Regulations, 2011, the operating air carrier is guilty of an infringement punishable by an administrative In relation to global distribution suppliers, the applicable law is fine of not less than four hundred and seventy euros (EUR 470) and Chapter 434 of the Laws of Malta, namely the Code of Conduct for not exceeding five thousand euros (EUR 5,000). In the case of non- Computerised Reservation Systems Act. There is no restriction as compliance with a compliance order, the director general (Consumer to the number of computerised reservation systems to be used. Affairs) may impose a daily fine of not less than one hundred and twenty euros (EUR 120) and not more than two hundred and thirty euros (EUR 230) for each day of non-compliance. 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? Any person who feels aggrieved by a decision, order, administrative fine or measure imposed or taken by the director general (Consumer There are no ownership requirements. Affairs), may file an appeal before the Competition and Consumer Appeals Tribunal in terms of the Act.

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

5.1 In your opinion, which pending legislative or In the granting of an aerodrome licence, our law does not prohibit regulatory changes (if any), or potential developments vertical integration; however, the need has never arisen to legislate affecting the aviation industry more generally in on vertical integration insofar as air operators and airports are your jurisdiction, are likely to feature or be worthy of concerned. The only international airport in Malta was, until 2002, attention in the next two years or so? owned and operated by the government and, although privatised now, it is not owned or operated by any air operator. In our opinion, it is likely that more powers will be given to the Malta mortgagee. 4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your jurisdiction or operators of aircraft generally into and out of your jurisdiction? Dr. Tonio Grech By Article 4 of the Civil Aviation (Air Operators’ Certificates) Act, Dingli & Dingli Law Firm 18/2 South Street Chapter 218 of the Laws of Malta, the Director of Civil Aviation Valletta 1102 shall grant to any person applying therefor an air operator’s Malta certificate if he is satisfied that that person is competent, with regard Tel: +356 2123 6206 in particular to his previous conduct and experience, his equipment, Fax: +356 2124 0321 organisation, staffing, maintenance and other arrangements, to Email: [email protected] secure the safe operation of aircraft of the types specified in the URL: www.dingli.com.mt certificate on flights of the description and for the purpose so specified. In assessing a person’s competency to operate aircraft, 1979–1984: Read law at the University of Malta and graduated as a lawyer. the Director of Civil Aviation will take into account that person’s capability of meeting the relative safety requirements applicable, 1984–1989: Practised as an advocate at the Attorney General’s Office dealing with, inter alia, transport matters as counsel to the according to law, to his operation of aircraft. The certificate may Ports Department and the Department of Civil Aviation. Attended be granted subject to such conditions as the Director thinks fit, and international conferences on civil aviation and drafted laws to update shall remain in force for a period of one year unless suspended or civil aviation legislation in Malta. Drafted the Eurocontrol Act which revoked earlier. was enacted by Parliament in February 1989. In considering the conduct and experience of such person, the 1989 to date: Practising as a private litigation lawyer, dealing mainly with civil, commercial and maritime court cases, in particular where Director of Civil Aviation may take into account the conduct and protection and indemnity matters are involved. experience of his staff. 2001: Joined Dingli & Dingli Law Firm as a Partner. Article 4 also obliges the person applying for an air operator’s 2004: Successfully completed a course on the Law and Administration certificate to provide full access to any documentation, records, of Trusts organised by the Malta Financial Services Authority; became equipment, aircraft and facilities which the Director may wish to a member of the Institute of Financial Services Practitioners. inspect or examine.

Dingli & Dingli Law Firm is a Maltese firm established in 1982 with offices at 18/2, South Street, Valletta 1102. Although by Malta’s standards it is a medium-sized firm, it enjoys a solid reputation for efficiency and effectiveness, leading to results. The firm handles all types of legal work and in completely new areas of practice it is ready to learn quickly. The firm is fluent in Maltese, English, Italian, French and Spanish, also having a basic understanding of German and Russian. Malta’s relatively recent entry as a Member of the European Union has opened a window of opportunity, and the firm leaves no stone unturned to face the future with confidence and expectation. The firm is particularly active in the area of maritime law, , taxation and international tax planning, financial services, aviation law, intellectual property law, investment, residency, real estate, succession and trusts. The firm is often involved in the major maritime cases brought before the Courts of Malta or the Malta Arbitration Centre. These include, to name a couple of these cases, the Normand Carrier case, which involved a collision in the Grand Harbour in Malta, and the Nuria Tapias case, relating to a collision between the Nuria Tapias and the Junior M in the Black Sea, where the limitation fund was set up in Malta.

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Mexico Luis A. Cervantes Muñiz

Cervantes Sainz, S.C. Alejandro Zendejas Vázquez

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

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were created: Grupo Aeroportuario del Pacífico (GAP); Grupo 1.3 What are the principal pieces of legislation in Aeroportuario Centro Norte (holder of OMA – Operadora your jurisdiction which govern air safety, and who Mexicana de Aeropuertos); Aeropuertos del Sureste (ASUR); and administers air safety? Grupo Aeroportuario de la Ciudad de México (GACM – the current holding company of Mexico’s City New Airport, NAICM – Nuevo Air safety in Mexico is administered and enforced by the DGAC. Aeropuerto Internacional de la Ciudad de México). Such groups Within the DGAC, a specific Deputy Directorate General for comprise private investment groups, public investment achieved Air Safety and Security (DGASA) oversees this matter. This through IPO processes and, in some cases, they can also be operated administrative body regulates and governs the revision faculties and through public-private partnerships. Additionally, a large number of enforces air safety and security provisions; in addition, the DGASA airports are owned by state governments. is the entity responsible for supervising Airport Commanders who, Mexico As a global consideration, all airports in Mexico are constructed, amongst others, are in charge of performing the daily and routine maintained, operated and administered through a concession title checks for air safety and security. All safety and security activities granted by the Ministry of Communication and Transport. are governed by the Civil Aviation Law, the Regulations to the Civil Aviation Law, the Technical Air Personnel Licensing Law and sundry Mexican Official Standards. 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction?

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

Air charters receive specific treatment under the Civil Aviation Law. 1.9 What legislative and/or regulatory regime applies to This has no bearing on air safety and security, nor on compliance air accidents? For example, are there any particular with operational standards when flying into and out of Mexico. rules, regulations, systems and procedures in place which need to be adhered to? Notwithstanding, there are differences in the services which can be performed with charter operations, the type of traffic rights available The DGAC has a specific Directorate for the investigation, follow- to be exercised and certain administrative procedures for requesting up and ruling on air accidents. Each investigation deriving from authorisation for such operations. an air accident will follow the protocol set forth by the Directorate of Accidents. There are other federal and state agencies which can 1.6 As regards international air carriers operating in your assist in the investigation, such as the Republic Attorney General jurisdiction, are there any particular limitations to be (Procuraduría General de la República – PGR), state-level aware of, in particular when compared with ‘domestic’ attorney generals’ offices and civil protection agencies. All accident or local operators? By way of example only, restrictions and taxes which apply to international but investigations, search and rescue activities must be performed in not domestic carriers. accordance with the Search, Rescue and Accident Investigation Regulations. No major differences between domestic and foreign carriers may be observed in Mexico. The main difference to be highlighted on 1.10 Have there been any recent cases of note or other the operational side is that no foreign carrier – whether private, notable developments in your jurisdiction involving scheduled, non-scheduled or from general aviation – is allowed to air operators and/or airports? perform cabotage operations, in either of their varieties: stand-alone or continuous cabotage. Several developments have taken place in the aviation sector very A consequence of this is that there is a limitation on the percentage of recently. It is worth mentioning the initiatives deriving from the the capital stock of an air transport company in which foreign entities authorisation for the construction of the new airport for Mexico City. – whether individuals or companies – can participate. The limit is With regard to the bilateral structure of air transport, Mexico entered 25% in domestic air transport, air taxi transport, and specialised air into negotiations with the government of the United States of America, transport. In addition, there is a limit of 49% for a foreign company from which a new bilateral air services agreement resulted. The new to participate in a concession or permit for airfields. This limit can bilateral agreement was steered towards liberalising certain rights and be exceeded upon authorisation from the Ministry of Economy with encouraging each of the parties to open new commercial opportunities the prior approval of the Ministry of Communication and Transport. for air carriers. In addition to the air service agreement with the United States, Mexico updated or renegotiated agreements with: Belize; Canada; Colombia; Kuwait; the Philippines; Qatar; Saudi Arabia; the 1.7 Are airports state or privately owned? United Arab Emirates; and the United Kingdom. Furthermore, the Civil Aviation Law underwent a major amendment to incorporate the Mexico has 76 airports, not taking into consideration non-controlled safety management system standards in regard to air safety. airstrips. After a reform in the 1990s, four major airport groups

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2. Convention for the Unification of Certain Rules for 2 Aircraft Trading, Finance and Leasing International Carriage by Air (also known as the Montreal Convention 1999). 2.1 Does registration of ownership in the aircraft register 3. Convention on the International Recognition of Rights in constitute proof of ownership? Aircraft (also known as the Geneva Convention). 4. Convention for the Unification of Certain Rules relating to Registration of ownership in Mexico constitutes a declaration of International Carriage by Air (commonly referred to as the the ownership of an aircraft – this includes ownership of any given Warsaw Convention 1929). component thereto such as the engines, to the extent it is attached to 5. Convention on Offences and Certain other Acts Committed the aircraft. Registration in Mexico also has the effects set forth by on Board Aircraft (referred to as the Tokyo Convention Mexico the Chicago Convention 1944. Registration is declaratory and has 1963). no constitutive effects. It is used to publicise and has erga omnes 6. Convention on International Interests in Mobile Equipment effects over the ownership. and its protocol regarding aviation equipment (known as the Cape Town Convention).

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

2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as 2.8 Does your jurisdiction make use of any taxation regards aircraft operation? benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example There are no specific regulatory requirements to be met. Upon access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal execution of a purchase, sale, or sale and leaseback agreement, of aircraft? such agreement must be duly translated into the Spanish language, ratified before a Notary Public and registered before the Mexican Under Mexican law, there are no tax benefits that enhance aircraft Aeronautical Registry. trading.

2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests 3 Litigation and Dispute Resolution in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft owned by another party? If so, what are the 3.1 What rights of detention are available in relation to conditions to such title annexation and can owners aircraft and unpaid debts? and financiers of engines take pre-emptive steps to mitigate the risks? Article 1168 of the Commercial Code sets forth injunctive relief provisions, including for the detention of any type of property or Under local law, there is no concept of title annexation. goods. This injunctive relief measure is granted by the judge in the absence of the defendant upon the filing of the lawsuit in the case 2.5 What (if any) are the tax implications in your that the requirements established in article 1175 are duly complied jurisdiction for aircraft trading as regards a) value- with. Evidence must be filed before the court that a liquidated debt added tax (VAT) and/or goods and services tax (GST), exists and that there is a founded suspicion that the property can be and b) documentary taxes such as stamp duty; and subtracted to avoid the payment of the debt. Finally, the potential (to the extent applicable) do exemptions exist as damages that may be caused by the measure must be warranted. regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? 3.2 Is there a regime of self-help available to a lessor Aircraft trading in Mexico is subject to Value Added Tax; depending or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights on the transaction, Income Tax may also be applicable. under the lease/finance agreement?

2.6 Is your jurisdiction a signatory to the main international There is no regime of “self-help” available in Mexico. It is important Conventions (Montreal, Geneva and Cape Town)? to note that Mexico adopted Option B of the Declarations to the Cape Town Convention. Mexico is a signatory to the following: 1. Convention on International Civil Aviation (also known as the Chicago Convention).

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market” for an airline concentration (the Federal Competition Law 3.3 Which courts are appropriate for aviation disputes? does not use the term “joint venture”) would be analysed under: Does this depend on the value of the dispute? For (i) the possibility of replacing the good or service on which the example, is there a distinction in your jurisdiction concentration would have a direct effect; (ii) the distribution costs of regarding the courts in which civil and criminal cases are brought? the specific service and financial thresholds thereto; (iii) the viability of the market access of other competitors; and (iv) the opinion of the sectorial authorities governing the good or service over which the The Federal Courts are competent in aviation disputes as stated by concentration would have a major impact. the Civil Aviation Law. In case the dispute is commercial, the value of the dispute may determine which court is competent. Finally, Additionally, for a joint venture to go into the review and consequently be subject to the authorisation of the Federal Commission of Economic different courts rule on civil and criminal cases. Mexico Competence (COFECE – the Mexican authority on antitrust and competition matters), it needs to exceed certain limits set forth by 3.4 What service requirements apply for the service of the Federal Competition Law (FCL). A joint venture will require court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties? COFECE clearance when: (i) it implies a concentration equal to or above 18,000,000 (eighteen million) times the daily minimum wage valid in Mexico City (DMWVFD – a reference value determined by The service of process by Mexican courts is always specific to the Minimum Wage Commission which can be consulted on their the address of the defendant and is carried out by judicial clerks website or in the Daily Official Gazette of the Federation); (ii) it exclusively. There are no differences concerning the domestic or implies the accumulation of 35% or more of the shares or assets of an foreign nature of an airline for the purposes of service of process. In economic agent – as defined by the COFECE – whose annual sales any case, if a foreign airline does not have the permanent address of in the territory of Mexico exceed 18,000,000 (eighteen million) times a legal representative in Mexico, the notification would have to be the DMWVFD; and (iii) the transaction implies the accumulation of carried out by diplomatic means. assets or corporate capital exceeding 8,400,000 (eight million four hundred thousand) times the DMWVFD and the annual sales of the 3.5 What types of remedy are available from the courts economic agents involved, jointly or separately, exceed 48,000,000 or arbitral tribunals in your jurisdiction, both on i) an (forty-eight million) times the DMWVFD. interim basis, and ii) a final basis?

A ruling that has been rendered by a first instance court may be 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain appealed and subsequently a direct amparo lawsuit may be filed regulatory clearance/anti-trust immunity from against the appeal ruling. Arbitral awards are final, as recognised regulatory agencies? by the Commercial Code. Consequently, they can only be nullified based on very specific causes of action set forth in article 1457 of Yes, the procedure needs to undergo a parallel and simultaneous the Commercial Code. review. Such review is performed by internal areas of the DGAC and the COFECE. The DGAC review is governed by the Federal 3.6 Are there any rights of appeal to the courts from the Administrative Procedure Law (Ley Federal del Procedimiento decision of a court or arbitral tribunal and, if so, in Administrativo). Revision by the COFECE is regulated by the what circumstances do these rights arise? Federal Competition Law (Ley Federal de Competencia).

Yes; in general terms, any party in a litigation may appeal the 4.4 How does your jurisdiction approach mergers, first instance ruling. That would not be the case in an arbitration, acquisition mergers and full-function joint ventures? since the awards granted by an arbitration panel are final and can only be nullified for the reasons established in article 1457 of the If a transaction of the sort described in the above questions is to Commercial Code. be carried out, two types of requirements should be met: antitrust; and corporate. As regards antitrust requirements, in case the 4 Commercial and Regulatory operation is significant in terms of volume of operations, income or consideration involved, a formal notice must be filed before the COFECE which is the Mexican authority on antitrust and 4.1 How does your jurisdiction approach and regulate competition matters. On the corporate side, certain corporate acts joint ventures between airline competitors? must be executed in order for the merger, for example, to be valid: a merger agreement; shareholders’ meetings; and registration with the There are no specific provisions regulating joint ventures. Civil Public Registry. Finally, it is worth noting that in case the parties and commercial general legislation may be applicable to a joint involved in a merger hold permits or concessions granted by the venture. Notwithstanding the foregoing, the validity of a joint Mexican authorities, then prior to the execution of the merger the venture between competing airlines is subject to authorisation from authorisation of those authorities may be needed in order to prevent both the Ministry of Communications and Transport and the Federal forfeiture of the rights concerning the permits or concessions. Competition Authority.

4.5 Please provide details of the procedure, including 4.2 How do the competition authorities in your time frames for clearance and any costs of jurisdiction determine the ‘relevant market’ for the notifications. purposes of mergers and acquisitions? If certain thresholds are met, the merger or full-function joint On a general basis, and disregarding the specifics of a given case – venture would be subject to the COFECE’s approval, which would i.e. the filing of prior authorisation for a concentration – the “relevant

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analyse whether the operation will have negative economic effects maintenance, use, distribution and destruction of data. Data loss is on the relevant market. If so, this authority may reject the operation pursued and sanctioned in accordance with this law and the sanction or establish certain conditions that the parties must comply with in will vary depending on the specific violation. order for the operation to materialise. On the contrary, if the analysis leads the authority to consider that no harm would be caused to the 4.10 What are the mechanisms available for the protection relevant market, the authorisation would be issued and the parties of intellectual property (e.g. trademarks) and other would be free to formally execute all the corporate documents assets and data of a proprietary nature? needed for such purposes. The COFECE has 60 days to issue its ruling once the notice has been filed or the additional information Industrial property – used as a general term – and intellectual requests made by the authority have been complied with by the

Mexico property – broadly used – are protected by the Mexican Institute of interested parties. The parties must pay a fee of around US$8,000 Industrial Property (IMPI) and the Mexican Institute for Authorial for the COFECE to analyse the concentration notification. Rights (INDAUTOR). IMPI protects trademarks, patents, trade Regarding corporate acts, the parties in the merger must first secrets, industrial designs, trade names and any rights related to execute a merger agreement where they set forth the terms and industrial property. IMPI is the competent authority to file, pursue conditions in which the merger would be carried out. Subsequently, and solve any claim related thereto. INDAUTOR mainly deals with a shareholders’ meeting should be held by each party involved to intellectual creations requiring copyright. approve the merger on the agreed terms, along with the financial statements that will be used for the merger. Finally, the parties 4.11 Is there any legislation governing the denial of must register the corporate resolutions before the Public Registry, boarding rights and/or cancelled flights? considering that the merger will be effective only after three months of its registration. In the case that all the debts owed by Yes, the Civil Aviation Law and the Regulations to the Civil Aviation the parties are covered at the time of the registration, the merger Law directly regulate passenger rights, including denial of boarding. will have full effect without a need for the aforementioned waiting In addition to the Civil Aviation Law and its Regulations, the period. The estimated cost of the entire corporate process, including Federal Consumer Protection Law is applicable, as the relationship notary expenses and registration fees, would be around US$4,500, between an airline and a passenger is considered a commercial depending on the characteristics of the operation. consumer affair. Both legislative bodies describe passenger rights, remedies available for the cases of denied boarding, flight delay or 4.6 Are there any sector-specific rules which govern the flight cancellation. aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid? 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? There are no specific rules regarding the aviation sector. The Civil Aviation Law and its regulations provide specific enforcing faculties for an air carrier to properly use and adhere to 4.7 Are state subsidies available in respect of particular its arrival/departure schedules. Should a violation be detected and routes? What criteria apply to obtaining these enforcement pursued, this would be done through the enactment of subsidies? an administrative sanctioning procedure, performed and enforced by the DGAC. Parallel to the procedure which can be started by the No state subsidies are available; nor are these permitted by law. DGAC, the Consumer Protection Agency (Procuraduría Federal del Consumidor – PROFECO) has legal authority to initiate a 4.8 What are the main regulatory instruments governing procedure on violations of the Federal Consumer Protection Law the acquisition, retention and use of passenger data, due to late arrivals and departures under the parameters set forth by and what rights do passengers have in respect of the Civil Aviation Law. their data which is held by airlines and airports?

Passenger acquisition, maintenance and handling is governed 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, and regulated by the Federal Personal Data Protection Law (Ley are imposed on the airport authorities? Federal de Protección de Datos en Posesión de Particulares). Passengers have a right, and carriers a corresponding obligation, to Airport and airport authorities are governed by the Civil Aviation determine how their personal information is to be treated. With a Law and the Airports Law and its regulations. detailed scope, passengers can determine how their information is maintained and for what purposes it is authorised to be used, and may limit the transfer of such information or request its deletion or 4.14 To what extent does general consumer protection destruction. legislation apply to the relationship between the airport operator and the passenger?

4.9 In the event of a data loss by a carrier, what The relationship between an airport operator and a passenger would obligations are there on the airline which has lost the data and are there any applicable sanctions? fall into the scope of the Consumer Protection Law (LFPC) so long as the passenger is considered a user of the services of the airport. In spite of this, an airline would be jointly liable as the Passenger data must be treated in accordance with the Federal relationship between a passenger and an airport is created because Law of Personal Data Protection. It is important to emphasise of the passenger using an airline. that compliance with the law is mandatory for the acquisition,

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

5.1 In your opinion, which pending legislative or The major computer reservation systems (CRSs), fixed-based regulatory changes (if any), or potential developments operators (FBOs), ground handling and ancillary GDS service affecting the aviation industry more generally in providers operate in Mexico. your jurisdiction, are likely to feature or be worthy of attention in the next two years or so?

4.16 Are there any ownership requirements pertaining to st GDSs operating in your jurisdiction? As of December 1 2018, the recently elected President of the Republic took office. During his political campaign, one of the Mexico highlights was the question of whether if Mexico City International GDSs, as long as they do not fall into the “investment – limited New Airport should continue in its present location and time line, activity” areas of the Foreign Investment Law, have no specific whether it should be relocated or if a new airport should be built in regulations. Their relationship is considered commercially and the nearby area of Military Air Force Base number 1 in Santa Lucía, general laws are thus applicable. State of México (35 miles from the current construction site of the new airport). At the time of writing this chapter, there was still no 4.17 Is vertical integration permitted between air operators decision on the matter. Stakes are high as the new airport is a key and airports (and, if so, under what conditions)? element to properly articulate and take advantage of the legal frame provided by the numerous international air services agreement that No vertical integration is permitted. Additionally, there is a were updated or newly celebrated during the 2012–2018 Federal direct prohibition against air service operating companies, their Government Administration. Should the decision be to halt or in holdings or subsidiaries, owning or acquiring, directly or indirectly, any way modify the current airport, from a transport-connectivity the control of airports or airfields. In this regard, there is also a perspective, the efforts devoted to updating and modernising the maximum allowed threshold of 5% of the stock capital of an airport international air transport services legal framework applicable to concessionaire or permit-holder to own, hold or acquire stock Mexico will have been without reason, as transport will continue capital in an air transport company. to be limited to the bilateral exchange of services under a regime designed to work in the second half of the past century. It will also 4.18 Are there any nationality requirements for entities represent a major peril for domestic and international carriers who applying for an Air Operator’s Certificate in your have placed their stakes considering this infrastructure project, as the jurisdiction or operators of aircraft generally into and investments in medium high density equipments will find no proper out of your jurisdiction? market to fully exploit its potential. As a corollary to the above, close attention is needed to see how the new administration will tackle the Domestic companies (under the applicable limits set forth by the urgent need to provide a more robust administrative, financial and Foreign Investment Law) can either be holders of a Concession Title human capital scheme to the actual civil air transport authority. It is or an Operators Permit for the exploitation of air services. Foreign much needed to prove the current Civil Aeronautics Directorate with carriers may only be holders of a Permit for the exploitation of a functioning independence from the Ministry of Communication international, scheduled or non-scheduled, air services. and Transport; to provide it with sufficient financial and human With regard to the Air Operator Certificate, domestic carriers can resources to tackle the very broad scope of task it has which will apply and obtain an Air Operators Certificate. International Carriers immediately translate into a stronger, more resourceful authority. can apply and obtain a convalidation of the Air Operators Certificate issued in their home jurisdiction.

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Luis A. Cervantes Muñiz Alejandro Zendejas Vázquez Cervantes Sainz, S.C. Cervantes Sainz, S.C. Blvd Manuel Avila Camacho 24 Blvd Manuel Avila Camacho 24 Lomas de Chapultepec Lomas de Chapultepec 11000, CDMx 11000, CDMx Mexico Mexico

Tel: +52 55 9178 5040 Tel: +52 55 9178 5040 Email: [email protected] Email: [email protected] URL: www.cervantessainz.com URL: www.cervantessainz.com Mexico Luis A. Cervantes Muñiz is a graduate of the Escuela Libre de Alejandro Zendejas Vázquez holds a Master’s degree in advanced Derecho (1980). Early in his career he became a partner at studies of International Air and Space Law from Universiteit Leiden, the Santamarina y Steta, S.C. He subsequently spent a couple of years Netherlands. He was admitted to practise law in 2001 and holds a B.A.- at Jáuregui y Navarrete, S.C. In 2001 he founded Cervantes Sainz, equivalent degree from Universidad Iberoamericana, Mexico City. His S.C., where he currently practises law. Over the past three decades, professional experience in the private sector has been focused primarily Mr. Cervantes has been a Law Professor, teaching courses including in the aviation industry. He worked for Interjet Airlines as a junior in- Mercantile Corporations, Commercial Law, Credit Instruments and house attorney; later to be appointed Legal VP in Grupo Hawk Mexico, Transactions, and Foreign Investment, both at Universidad Anáhuac a private air transport company. Mr. Zendejas was later appointed as and Universidad Iberoamericana. He is currently Professor of General Counsel for Vivaaerobus. In the public sector, Mr. Zendejas Commercial Law and Foreign Investment Law at Escuela Libre de served as General Deputy Technical Director and General Counsel in Derecho, in both law school and postgraduate programmes. Mr. the Civil Aviation Authority of Mexico (DGAC); he continued his public Cervantes is an active member of the Mexican Bar Association (Barra service career thereafter, being appointed as General Deputy Director for Mexicana de Abogados), the Illustrious Mexican School of Lawyers Air Transport and Aeronautical Control at the DGAC, where he was able (Ilustre y Nacional Colegio de Abogados de México), the Mexican to execute sundry bilateral air services agreements – amongst others, Association of Corporate Lawyers (Asociación Nacional de Abogados the Mexico-USA agreement – and key amendments to the Civil Aviation de Empresa), the Mexican Institute of Mediation (Instituto Mexicano de Law in relation to air safety and security, as well as the foreign investment la Mediación), and the International Bar Association. law regarding the maximum allowable percentage of foreign investment capital. As of February 2016, Mr. Zendejas has been in private practice with Cervantes Sainz, S.C.

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

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Nigeria Kashimana Tsumba

Banwo & Ighodalo Tenilola Olowu

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

1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ No, there is no separate regulation for commercial, cargo and private or regulate aviation in your jurisdiction. carriers. Part 8 of the NCAR prescribes the requirements for operations and expressly provides that it applies to all types of aircraft. The Civil Aviation Act (the “CAA”) 2006 is the principal legislation governing aviation in Nigeria while the chief regulatory body is the 1.5 Are air charters regulated separately for commercial, Nigerian Civil Aviation Authority (“NCAA”). Other regulatory cargo and private carriers? bodies which regulate aviation include: ■ the Federal Airport Authority of Nigeria (“FAAN”), which No, this is not regulated separately. Air charters are regulated amongst other duties as may be stipulated by the Federal pursuant to the relevant and applicable provisions in the NCAR. Government, is statutorily charged to manage all commercial airports in Nigeria; 1.6 As regards international air carriers operating in your ■ the Federal Ministry of Aviation (“FMA”), which is now part jurisdiction, are there any particular limitations to be of the Transportation Ministry of Nigeria and is responsible aware of, in particular when compared with ‘domestic’ for the formulation of aviation policies in Nigeria; and or local operators? By way of example only, ■ the Nigerian Airspace Management Agency (“NAMA”) restrictions and taxes which apply to international but which provides air traffic services, aeronautical not domestic carriers. telecommunication, navigation services for take-off and landing of aircraft, amongst others. Air operators operating domestic routes do not require a route licence to operate commercial air travel provided that they notify 1.2 What are the steps which air carriers need to take in the NCAA of the route(s) to be operated, the frequency of operations order to obtain an operating licence? and notice of flight schedules to the NCAA, FAAN and NAMA. However, foreign airlines engaging in scheduled operations must An application must be made in writing to the Director General obtain a Foreign Carrier Operating Permit (“FCOP”) issued by the of the NCAA, no later than six months before the proposed date NCAA before engaging in operations after safety assessment audits of utilisation and must be signed by the applicant. The form and are carried out by the NCAA. content of the application is provided for in the Guidelines and In June 2018, in a bid to reduce the tax burden and improve the Requirements for the grant of Airline Operating Permit of the ease of doing business for taxpayers, the Federal Executive Council NCAA. approved two Executive Orders and five Amendment Bills, one of which is the Value Added Tax Act (Modification) Order which 1.3 What are the principal pieces of legislation in exempts transport services available for use by the public from your jurisdiction which govern air safety, and who the payment of Value Added Tax, thus removing the mandatory administers air safety? 5% VAT on transportation. However, the Federal Inland Revenue Service, which is the regulatory body responsible for assessing and Aviation safety is governed by the CAA and the Nigerian Civil collecting Federal Government tax in Nigeria, is yet to implement Aviation Regulations 2015 (“NCAR”). The International Civil this directive. Worthy of note is the fact that in Nigeria, international Aviation Organisation (the “ICAO”), also known as the Chicago airlines have not been subject to the payment of VAT. Convention, also ensures safe operations by Member States. Notably, the NCAA was established in conformity with the ICAO 1.7 Are airports state or privately owned? international standards to further this objective. These Standards were incorporated into the NCAR to ensure compliance as general There are 26 airports owned by the Federal Government and safety conditions for crew, operators, airworthiness, etc. in Part 20 operated by the FAAN, five of which are functional international of the NCAR.

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airports spread around the country. The only State-owned airport is the Akwa Ibom Airport located in Uyo, the capital city of Akwa Ibom 1.10 Have there been any recent cases of note or other State, while the Murtala Mohammed Airport Two (“MMA2”) is the notable developments in your jurisdiction involving air operators and/or airports? only airport operated under a public-private partnership agreement with Bi-Courtney Aviation as the concessionaire. There are also some privately-owned airports, one of which is the Osubi airport In March 2018, the African Continental Free Trade Agreement in Warri, Delta State, owned and operated by the Shell Petroleum (“AfCFTA”) treaty was endorsed by 44 African countries, although Development Company. Nigeria is yet to adopt the same. The AfCFTA seeks to create a single market by tackling “non-tariff barriers” and liberalising commercial services. Airline operators have stated that where Nigeria adopts

Nigeria 1.8 Do the airports impose requirements on carriers the AfCFTA, foreign airlines would be able to schedule local flights flying to and from the airports in your jurisdiction? in Nigeria without the requirement or need of employing local staff. On May 18, 2017, the then-Acting President of Nigeria signed the All air operators must have an Air Transport Licence (“ATL”) issued Presidential Executive Order No. 1 (“EO1”) on “the promotion of by the NCAA to carry out scheduled domestic operations in Nigeria. transparency and efficiency in the business environment designed For domestic carriers operating on a non-scheduled basis, they must to facilitate the ease of doing business in the country”. The EO1 obtain an Airline Operating Permit (“AOP”) issued by the Authority expressly banned touting by officials and unofficial persons at while carriers operating non-commercial flight operations must the airports and provided for the merging of departure and arrival obtain a Permit for Non-Commercial Flights (“PNCF”). interfaces into a single customer interface by government agencies For Nigerian carriers operating international routes, an application is such as the Nigerian Customs Service and the Nigerian Immigration to be made to the NCAA for the issuance of an Air Carrier’s Permit Service. More recently, on July 18, 2018, the Nigerian Aviation (“ACP”). In addition, the air operator must join the International Minister revealed the name of the proposed national carrier as Air Transport Association (“IATA”) and the IATA Clearing House “Nigeria Air” which he stated is to be private sector-led and driven. and must show evidence of financial capability for such operations. Further, non-scheduled operations do not require flight clearance from the NCAA prior to undertaking non-scheduled international 2 Aircraft Trading, Finance and Leasing operations, as long as the operators have Air Operator Certificates (“AOC”), but shall only be required to depart and enter the country 2.1 Does registration of ownership in the aircraft register through designated custom airports. constitute proof of ownership? For foreign airlines engaging in scheduled operations in and out of Nigeria, they must obtain a FCOP issued by the NCAA. In addition, Part 4 of the NCAR provides that no person may operate an aircraft an air service agreement, usually a Bi-lateral Air Service Agreement that is eligible for registration in Nigeria unless it has been registered (“BASA”) is entered into after a safety assessment audit is carried out by its owner or operator and has been issued a certificate of aircraft by the NCAA, prior to the issuance of the FCOP and commencement registration. However, the underlined “operator”, along with the of operations. requirement that an aircraft is eligible for registration if it is owned by a foreign person who has leased the aircraft to a Nigerian citizen, implies that other persons aside from the actual owners of the aircraft 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular can register such an aircraft in Nigeria. Registration of ownership is rules, regulations, systems and procedures in place prima facie proof of title but not conclusive proof of ownership of which need to be adhered to? the aircraft as operators who have leased the aircraft from a foreign person can also register the aircraft in the aircraft register. The Civil Aviation (Investigation of Air Accidents and Incidents) Regulations 2016 applies to the investigation of accidents in Nigeria. 2.2 Is there a register of aircraft mortgages and charges? The Act provides for the establishment of an Accident Investigation Broadly speaking, what are the rules around the Bureau which shall report to the President in the event of an air operation of this register? accident. In addition, the Act stipulates that the State in which the accident occurs will institute an inquiry into the circumstances Presently, there is no register of aircraft mortgages or charges even of the accident, in accordance with the procedure which may be though the NCAR requires the NCAA to establish and maintain recommended by the International Civil Aviation Organization. The “legal interests in aircraft registry”. The information in this register procedure to be complied with can be summarised as follows: may be made available to individuals upon an application. 1. The State in which the accident occurs is to conduct an In practice, interests such as mortgages, charges, liens and other inquiry into the circumstances of the accident. encumbrances are noted in the registration particulars of the aircraft 2. The ICAO will recommend a procedure which is to be and noted in the file maintained for each aircraft by the NCAA. adopted subject to the local legislations of the affected Member State. 3. The State of Registry, that is, the contracting State of the 2.3 Are there any particular regulatory requirements ICAO, on whose register the aircraft is entered is to be which a lessor or a financier needs to be aware of as accorded observer status at the inquiry. regards aircraft operation? 4. The State conducting the investigation is to give feedback of the investigation reports to the State of Registry. The lessor or financier needs to be aware that the owner of the aircraft is liable for any damage, injury or loss arising from the

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operations and activities of the aircraft operator where the same is under its control. The Civil Aviation Act also provides that damages 2.6 Is your jurisdiction a signatory to the main in respect of injury shall be recoverable without proof of negligence international Conventions (Montreal, Geneva and Cape Town)? or intention or any other cause of action subject to the right of indemnity by the lessee or operator. Yes, Nigeria is a signatory to: Paragraph 8.3.1.10 of the NCAR also provides that a lessor shall (a) The Convention for Unification of Certain Rules Relating to transfer to the lessee, at the time of the lease, all maintenance International Carriage of Air – Montreal, 1999. records relating to the aircraft in a manner acceptable to the NCAA. (b) The Convention on International Recognition of Rights in Aircraft – Geneva, 1948. 2.4 As a matter of local law, is there any concept of title (c) The Convention on International Interests in Mobile Equipment Nigeria annexation, whereby ownership or security interests and the Protocol to the Convention on International Interests in a single engine are at risk of automatic transfer or in Mobile Equipment on Matters Specific to Aircraft Equipment other prejudice when installed ‘on-wing’ on an aircraft – Cape Town, 2001. owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks? 2.7 How are the Conventions applied in your jurisdiction?

There is no local law that provides for title annexation in Nigeria. Nigeria has ratified and domesticated the conventions mentioned in question 2.6 above in the Civil Aviation Act 2006 and thus, they 2.5 What (if any) are the tax implications in your are applicable and enforceable in Nigeria. The government has jurisdiction for aircraft trading as regards a) value- further given approval for the establishment of the national entry added tax (VAT) and/or goods and services tax (GST), point to the International Registry within the Nigerian Civil Aviation and b) documentary taxes such as stamp duty; and Authority. The Cape Town Convention, 2001 by Section 73(2) and (to the extent applicable) do exemptions exist as has been domesticated and incorporated under the Fifth Schedule to regards non-domestic purchasers and sellers of the CAA 2006. aircraft and/or particular aircraft types or operations?

Interest earned by a lessor on a finance lease with regards to aircraft 2.8 Does your jurisdiction make use of any taxation trading is not liable to a charge of VAT as it is a return on investment. benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example Also, the Federal Inland Revenue Service (“FIRS”) in Information access to an extensive network of Double Tax Treaties No. 9701 provides that the import of aircraft, aircraft spare-parts or similar, or favourable tax treatment on the disposal and machinery as goods and services taxable at 0%. The import of of aircraft? aircrafts and spare-parts are thus zero-rated goods for the purpose of value-added tax. Previously, VAT was assessed on domestic ticket Please refer to our response to question 2.5. sales in Nigeria, however, by an Executive Order on the Removal of VAT from all forms of shared transportation issued by the Federal Government of Nigeria in June 2018, VAT has been removed from 3 Litigation and Dispute Resolution the Commercial/Domestic air transport sector.

Stamp duty is payable on leases and other documentation depending 3.1 What rights of detention are available in relation to on the term of the lease. For a lease for a term of one to seven years, aircraft and unpaid debts? the applicable stamp duty is 0.78%. However, the Commissioner in certain circumstances can assess stamp duty at 1.5%. Generally, Section 27(3) of the CAA gives the NCAA the power to take most agreements in the aviation industry would be subject to stamp all steps reasonably necessary to ground any aircraft to ensure duties. Also, aviation lease/loan agreement would be subject to compliance. Rule 1.3.3.4 of the NCARs provides that an aircraft stamp duties at the applicable rate depending on the term of the lease. which is involved in a violation for which a civil penalty has been Withholding Tax: income on a property situated in Nigeria is liable imposed or may be imposed on its owner or operator may be subject to tax, regardless of the place of payment. It also applies to lease to detention by the authority in accordance with its enforcement payments and loan payments. It is usually assessed at the rate of procedures. The CAA recognises the right of a State entity, inter- 10% but can be reduced to 7.5% where a double taxation agreement governmental organisation or any other private provider of public has been entered into in Nigeria. Therefore, any income on an services to arrest or detain an object under the law of that State for aircraft situated in Nigeria, will be liable to a withholding tax of payment of amounts owed to such entity, organisation or provider. 10% or 7.5% as the case may be. Capital Gains Tax is imposed on the gains arising from the sale or 3.2 Is there a regime of self-help available to a lessor disposal of chargeable assets at a rate of 10%. In the event of a sale or a financier of an aircraft if it needs to reacquire of any aircraft or aviation asset, the gain arising from the sale will be possession of the aircraft or enforce any of its rights subject to a Capital Gains Tax imposed at the rate of 10%. under the lease/finance agreement?

The CAA provides that any remedy available to a lessor or financier that does not require an application to the court may be exercised without court action and leave of court. Generally, a court order is not required before a lessor or financier can exercise the right of repossession or sale of an aircraft in the event of a default subject to the specific provisions of the contract.

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Rules of Court. For an arbitral award, it is not appealable. The 3.3 Which courts are appropriate for aviation disputes? only recourse is to apply for the setting aside of the award in its Does this depend on the value of the dispute? For entirety at the High Court. The Constitution in Sections 241(1) example, is there a distinction in your jurisdiction and 242 provide that the right to appeal a decision from the Federal regarding the courts in which civil and criminal cases are brought? High Court to the Court of Appeal can either be as of right or with leave of the court. Appeal is as of right where the decision is a final decision of the Federal High Court or where the ground of The Federal High Court is vested with exclusive jurisdiction to try appeal involves questions of law alone or where the decision is on both criminal and civil aviation disputes pursuant to Section 63 of the interpretation of the constitution or where the decision is on the the Civil Aviation Act and 251(k) of the 1999 Constitution of the question of whether any fundamental right has been, is being or is

Nigeria Federal Republic of Nigeria (as amended). However, if the aviation likely to be contravened. In all other circumstances, appeal must be dispute is concerning employee or labour matters, such action may with leave of court. However, according to Section 241 (2) of the be instituted in the National Industrial Court of Nigeria. Constitution, a party cannot appeal against a decision of the High Court granting unconditional leave to defend an action, against a 3.4 What service requirements apply for the service of consent judgment or an order as to costs only. In the case of an court proceedings, and do these differ for domestic arbitral award, an application for the setting aside of an award can be airlines/parties and non-domestic airlines/parties? lodged in the Federal High Court where the arbitrator misconducted himself, where the award was improperly procured or that the award The Federal High Court Rules (“FHCR”) and the Sheriff and Civil contains decisions on matters which are beyond the scope submitted Processes Act (“SCPA”) provide guidelines for service of court to arbitration. processes as well as the requirements for valid service. For domestic airlines/parties, the FHCR provides in Order 6 Rules 2 & 8 that service is effected when the process is served personally on 4 Commercial and Regulatory party, on the principal officers of the company or leaving it at the office of the company. Where personal service cannot be effected, Order 2 4.1 How does your jurisdiction approach and regulate Rule 5 allows substituted service through delivery to any person at the joint ventures between airline competitors? last place of business of the airline or party; delivery to an agent of the airline/party involved (where there is a strong probability that it would The NCAA, being the chief regulatory agency, is charged with get to the airline/party); advertisement in the official gazette; pasting in regulating all matters relating to aviation in Nigeria. By virtue the court house; or delivery to the legal practitioner of the airline/party. of Part 18 of the NCAA Regulations (Air Transport Economic Where service is to be effected on non-domestic airlines/parties, the Regulations), the Authority is to be notified where there are mergers, processes can be served in the same manner as that of domestic airline/ takeovers, joint ventures or other acquisitions of control in the parties highlighted above. There are, however, additional requirements. aviation industry, including interlocking directorships, whether of a Order 6 Rule 14 of the FHCR provides that leave of the court must be horizontal, vertical, or conglomerate nature, where: sought and obtained to serve a writ on a defendant outside jurisdiction. (i) at least one of the joint venture companies is established in Leave is sought by way of an application to the Federal High Court Nigeria; supported by an affidavit stating: (i) that the plaintiff has a good cause (ii) the resultant market share in the aviation industry or any of action; (ii) in what country the defendant can be found; and (iii) the substantial part of it, relating to any product or service, is grounds upon which the application is made. Moreover, Section 97 likely to create market power; and of the SCPA provides that any writ of summons which is to be served (iii) at least one of the joint venture companies derives income outside the State in which it is issued shall have, endorsed on the face in or from Nigeria, arising from the sale and rendering of of it, notice that the writ is to be served outside jurisdiction. services in the civil aviation industry, or there exists use of the firm’s assets in a manner that yields interest, royalties and dividends. 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an Furthermore, such arrangements would be prohibited by the interim basis, and ii) a final basis? Authority where the proposed transaction substantially increases the ability to exercise market power either by giving the ability to a All civil remedies can be obtained from the court or arbitral tribunal company or group of companies acting jointly to profitably maintain in an aviation dispute. This is, however, dependent on the cause of prices above competitive levels for a significant period of time or by action and reliefs sought. any other anti-competitive means. On an interim basis, remedies available are interim injunction, interlocutory injunction, prohibitory injunction, and/or mandatory 4.2 How do the competition authorities in your injunction. jurisdiction determine the ‘relevant market’ for the On a final basis, remedies available include perpetual injunctions, purposes of mergers and acquisitions? damages, specific performance, declaration, etc. Part 18 of the NCAA Regulations (Air Transport Economic Regulations) in its interpretation paragraph defines “Relevant 3.6 Are there any rights of appeal to the courts from the Market” as the area of effective competition within which an airline decision of a court or arbitral tribunal and, if so, in or service provider operates and includes geographic area, route, what circumstances do these rights arise? substitutability, close competitors, and such other factors that may affect consumer choice. Generally, the right of appeal from a decision of a court is governed by the Constitution of the Federal Republic of Nigeria and the

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4.3 Does your jurisdiction have a notification system 4.8 What are the main regulatory instruments governing whereby parties to an agreement can obtain the acquisition, retention and use of passenger data, regulatory clearance/anti-trust immunity from and what rights do passengers have in respect of regulatory agencies? their data which is held by airlines and airports?

Yes, it does. Part 18 of the NCAA Regulations at Paragraph There is no clear designated regulation governing the acquisition 18.15.19, provide that the Authority has the power to make any of passenger data in Nigeria; however, the NCAA regulations are concession based on application of parties. The Authority by virtue the main regulatory instruments in respect of passenger rights. of Section 30(4) (i) of the NCAA, 2006 can investigate cases of Paragraph 17.4 provides for the general conditions of security that unfair or deceptive trade practices and requires the offending party should be observed by aircraft operators, and particularly paragraph Nigeria to desist from such antitrust or anti-competition practice. 17.4.10 provides that a security programme as anticipated under the regulations and presented to the Authority for approval should provide for the safety of the passengers, crew and their property. 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? 4.9 In the event of a data loss by a carrier, what Please refer to our response in question 4.1. obligations are there on the airline which has lost the data and are there any applicable sanctions?

4.5 Please provide details of the procedure, including Please refer to our response to question 4.8. time frames for clearance and any costs of notifications. 4.10 What are the mechanisms available for the protection Part 18 of the NCAA Regulations at Paragraph 18.15.16.3 provide of intellectual property (e.g. trademarks) and other for a 60-day waiting period from the date of issuance of receipt of assets and data of a proprietary nature? the notification, unless shortened by the Authority, or extended by the Authority for a period not exceeding 30 days. Please refer to our response to question 4.8.

4.6 Are there any sector-specific rules which govern the 4.11 Is there any legislation governing the denial of aviation sector in relation to financial support for air boarding rights and/or cancelled flights? operators and airports, including (without limitation) state aid? The Nigerian Civil Aviation Act and Part 19 of the NCAA Regulations. The NCAA Regulations make no provision for financial support to air operators and airports, but instead do a regular assessment 4.12 What powers do the relevant authorities have in of the financial health of the same. Paragraph 18.10.3 requires all relation to the late arrival and departure of flights? Nigerian licensed airlines to submit to the Authority on a monthly basis, all financial data and records on their operations in the form Paragraph 19.6 requires operating air carriers, in the event of any and manner as may be prescribed by the Authority. The Authority lateness, to inform the passengers of said expected lateness 30 thereafter evaluates the financial returns and makes available a copy minutes after the scheduled time of departure and after a period of the report of the financial health assessment to the Management of three hours (for domestic flights) to offer reimbursement. of the airline which may make a representation to the Authority. Regulation 19.6.2 deals with international flights, which typically The Authority upon receipt of the airline’s representation reviews provides for the same form of compensation. and communicates its decision to the airline. Nigeria also has a regulatory body known as the Asset Management Corporation of Nigeria (“AMCON”), a body established in July 4.13 Are the airport authorities governed by particular 2010 to be the Federal Government’s special debt recovery vehicle. legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? AMCON can also take over the management of airlines for the purpose of revitalising their finances, where it is determined by the Authority that the air operators and/or airlines are in poor financial health. Airport authorities are governed by the Federal Airports Authority of Nigeria Act (“FAAN Act”). The Act broadly imposes on the airport authorities the duty to develop, provide and maintain airports 4.7 Are state subsidies available in respect of particular amongst other: routes? What criteria apply to obtaining these (a) to develop, provide and maintain at airports and within the subsidies? Nigerian air space all necessary services and facilities for the safe, orderly, expeditious and economic operation of air Paragraph 18.3.1.2 of the NCAA Regulations provide that, subject transport; to these regulations, domestic airlines may determine the route(s) to (b) to provide adequate conditions under which passengers and operate, the frequency or frequencies of operations and fares to be goods may be carried by air and under which aircraft may charged, and shall inform the Authority prior to the introduction of be used for other gainful purposes, and for prohibiting the the same. Paragraph 18.7.4 requires all airports and air navigation carriage by air of goods of such classes as may be prescribed; service providers to provide financial or other data as may be (c) to prohibit the installation of any structure which, by virtue required by the Authority to determine the basis for charges, fees and of its high position, is considered to endanger the safety of tariffs. It is on that basis that requests may be made for subsidies. air navigation;

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(d) to charge for services provided by the Authority at airports; and (e) to provide accommodation and other facilities for the 4.18 Are there any nationality requirements for entities effective handling of passengers and freight. applying for an Air Operator’s Certificate in your jurisdiction or operators of aircraft generally into and out of your jurisdiction? 4.14 To what extent does general consumer protection legislation apply to the relationship between the Paragraph 9.1.1.6 provides that the Authority may issue an AOC if, airport operator and the passenger? after investigation, the Authority finds that the applicant: (1) is a citizen of Nigeria; The consumer protection legislation provides for assistance to be (2) has its principle place of business and its registered office, if

Nigeria granted to the passengers by the operational air carriers and airport any, located in Nigeria; authorities, where there are instances such as delayed and/or (3) meets the applicable regulations and standards for the holder cancelled domestic or international flights. of an AOC; (4) meets the aircraft requirements specified in the IS for the type 4.15 What global distribution suppliers (GDSs) operate in of operation proposed; your jurisdiction? (5) is properly and adequately equipped for safe operations in commercial air transport and maintenance of the aircraft; and The global distribution suppliers (“GDSs”) consist of: Sabre Travel (6) holds the economic authority issued by the Authority Network; Travelport; and Amadeus Nigeria. under the provisions of the Civil Aviation Act 2006 or any amendment thereof. 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? 5 In Future There are no specific requirements for ownership of GDSs in Nigeria, other than the registration as a Nigerian Company with 5.1 In your opinion, which pending legislative or the Corporate Affairs Commission (“CAC”), which is the statutory regulatory changes (if any), or potential developments body charged with the functions of regulating and supervising the affecting the aviation industry more generally in formation, incorporation, registration, as well as winding-up of all your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? companies in Nigeria. However, registration with the CAC as a Nigerian company does not preclude GDSs from having foreign shareholders. Member States of the African Union (currently 49 of 55) have taken a bold step in signing the AfCFTA. The AfCFTA seeks to create a single continental market for goods and services in the Member 4.17 Is vertical integration permitted between air operators States, with free movement of business persons and investments and airports (and, if so, under what conditions)? using a single currency. While Nigeria is yet to sign as it is currently evaluating the potential Please refer to our response to question 4.1. impacts on the economy, it is expected that upon signing the AfCFTA, the transportation sector, which includes the aviation sector, would experience a significant shift in the aviation business demographic.

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Kashimana Tsumba Tenilola Olowu Banwo & Ighodalo Banwo & Ighodalo 98, Awolowo Road 98, Awolowo Road Ikoyi, Lagos Ikoyi, Lagos Nigeria Nigeria

Tel: +234 810 369 8795 Tel: +234 818 788 0834 Email: [email protected] Email: [email protected] URL: www.banwo-ighodalo.com URL: www.banwo-ighodalo.com Nigeria Kashimana is experienced in handling a wide spectrum of transport law Tenilola is an astute member of the Aviation, Shipping and International matters including aviation advisory, aircraft finance, passenger liability Trade Practice Group of the Firm. In her time in the team, she has and shipping matters. She is skilled in both a litigation and advisory advised on aviation financing transactions, ship financing transactions, capacity. She previously served as an intern at the International Maritime and regulatory advice in respect of both areas, amongst others. She is Organization (“IMO”) and as a visiting researcher at the Institute of an associate member of the Chartered Institute of Arbitrators, and the Maritime Law, Southampton, UK. Founder of the Alternative Dispute Resolution Society of the University of Lagos, Nigeria. She is a member of the IBA Section on Transport Law, a Contributor to the Lloyds List Group, and the Nigerian Institute of Advanced Legal She is also a member of the Nigerian Maritime Law Association and Studies Journal. Kashimana is passionate about transport law and the Lagos Court of Arbitration. Tenilola is passionate about dispute continuing professional development in the industry. resolution, transport law and the development of the same in Nigeria.

Banwo & Ighodalo was established on 1st February, 1991 with a resolve to create a world-class law firm. We are known in our markets for excellent mastery of legal issues, the development of creative solutions and our lawyers are selected for their embodiment of these qualities. We deliberately recruit and train for innovation, knowledge and the ability to create exceptional solutions for our clients. The Firm is consistently listed as a 1st-tier law firm and a firm of choice in Capital Markets, Mergers & Acquisition, Corporate Finance, Energy & Natural Resources and Intellectual Property. We also have thriving and acclaimed practices in Litigation, Arbitration and other Alternative Dispute Resolution and in Shipping, Aviation and International Trade. Both the firm on one hand, and its partners and some associates on the other hand, are ranked in several leading Nigerian and international legal directories. Contact: Mr. Ken Etim (Managing Partner).

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Pakistan Syed Ali Bin Maaz

Kabraji & Talibuddin Mubeena Sohail Ellahi

v. an undertaking from the chief executive of the company to 1 General acquire and maintain valid insurances; vi. a bank guarantee, security deposit and licence issuance fee; and 1.1 Please list and briefly describe the principal vii. an undertaking from the chief executive that the company legislation and regulatory bodies which apply to and/ shall obtain the air operator certificate within 365 days from or regulate aviation in your jurisdiction. the date of issuance of the licence. In order to operate an aircraft in Pakistan, the operator/air carrier The principal legislation that governs aviation in Pakistan is as shall hold a valid “Air Operator Certificate” duly granted by the follows: CAA. The term “air operator certificate” is defined in the CAR to i. the Civil Aviation Ordinance 1960 (the “CAO”); mean “a certificate granted under rule 54 or 187”. An operator is ii. the Pakistan Civil Aviation Authority Ordinance 1982 (“1982 not permitted to undertake any flying activities for the purpose of Ordinance”) pursuant to which the Pakistan Civil Aviation (i) regular public transport, (ii) charter, or (iii) aerial work, without Authority was established; being issued an “air operator certificate” by the Director General iii. the Civil Aviation Rules 1994 (the “CAR”) which were of the CAA. Rule 187 of the CAR provides that an operator shall promulgated by the Federal Government of Pakistan through demonstrate to the satisfaction of the CAA that it has the equipment, powers conferred to it by, inter alia, the CAO and the 1982 organisation, staffing, maintenance and other arrangements in place Ordinance; and to secure safe operations for the type of aircraft being requested iv. the Cape Town Convention and Aircraft Protocol to be included in the certificate and that the operator is capable of (Implementation) Rules 2004 (the “Implementation Rules”) establishing and maintaining a satisfactory method of supervision which incorporate the Cape Town Convention and Aircraft of the flight operations. The Director General of the CAA may, Equipment Protocol into domestic law. however, require such additional information from the operator The Pakistan Civil Aviation Authority (the “CAA”) is the regulatory applying for the certificate as it may deem necessary. body for the aviation industry in Pakistan. A Pakistani operator wishing to undertake commercial air operations in the form of regular public transport, charter (if the service is an 1.2 What are the steps which air carriers need to take in international service, or if the aircraft has a maximum permissible order to obtain an operating licence? take-off mass greater than 5,700 kg), or aerial work must obtain an appropriate licence from the Director General of the CAA, To apply for a licence (including, but not limited to regular public who shall grant the same upon (i) obtaining prior approval of the transport and charters), applications must follow a prescribed Federal Government, and (ii) compliance with the provisions of form as directed by the CAA and shall be duly executed by the rules 178 and 179 of the CAR relating to application, incorporation, chief executive of the applicant company (the applicant could be a registration, security deposit and minimum capital requirements set company incorporated/registered with the Securities and Exchange out therein for local operators. Commission of Pakistan/Registrar of Firms, as may be applicable Further requirements in respect to airworthiness compliance are in accordance with the Companies Act 2017 or the Partnership Act set out in the Airworthiness Notice AWNOT-065-AWRG-4.0 dated 1932) and submitted along with the following documents, inter alia: 10 July 2013 and licensing requirements including but not limited i. a covering letter of the company; to fees, paid-up capital and fleet requirement are set out in the Air ii. a comprehensive feasibility report and business plan supported Navigation Order (the Licensing/Certification of Flying Training, by preceding three years bank statements certified by a Commercial and Private Air Operations) ANO-001-ATNR-2.0 chartered accountant; dated 15 September 2015 (“ANO-001”). iii. a processing fee; iv. copies of certificate of registration/incorporation, memorandum 1.3 What are the principal pieces of legislation in and articles of association, partnership deed, if applicable, your jurisdiction which govern air safety, and who duly verified by the Securities and Exchange Commission administers air safety? of Pakistan and other necessary forms as may be prescribed by the Securities and Exchange Commission of Pakistan/ The principal piece of legislation governing air safety is the CAR. Registrar of Firms; Pursuant to the CAR, the Director General has been additionally

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empowered to pass “airworthiness notices or circulars” which are (c) the serial number of the aircraft; notices relating to, inter alia, air safety circulars and “air navigation (d) the name and addresses of all persons or organisations who orders”. have a legal interest as owners of the aircraft; The Air Navigation Order ANO-011-FSXX-3.0 dated 1 January (e) if the aircraft is the subject of a hire purchase or leasing 2018 (“ANO 2018”) establishes the requirement on various safety- agreement, the name and address of the person or persons or related matters pertaining to the safety of passengers, crew and the organisation purchasing or leasing the aircraft; and operational staff of both the air operators and the ground handling (f) a declaration as to the truth of the statement set out in the agencies. In accordance with the ANO 2018 order, operators/ application. handlers are required to provide all the contents stated therein to the Additionally, copies of any lease or a sub-lease must be filed with the flight crew, cabin crew and all ground operations personnel related CAA. They may require the original or (in most cases) certified true Pakistan to any aspects of the safety requirements through the provision copies of the documents in order to validate the contents following of the operations manual, passenger handling manual, baggage which the originals will be returned. Filing a copy of the lease will handling manual and/or policies as applicable. be required as the CAA will need to see the nature of the lessor’s interest in the Aircraft before making the appropriate notations in 1.4 Is air safety regulated separately for commercial, the Pakistan Aircraft Register and naming them as the owner in the cargo and private carriers? certificate of registration, if applicable. With respect to air operator certificates (“AOCs”) please see our No, the CAA is responsible for regulating air safety for all response to question 1.2. commercial, cargo and private carriers in accordance with its rules and regulations issued from time to time. 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular 1.5 Are air charters regulated separately for commercial, rules, regulations, systems and procedures in place cargo and private carriers? which need to be adhered to?

No, air charters are not regulated separately for commercial, cargo In the event that an accident occurs with an aircraft registered in and private carriers. Pakistan or an aircraft registered in another state while being in Pakistan, the pilot-in-command, the operator, the owner, and the hirer (if any) shall each be responsible for ensuring that a 1.6 As regards international air carriers operating in your notification of the accident is furnished to the Director-General jurisdiction, are there any particular limitations to be by the quickest available means immediately after the accident, aware of, in particular when compared with ‘domestic’ and by a written report to the Director General pursuant to rule or local operators? By way of example only, restrictions and taxes which apply to international but 270 of the CAR. The written report shall contain the particulars not domestic carriers. specified in rule 270(2) of the CAR. Furthermore, a “voluntary incidents reporting system” is also required to be established for Please see our response to question 4.18 below. Separate tax advice obtaining information that may not be received under the mandatory can be sought from a tax specialist on this issue in relation to taxation. incident reporting requirements. In the event of an accident, rule 272 provides that the Director General of the CAA shall have the custody of the aircraft and the same cannot be removed or otherwise 1.7 Are airports state or privately owned? interfered with except with the permission of the Director-General or the chairman of a Board of Accident Inquiry. The expenses to be All civil airports in Pakistan are owned and operated by the incurred in an aircraft accident and incident investigation conducted CAA which is a statutory authority created pursuant to the 1982 by the Safety and Investigation Board shall be borne by the operator Ordinance, with the exception of Sialkot International Airport, of the aircraft registered in Pakistan. Such expenses in relation to which is the first private airport in Pakistan owned and operated by foreign registered aircraft in Pakistan may be provided by the CAA, the Sialkot Chamber of Commerce & Industry. which shall be later recovered from the operator of that aircraft through the State of Registry. Where an accident in Pakistan has 1.8 Do the airports impose requirements on carriers been investigated under the CAR, the Federal Government may, flying to and from the airports in your jurisdiction? whenever it is considered to be desirable in the public interest, appoint a Board of Accident Inquiry to inquire into the cause of the Requirements are imposed by the CAA in Pakistan pursuant to accident and into other such matters relating to the accident that may the applicable law. Rule 7 of the CAR states that an aircraft other be referred by the Federal Government. than a military aircraft shall not fly in Pakistan unless it has been Additionally, all air carriers are required by the Air Navigation Order- included in the Pakistan Aircraft Register or has been registered in a 020-FSXX-3.0 dated 10 April 2018 to ensure an accident prevention contracting state, which is a party to the Convention on International and flight safety programme is maintained on a continuing basis as Civil Aviation. set out thereunder. The requirements in respect to registration of an aircraft in Pakistan are set out in Rule 8(1) of CAR, which states that the application for the 1.10 Have there been any recent cases of note or other inclusion of an aircraft in the Pakistan Aircraft Register shall contain: notable developments in your jurisdiction involving (a) the name of the manufacturer; air operators and/or airports? (b) the manufacturer’s designation of the aircraft; No, not that we are aware of.

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Implementation Rules as this has been implemented as a part of 2 Aircraft Trading, Finance and Leasing Pakistan’s municipal law and there is nothing under Pakistan law that would suggest a shift in title of an engine merely by virtue of it 2.1 Does registration of ownership in the aircraft register being fixed to another aircraft. constitute proof of ownership? 2.5 What (if any) are the tax implications in your Yes, provided the owner’s name is included in the application for the jurisdiction for aircraft trading as regards a) value- Certificate of Registration issued by the CAA. added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as

Pakistan 2.2 Is there a register of aircraft mortgages and charges? regards non-domestic purchasers and sellers of Broadly speaking, what are the rules around the aircraft and/or particular aircraft types or operations? operation of this register? Stamp duty on a lease agreement between a lessor and the operator, With respect to aircraft, Pakistan does not have a separate register if executed in or brought into the province of Sindh, would be a to record mortgages and charges and there are no provisions of nominal amount of PKR 500. A further USD 60 (which is subject Pakistan law which would enable an aircraft mortgage or any other to revision as may be deemed necessary by the CAA) would be security in an aircraft to be perfected in Pakistan by entry in any payable to the CAA as a registration charge. Please seek tax advice domestic register (either with the CAA or any other government from a tax specialist in relation to any other applicable taxes payable entity) unless the aircraft is owned by a Pakistani company. In in respect of the relevant transaction. that case, the mortgage or charge will need to be registered at the Company’s Registration Office under Section 100 of the Companies Act 2017. The CAA is not required by law to maintain a register 2.6 Is your jurisdiction a signatory to the main of mortgages or other security documents creating or evidencing international Conventions (Montreal, Geneva and Cape Town)? security in respect of any aircraft nor is any notice required to be given to third parties in respect of any security interests in the aircraft Yes, Pakistan is a signatory to the Montreal, Geneva and Cape Town by registration of the security interest or otherwise. However, as Conventions. the aircraft will be registered in the Pakistan Aircraft Register, it is possible to avail of a practice developed over time, which is that a notation may be made in the remarks section of the Pakistan Aircraft 2.7 How are the Conventions applied in your jurisdiction? Register to include a brief description of the security interest or interests in the aircraft. This may only be obtained if the lessor Much like the United Kingdom and other jurisdictions, in Pakistan submits to the CAA a duly notarised, consularised and certified true a treaty must be implemented by domestic legislation in order to copy of the relevant security agreement. create or effect private rights and obligations within the state. It is another matter that the provisions of the treaty operate to bind the 2.3 Are there any particular regulatory requirements state itself in relation to other states which are party to it. This rule which a lessor or a financier needs to be aware of as was affirmed by the Supreme Court of Pakistan in 1961 in a case regards aircraft operation? reported at PLD 1961 SC 573 and related to the Geneva Convention and Protocol on Arbitration Clauses, 1924. In the case of the Cape Given that Pakistan has implemented the Cape Town Convention Town regime, it was implemented by rules made by the Federal and Aircraft Equipment Protocol, the recordation of an Irrevocable Government in exercise of powers conferred to it under the CAO. Deregistration and Export Request Authorization (“IDERA”) in favour of a lessor or a financier entitles the relevant authorised party 2.8 Does your jurisdiction make use of any taxation named under the IDERA to exercise the self-help remedies set out benefits which enhance aircraft trading and leasing under the Implementation Rules, including the right to de-register (either in-bound or out-bound leasing), for example the aircraft from the Pakistan Aircraft Register and to export the access to an extensive network of Double Tax Treaties aircraft from Pakistan. Please also see our responses to questions or similar, or favourable tax treatment on the disposal 1.2 and 1.8. of aircraft?

Please seek tax advice from a tax specialist. 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer 3 Litigation and Dispute Resolution or other prejudice when installed ‘on-wing’ on an aircraft owned by another party? If so, what are the conditions to such title annexation and can owners 3.1 What rights of detention are available in relation to and financiers of engines take pre-emptive steps to aircraft and unpaid debts? mitigate the risks?

Upon contravention of the applicable laws of Pakistan, aircraft can No. The Cape Town Convention has codified the prevailing legal be detained or arrested as such powers are provided to the Federal opinion of the international aviation practice and explicitly ensures Government and the CAA pursuant to the applicable laws. Section that the registered international interest in an engine shall not 8 of the CAO grants the CAA a right to detain any aircraft, if in its be affected by its installation on or removal from an aircraft. If opinion the flight of such aircraft would compromise the safety of the engines are removed from the aircraft, and the international persons in the aircraft or to any other persons or property or such interest is appropriately registered in the international registry, detention for securing compliance with the provisions of the CAO then the interest would be enforceable in Pakistan by virtue of the or the CAR. Additionally, Rule 46(2) of the Implementation Rules

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states that nothing in the Implementation Rules shall affect the exercise by any person, including any state entity of powers to arrest 3.3 Which courts are appropriate for aviation disputes? or detain an aircraft object for violation of law, including safety- Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction related and/or criminal violations or for payment of any amounts regarding the courts in which civil and criminal cases owed to any such person and directly related to the services provided are brought? by it in respect of that aircraft object, provided that no such arrest or detention shall adversely affect the priority of an international Pakistan declares that the following court(s) shall have jurisdiction interest held by a party not violating such law. over claims brought under the Implementation Rules: a. the High Court of Balochistan; 3.2 Is there a regime of self-help available to a lessor b. the Lahore High Court; Pakistan or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights c. the Peshawar High Court; and under the lease/finance agreement? d. the High Court of Sindh. Yes, there is a distinction in our jurisdiction depending on the nature The laws of Pakistan provide for a variety of remedies to protect the of the proceedings (i.e., civil or criminal). interests of lessors and creditors especially in the event of a default. A chargee (which will include a creditor) may exercise any one or more of the following remedies without the necessity of applying to a court 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic for an order pursuant to Rule 13(1) of the Implementation Rules: airlines/parties and non-domestic airlines/parties? (a) take possession or control of any aircraft object charged to it and the chargor shall be under a legal duty to give such The rules for service of civil court proceedings in Pakistan are set out possession or control in the manner and within the time the under the Civil Procedure Code 1908 (“1908 Code”) which do not chargor has so agreed; differ by reason of whether the airline is domestic or non-domestic (b) sell or grant a lease of any such aircraft object; and but given that if a non-domestic airline does not have presence in (c) collect or receive any income or profits arising from the Pakistan, there are modes to effect service on such airline where it management or use of any such aircraft object. resides. Once a suit has been duly instituted, the court may issue a Pursuant to Rule 13(2), the chargee may alternatively apply for a notice to the defendant to appear in the court and answer the claim court order authorising or directing any of the acts referred to in on a day as specified thereunder. Upon personally delivering the sub-rule (1). A chargee proposing to sell or grant a lease of an summons, the serving officer must obtain an acknowledgment of aircraft object under sub-rule (1) shall give reasonable prior notice service, and in the event that the defendant or his agent refuses to in writing of the proposed sale or lease to: sign the acknowledgment or cannot be found, or there is no agent (a) interested persons specified in sub-clauses (a) and (b) of empowered to accept service of the summons on his behalf, nor any clause (xxxi) of Rule 2; and other person on whom service can be made, Rule 17 Order V of (b) interested persons specified sub-clause (c) of clause (xxxi) of the 1908 Code provides that, the serving officer shall affix a copy Rule 2 who have given notice of their rights to the chargee of the summons on the outer door or some other conspicuous part within a reasonable time prior to the sale or lease. of the house in which the defendant ordinarily resides or carries on However, it must be noted that a chargee must give a reasonable business and shall then return the original to the Court from which it prior written notice of “10 or more working days” of a proposed was issued, with a report endorsed thereon or annexed thereto stating sale or lease to interested persons. The foregoing shall not prevent that he has so affixed the copy, the circumstances under which he a chargee and a chargor or a guarantor from agreeing to a longer did so, and the name and address of the person (if any), by whom the period of prior notice. Also, any sum collected or received by the house was identified and in whose presence the copy was affixed. chargee as a result of exercise of any of the remedies set out in sub- Pursuant to Rule 26 Order V of the 1908 Code, if the defendant rule (1) or (2) shall be applied towards discharge of the amount of resides out of Pakistan and has no agent in Pakistan empowered to the secured obligations. Where the sums collected or received by the accept service, the summons shall (except in the cases mentioned in chargee as a result of the exercise of any remedy set out in sub-rule rule 26-A thereto) be addressed to the defendant at the place where (1) or (2) exceed the amount secured by the security interest and any he is residing and sent to him by post. reasonable costs incurred in the exercise of any such remedy, then unless otherwise ordered by the court, the chargee shall distribute 3.5 What types of remedy are available from the courts the surplus among holders of subsequently ranking interests which or arbitral tribunals in your jurisdiction, both on i) an have been registered or of which the chargee has been given notice, interim basis, and ii) a final basis? in order of priority, as set out in Rule 36, and pay any remaining balance to the chargor. On occurrence of an event of default under Rule 21 of the Implementation Rules provides for speedy interim the lease, assuming that the owner is permitted to do so, the owner relief to creditors pending final determination of their claim; upon can enforce the lease by taking physical possession of the Aircraft the provision of evidence of default by the defaulter/operator. by enforcing the IDERA if it is the authorised party thereunder or The court may make any one or more of the following orders as apply for a court order to authorise or direct the same as per sub- requested by the creditor: rule 15(a) and (b) of the Implementation Rules, respectively. The (a) preservation of the aircraft object and its value; language of this rule suggests that the owner may exercise his right (b) possession, control or custody of the aircraft object; to take possession of the Aircraft without applying to the court to (c) immobilisation of the aircraft object; authorise or direct the same. (d) lease or, except where covered by clauses (a) to (c), management of the aircraft object and the income therefrom; and

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(e) if at any time the debtor/operator and the creditor specifically The recognition and enforcement of the award may also be refused agree, sale and application of proceeds therefrom and where where the competent authority of the country finds that: so agreed, the mere existence of such an agreement shall be i. recognition or enforcement would be against the public just and sufficient cause for the court to make such an order policy of Pakistan; or and for the purpose of satisfying the requirements of any legal provision in this behalf. ii. the subject matter of the dispute is not capable of settlement by arbitration under Pakistan law. Additionally, with respect to interim remedies, Order XXXIX of the 1908 Code provides for temporary injunctions and interlocutory orders to be granted depending on the nature of the case and the 4 Commercial and Regulatory facts surrounding thereto. An order for temporary injunction is

Pakistan granted in instances where it is proved in a suit by an affidavit or otherwise that (i) the property in dispute in a suit is in danger of 4.1 How does your jurisdiction approach and regulate being wasted, damaged or alienated, or (ii) the defendant threatens joint ventures between airline competitors? or intends to remove or dispose of his property with a view to defraud his creditors. Thus, in order to restrain the defendant from A joint venture arrangement shall require prior approval of the taking such actions or to stay and prevent the wastage, damage, Competition Commission of Pakistan (“CCP”), if it amounts to sale, removal or disposition of the property, the Court may grant a a collaborative arrangement by which two or more undertakings temporary injunction as it thinks fit until the final disposal of the suit agree to devote their resources to pursue a common objective; or until further orders. A party under a contractual arrangement may provided that such arrangement must be: (a) subject to joint apply to the Court for an interim injunction to restrain the counter control; (b) should perform the functions independently; and (c) on party to the contract from committing a breach of contract or other a lasting basis. Control, in relation to an undertaking is regarded injury of any kind arising out of the same contract or relating to the as existing if, by reason of securities (being not less than 10% of same property or right. A party seeking relief on a “final basis” from their market value), contracts or otherwise, influence is capable of the Court may obtain a decree for specific performance of a contract being exercised with regard to the activities of the undertaking and or a permanent injunction. in particular, the following: Pursuant to Section 3(2) of the Recognition and Enforcement i. ownership of, or the right to use all or part of, the assets of an undertaking; and (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 which incorporates the Convention on the Recognition ii. rights or contracts which enable decisive influence to be and Enforcement of Foreign Arbitral Awards (“Convention”) into exercised with regard to composition, voting or decisions of the organs of an undertaking. domestic law, an application may be made to stay legal proceedings in a Court where the proceedings are pending provided such Control through securities means shares in the share capital of the proceedings stem from an agreement which provides for dispute undertaking carrying voting rights and includes any security which resolution through arbitration. entitled the holder to obtain or exercise voting rights.

3.6 Are there any rights of appeal to the courts from the 4.2 How do the competition authorities in your decision of a court or arbitral tribunal and, if so, in jurisdiction determine the ‘relevant market’ for the what circumstances do these rights arise? purposes of mergers and acquisitions?

Pursuant to the 1908 Code, a party aggrieved by a decree or order Under the Competition Act 2010 (the “Competition Act”), the term may have a right to appeal or file a review or revision against the “relevant market” means “the market which shall be determined by decision of a Court in accordance with the applicable law, and the Commission with reference to a product market and a geographic subject to the conditions set out thereunder. The nature of the market and a product market comprises of all those products or appellate proceedings, however, shall depend on the underlying services which are regarded as interchangeable or Substitutable by claim brought before the court and the orders passed thereon. the consumers by reason of the products’ characteristics, prices and intended uses. A geographic market compromises the area in which The recognition and enforcement of a foreign arbitral award may be the undertaking concerned are involved in the supply of products or refused on one or more of the following grounds: services and in which the conditions of competition are sufficiently i. incapacity of the parties; invalidity of the agreement under homogeneous and which can be distinguished from neighbouring the chosen law, or if no choice is indicted, under the laws of geographic areas because, in particular, the conditions of the jurisdiction where the award is made; competition are appreciably different in those areas”. Under the ii. improper notice of appointment of arbitrator or proceedings Competition Act 2010, the dominant position requirement is stated thereto, or lack of opportunity to present the case, in regards as 40%. An undertaking is presumed to be dominant if its relevant the party against whom the award is made; market share exceeds 40%. iii. the award deals with issues not contemplated by or falling within the terms of the submission to arbitration, or contains The Competition Act defines “dominant position” as follows: decisions on matters beyond the scope of the submission to “dominant position” of one undertaking or several undertakings arbitration; in a relevant market shall be deemed to exist if such undertaking iv. the composition of the arbitral authority or procedure is not in or undertakings have the ability to behave to an appreciable extent accordance with (A) the agreement of the parties, or (B) the independently of competitors, customers, consumers and suppliers law of the country where the arbitration took place; or and the position of an undertaking shall be presumed to be dominant v. the award has not yet become binding on the parties, or has if its share of the “relevant market” exceeds 40%. Therefore, the been suspended or set aside by a competent authority where 40% threshold is only relevant in relation to market share and not in the award was made. relation to an undertaking.

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Pursuant to the Regulation 3 of the Competition (Merger Control) Regulations 2016 (the “Merger Regulations”), a “merger” 4.3 Does your jurisdiction have a notification system (which is defined to mean the merger, acquisition, amalgamation, whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from combination or joining of two or more undertakings or part thereof regulatory agencies? into an existing undertaking or to form a new undertaking, and the expression “merge” means to merge, acquire, amalgamate, combine The CCP is required to pass an order on the pre-merger clearance or join, as the context may require) is deemed to have occurred if: application within 30 days of the receipt of the application filed by (i) two or more previously independent undertakings merge to the merger parties. Failure by CCP to make a determination within form a new undertaking and cease to exist as separate legal 30 days shall be deemed as consent to the intended merger by the entities;

CCP. The CCP may, at any time after receiving the application, Pakistan (ii) one undertaking is absorbed into another with the latter give notice to the applicant to provide additional information or retaining its legal entity and the former ceasing to exist; documents within a stipulated period. Thus, the 30-day time frame (iii) one or more persons or other undertakings acquire direct or shall not commence unless the non-conformity as may be notified indirect control of the whole or part of one or more other by the CCP, if any, is rectified by the applicant. undertakings; (iv) the acquisition of shares or assets (including goodwill) or a substantial part of the shares or assets places the acquiring 4.4 How does your jurisdiction approach mergers, undertaking in a position to replace or substantially replace acquisition mergers and full-function joint ventures? the other undertaking in the business or, as appropriate, the part concerned with the business in which that undertaking Please see our responses to questions 4.1 and 4.2 above. was engaged in immediately before the acquisition; or (v) there is a collaborative arrangement through which two or more undertakings devote their resources to pursue a 4.5 Please provide details of the procedure, including time frames for clearance and any costs of notifications. common objective. The agreement must be subject to joint control and should perform the functions of an autonomous entity and be on a lasting basis. Upon submission of an application in accordance with the Merger An undertaking is regarded as having “control” if, by means of Regulations, the CCP shall carry out a preliminary assessment to securities (being not less than 10% of their market value), and/or analyse if the transaction falls within the description of a “merger” contracts or any other means, it is capable of exercising decisive and the thresholds and presumption of dominance set out thereunder. influence in the activities of the other undertaking, e.g. ownership Following which, the CCP shall conduct the first phase review of, or the right to use all or part of, the assets of the undertaking. For which shall be completed within 30 days. Upon completion of the this purpose, control through securities means having shares in the first phase review, the CCP shall either issue a favourable decision share capital of an undertaking carrying voting rights and includes and allow the merger transaction to proceed or carry out another any other security which entitles the holder thereof to obtain or review, i.e. a second phase review. The decision shall be provided exercise voting rights. Such securities also include all depository to the applicant through an order. If the CCP does not provide an receipts carrying entitlement to the holder to exercise voting rights order following the expiry of 30 days from the first phase review, it in the related undertaking. shall mean that the CCP has no objections to the intended merger. Pursuant to Regulation 4 of the Merger Regulations, an application If the CCP is not satisfied with the information it has been provided for clearance from the CCP will be required prior to acquisition if the: under the first phase review and cannot conclude as to whether or not there is a merger situation raising competition concerns, it shall (i) value of the gross assets of either one of the parties to the carry out a detailed assessment in the shape of the second phase transaction or the target company (excluding goodwill) is not less than PKR 300 million, or the combined value of the gross review by notifying the merger parties and requesting additional assets of the parties and the target company is not less than information if necessary. The second phase review shall be PKR 1 billion; or completed within 90 days and the CCP shall provide its decision (ii) the annual turnover of either one of the parties to the thereon, provided the 90 days period shall commence after the CCP transaction or the target company in the preceding year is not notifies the merger parties that the merger situation has proceeded to less than PKR 500 million, or the combined turnover of the the second phase review and all the additional information as and if parties and the target company is not less than PKR 1 billion; requested has been received by the CCP. and

(iii) the shares sought to be acquired are for a value equal to or 4.6 Are there any sector-specific rules which govern the greater than PKR 100 million; or aviation sector in relation to financial support for air (iv) the purchaser will acquire, as a result of the acquisition, 10% operators and airports, including (without limitation) or more of the voting shares of the target company. state aid? The Competition Act does not specifically place the obligation to file the application for pre-merger clearance on any one party to a No specific rules are in place which provide for state aid or other transaction. However, in practice, and since the form of the pre- financial support to operators and airports. merger application requires information for all parties including the target company, the application is either jointly prepared and 4.7 Are state subsidies available in respect of particular submitted by a representative of all parties who is authorised for routes? What criteria apply to obtaining these the purpose or filed by the acquirer independently. A fee must also subsidies? be paid upon filing which is determined on the basis of the annual turnover of the merger parties. Pursuant to the National Aviation Policy 2015 (“Policy”) and the ANO-001, certain scheduled routes leading to politically and socially deprived locations have been ear-marked, and operators are

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offered attractive incentives to use those routes, including, but not (c) the name of crew members; limited to waiving off fees and other allied charges by the CAA. (d) the duty assignments of crew members; The Policy encourages Pakistani charter operations to operate (e) the place of departure; scheduled commuter services to/from Bannu, Chitral, Dalbandin, (f) the place of arrival; Gilgit, Gwadar, Khuzadar, Muzaffarabad, Panjgur, Parachinar, Rawalakot, Skardu, Turbat and Zhob. (g) the time of departure; (h) the time of arrival; In return, the following privileges have been set out in the Policy to be offered to the operators, inter alia: (i) the hours of flight; i. no landing, housing and air navigation charges on both ends (j) the nature of the flight; of the selected socio-political route; (k) incidents and observations, if any; and Pakistan ii. tax incentives; and (l) the signature of the person in charge. iii. after satisfactory operations of two years, with acceptable Any person who contravenes or fails to comply with the provisions regularity of seven weekly flights on socio-political routes, the of the CAR shall be guilty of an offence pursuant to Rule 333 of the operator would be entitled to apply for an RPT licence which CAR and this may include the owner, operator, hirer and/or the pilot shall be processed within 60 days. The operator shall then in command. become entitled to RPT operations for all categories of domestic routes. However, seven weekly flights to any one or more of the socio-political routes shall be mandatory to continue RPT. 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, and what rights do passengers have in respect of The mechanisms available to protect intellectual property in their data which is held by airlines and airports? Pakistan stem from, inter alia, the Trade Marks Ordinance 2001 (the “Trade Marks Ordinance”), Trade Marks Rules 2004, Patents There are no specific laws in place that govern passenger data Ordinance 2000, Registered Design Ordinance, 2000 and Copyright applicable to operators and airports; however, the Prevention of Ordinance 1962. Electronic Crimes Act 2016 sets out that an “information system” The Trade Marks Registry keeps a record of all registered trade or “data”, which is not open for access to the general public of marks with the names, addresses, description of the proprietors and Pakistan, shall only be accessed, stored and transmitted if such activities that take place in terms of assignments and transmissions. information system or data is authorised by either (i) law, or (ii) the Pursuant to Section 22 of the Trade Marks Ordinance, any person person empowered to make such authorisation under law. If any claiming to be the proprietor of a trade mark used or proposed to be data pertaining to the passengers is accessed, stored or transmitted used by him who is desirous of registering it shall apply in writing it must be authorised by them. A contravention of this general to the Registrar in the prescribed manner. An infringement of a principle shall result in punishment with imprisonment for three registered trade mark shall be actionable by the proprietor of the months or a fine of PKR 50,000, or both. trade mark and in an action for infringement, all such relief by way of damages, injunctions, accounts or otherwise shall be available to the proprietor of the trade mark. 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the Under the Patents Ordinance 2000, a patentee may institute a suit in data and are there any applicable sanctions? a District Court having jurisdiction to try the suit against any person who, during the continuance of a patent acquired by him under the The CAR provides that an aircraft (which has a maximum Patents Ordinance 2000 in respect of an invention, makes, sells or permissible total mass of 5,700 kg) shall not commence a flight uses the invention without his licence, counterfeits it, or imitates unless it is equipped with a serviceable flight data recorder capable it. In any suit for infringement, the Court shall have the authority of recording time, altitude, airspeed, vertical acceleration and to, inter alia, order prompt and effective provisional measures to heading and an aircraft with a maximum permissible total mass prevent an infringement, and in particular, to prevent the entry into over 27,000 kgs shall, in addition to the flight data, be capable the channels of commerce of goods, including imported goods after of recording the altitude of the aircraft and be equipped with a custom clearance; and to grant relief by way of damages, injunctions serviceable cockpit voice recorder capable of recording the aural or accounts; provided that where permitted, effective provisional environment of the flight deck. The flight data and cockpit voice measures may also be ordered by the Court. recorders shall be constructed, and located so as to accord maximum protection to the recorded data and shall be operational at all time 4.11 Is there any legislation governing the denial of during a flight. Furthermore, Rule 247 of the CAR provides that the boarding rights and/or cancelled flights? flight data recorders shall be capable of retaining the data recorded during at least the last 25 hours’ operation and the cockpit voice No such legislation is in place that deals specifically with the denial recorders shall be capable of retaining the information recorded of boarding rights and/or cancellation of flights. Ordinarily, the during at least the last 30 minutes of operation. The contract of carriage between the operator and the passengers is data shall be retained under Rule 247 for a period of not less than the instrument which governs their rights and liabilities in respect three months and shall then be made available for inspection by the thereto. However, the Ministry of Interior of Pakistan is responsible Director General of the CAA, should he require it. Operators are for making policies with respect to the entry and exit of foreigners also required under Rule 211 of the CAR to record in an aircraft (which includes admission into and departure from Pakistan) and journey log book the following details relating to each flight by a the regulation of movement of persons in Pakistan who are not regular public transport or a charter aircraft: domiciled in Pakistan. Furthermore, the Federal Investigation (a) the aircraft nationality and registration; Agency of Pakistan (“FIA”) is responsible for the enforcement of (b) the date; immigration laws while handling incoming and outgoing passengers

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at the FIA check posts. Pursuant to the Standing Order No. 27/2005, and Islamabad Capital Territory (Islamabad Consumer Protection the immigration officer has been authorised to refuse entry or exit by Act 1995), have separate consumer protection laws. A claim by a any passenger on the following grounds: passenger in relation to damages suffered due to defective services i. where there is a restraining order passed by a court or Federal provided by the airline may be brought to a consumer court of the Government with respect to that passenger; or relevant province where the cause of action accrues as long as the ii. where the passenger’s travel documents are incomplete or passenger can establish it is a “consumer” as defined under the suspected to be forged or such entry or exit is otherwise not applicable consumer protection laws of that province. in accordance with the legal requirements. Thus, the FIA has broad powers to disallow passengers to board and 4.15 What global distribution suppliers (GDSs) operate in offload passengers if traveling on bogus or forged travel documents. your jurisdiction? Pakistan On a related note, we have seen, as a matter of practice that passengers file appropriate legal proceedings in Consumer Courts pursuant to Different global distribution systems are used by airlines in Consumer Protection legislation as a result of defective service Pakistan, e.g., Pakistan International Airline Corporation Limited provided by the airline which may result from, inter alia, denial of uses SABRE. the passenger’s boarding or cancellation of their flights. 4.16 Are there any ownership requirements pertaining to 4.12 What powers do the relevant authorities have in GDSs operating in your jurisdiction? relation to the late arrival and departure of flights? See our response to question 4.15. The powers with respect to late arrival and departure of flights may be dictated by the terms and conditions of the relevant licences and 4.17 Is vertical integration permitted between air operators approvals issued by the CAA and any other contractual arrangements and airports (and, if so, under what conditions)? entered into between the CAA and the operators. There is no express prohibition under Pakistan law for vertical 4.13 Are the airport authorities governed by particular integration between air operators and airports; however, given legislation? If so, what obligations, broadly speaking, that the airports are primarily owned and operated by the statutory are imposed on the airport authorities? authority, i.e. the CAA (with the exception of Sialkot International Airport), it is unlikely that such a vertical integration would be Yes, the CAA was established pursuant to the 1982 Ordinance, and practically possible. is responsible for ensuring the promotion, regulation and control of the civil aviation activities in Pakistan; and for the development of 4.18 Are there any nationality requirements for entities infrastructure for the civil air transport services that is safe, efficient, applying for an Air Operator’s Certificate in your economical and properly coordinated in Pakistan. Furthermore, the jurisdiction or operators of aircraft generally into and CAA has been empowered to frame a scheme with respect to the out of your jurisdiction? following, inter alia: i. the provision of civil airports and aerodromes; Rule 179(2) of the CAR states that foreigners may not own more ii. the provision of air traffic services to aircraft; than 49% of the share capital of an air transport undertaking in iii. the provision of navigational services to aircraft; Pakistan. Only Pakistani operators can apply for an Air Operator’s Certificate in Pakistan. There are, however, no explicit nationality iv. the provision of communication services at the civil airports and aerodromes in the country; and requirements that apply to foreign operators of aircrafts coming into and out of Pakistan. However, there may be public policy v. any other matter facilitating the achievement of the objects considerations where the Indian or Israeli aircraft operators were to 1982 Ordinance. fly into and out of Pakistan. With respect to foreign operators flying Pursuant to Section 6 of the 1982 Ordinance, the CAA shall, subject and operating foreign registered aircrafts domestically in Pakistan to any other law being in force for the time being, have control over for private operations, compliance is mandatory with Rule 254D of the following, inter alia: the CAR and ANO-001. The ANO-001 requires that any person or i. civil airports and aerodromes in Pakistan including their a company who intends to acquire a commercial or private aircraft planning, constructions operations and maintenance; operations licence in Pakistan must obtain prior security clearance ii. air routes in Pakistan, in consultation with the Federal in accordance with the procedure set out thereto where such a person Government; and or the chief executive/director of a company has dual nationality. iii. collection of revenues at airports and aerodromes and at various offices of the CAA. 5 In Future

4.14 To what extent does general consumer protection legislation apply to the relationship between the 5.1 In your opinion, which pending legislative or airport operator and the passenger? regulatory changes (if any), or potential developments affecting the aviation industry more generally in Each of the provinces in Pakistan, i.e. Sindh (Sindh Consumer your jurisdiction, are likely to feature or be worthy of Protection Act 2014), Punjab (Punjab Consumer Protection Act attention in the next two years or so? 2005), Khyber Pakhtunkhwa (KPK Consumer Protection Act 1997), Balochistan (Balochistan Consumer Protection Act 2003) No, we do not believe that there will be any potential developments that will affect the aviation industry in Pakistan.

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Syed Ali Bin Maaz Mubeena Sohail Ellahi Kabraji & Talibuddin Kabraji & Talibuddin 406-407, 4th Floor, The Plaza at Do Talwar 406-407, 4th Floor, The Plaza at Do Talwar Block 9 Block 9 Clifton, Karachi-75600 Clifton, Karachi-75600 Pakistan Pakistan

Tel: +92 21 3583 8871 6 Tel: +92 21 3583 8871 6 Email: [email protected] Fax: +92 21 35838879 URL: www.kandtlaw.com Email: [email protected] URL: www.kandtlaw.com Pakistan Mr. Syed Ali Bin Maaz completed his LL.B. (Hons) from the University of Ms. Mubeena Sohail Ellahi graduated with an LL.B. (Hons) from the London (External Programme) in the year 2007 and completed his Bar University of Buckingham in the year 2012, and holds an LL.M. in Vocational Course from the University of West of England, Bristol in the International and Commercial Law with a specialism in oil and gas. In year 2008. Maaz was called to the Bar (Lincoln’s Inn) in the year 2008. 2016, she graduated from the Queen Mary University of London with He is a Member of the Sindh Bar Council, Karachi Bar Association and another LL.M., in Energy and Natural Resources. High Court Bar Association, and enrolled as an Advocate at the High She has worked on various corporate and commercial matters, Court of Sindh. contentious and non-contentious, with a particular emphasis on electronic He has worked on various corporate and commercial matters, and digital transactions, finance facility agreements, implementation contentious and non-contentious, including appearances in high courts, agreements and power purchase agreements in respect of the power civil, district and banking courts across Pakistan; advising in a wide sector (coal, oil and gas-powered projects) as well as advising on aviation range of commercial transactions including project finance and banking, law, company law, , data protection law, foreign exchange law debt and equity financing, mergers and acquisitions, foreign exchange and related queries. regulations, enforcement of foreign arbitral awards and insider-trading.

Kabraji and Talibuddin was formed in Karachi in 1997 and has since built a reputation for its legal services in the domestic and international markets (the “Firm” or “K&T”). The Firm is recognised as a leading firm in the Pakistan energy and aviation sector, having acted on a number of pioneer projects and transactions in Pakistan. The Firm’s in-depth experience and knowledge in this practice area is unparalleled, as recognised by many international publications and reputable legal directories. Having unrivalled experience in aviation finance and aircraft leasing matters, along with extensive insight of the aviation market and prominent stakeholders, the team at K&T ensures that the clients’ objectives are achieved in a strategic, efficient and commercially viable manner. The Firm represents foreign and local investors interested in investing in Pakistan in a diverse range of corporate and commercial transactions. K&T’s portfolio of clients is varied and includes some of the leading banks/financial institutions and multinational companies from across the globe. K&T also has extensive experience in corporate matters, including, but not limited to the contentious and non-contentious matters, both domestic and trans-border, including joint ventures, inward foreign investment and mergers and acquisitions. The Firm’s profound knowledge of the local market and the legal and regulatory environment allows us to provide efficient, strategic and commercially viable solutions to our clients.

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Panama Roy C. Durling

Arias, Fabrega & Fabrega Sofía J. Cohen

The Exploitation Certificate has a validity of three years, and may 1 General be extended indefinitely for the same period of time. The Operation Certificate is issued without an expiration date. 1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ 1.3 What are the principal pieces of legislation in or regulate aviation in your jurisdiction. your jurisdiction which govern air safety, and who administers air safety? The principal legislation on aviation in Panama is Law No. 21 of 28 January 2003, which regulates civil aviation activities in Panama. The principal piece of legislation in our jurisdiction governing air Panama has also adopted the RAC (Reglamento de Aviación Civil) safety is Law No. 21 of 28 January 2003, which regulates civil which includes regulations for civil aviation. aviation activities in Panama, and the Civil Aviation Authority is the In addition, Law No. 23 of 28 January 2009 sets out the regulatory authority that administers air safety in Panama. framework for the administration of airports. The principal regulatory body on aviation in Panama is the Civil 1.4 Is air safety regulated separately for commercial, Aviation Authority, an independent government entity, with legal cargo and private carriers? capacity and its own resources, created by Law No. 22 of 29 January 2003. Commercial, cargo and private carriers are all subject to Law No. 21 of 28 January 2003. 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? 1.5 Are air charters regulated separately for commercial, cargo and private carriers? In order to operate a passenger or in Panama, it is necessary to obtain an Exploitation Certificate and an Operation Air charters for commercial, cargo and private carriers are regulated Certificate, both issued by the Civil Aviation Authority. equally under Law No. 21 of 28 January 2003. There is a set of documents that need to be filed with the Civil Aviation Authority at the time of applying for an Exploitation 1.6 As regards international air carriers operating in your Certificate and an Operation Certificate. jurisdiction, are there any particular limitations to be The evaluation process of the application for an Exploitation aware of, in particular when compared with ‘domestic’ Certificate involves a public hearing according to local laws and is or local operators? By way of example only, subject to the provisions of international conventions. restrictions and taxes which apply to international but not domestic carriers. In addition to payment of the corresponding fees and charges set by the Civil Aviation Authority, the Civil Aviation Authority Ownership of local airlines offering cabotage services (domestic may require the posting of a bond for the purpose of securing the operations) is restricted to national investors. The law requires that obligations of the airline to governmental authorities in Panama. at least 60% of the issued and outstanding capital in a local airline The amount of such bond may be for a maximum of 30% of the offering cabotage services, be owned by Panamanians. estimated taxes, fees and charges applicable to two months of The issued capital of such local airlines must be represented by operation of the airline. nominative shares in the name of Panamanians. Also, the effective Once the Civil Aviation Authority grants the exploitation and control of the airline must be exercised by Panamanians, and for operation certificates, the airline should meet the following such purposes: (i) at least 60% of the shares with the right to vote requirements before starting operations: must be nominative shares in the name of Panamanians; (ii) the right ■ Evidence of having liability insurance. to vote such shares must be effectively exercised by Panamanians; ■ Airline fares to be applied. (iii) the board of directors or similar administrative body must be ■ A bond or under the terms established by the regulations, composed, in its majority, by Panamanians; and (iv) the domicile or unless an Air Transport Agreement or other rules exempt the principal place of business of the airline must be in Panama. airline from this requirement.

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In respect to taxes, there is no special treatment by virtue of filing of a mortgage may take place on day one and recordation nationality. Our income tax system taxes income produced completed on day three, the effectiveness of the mortgage against within the territory of Panama. Therefore, income from domestic third parties will relate back to the date and time it was first filed at operations would be considered locally produced, and hence, 100% the Public Registry [i.e., day one (1)]). taxable; whereas income produced by international carriers outside of Panama would not be taxed in Panama. 2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as 1.7 Are airports state or privately owned? regards aircraft operation?

Generally, no. However, in the case of lessors, the lessee/operator Panama Generally, airports in Panama are currently owned directly or indirectly by the government. Law No. 23 of 29 January 2003 of the aircraft has to qualify as a Panamanian national (the majority (which sets the regulatory framework for the administration of of its issued and outstanding shares must be directly or indirectly in airports in Panama), provides that the government may incorporate the hands of Panamanian citizens). private companies, whose shares are to be wholly owned by the government of Panama, for the purpose of operating airports, as 2.4 As a matter of local law, is there any concept of title is the case of Tocumen International Airport, the main and largest annexation, whereby ownership or security interests international airport in Panama. in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft owned by another party? If so, what are the 1.8 Do the airports impose requirements on carriers conditions to such title annexation and can owners flying to and from the airports in your jurisdiction? and financiers of engines take pre-emptive steps to mitigate the risks? Except for requirements and regulations imposed by our general laws, airports do not impose specific requirements on carriers. There should be no risks if the owner of the engine has a valid title in its favour and it becomes possible to replace such engine with another one, without affecting the aircraft. 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place 2.5 What (if any) are the tax implications in your which need to be adhered to? jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), Law No. 21 of 2003 and the RAC (Reglamento de Aviación Civil) is and b) documentary taxes such as stamp duty; and the regulatory regime that applies to air accidents. (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving Panama has a territorial tax regime pursuant to which only income air operators and/or airports? produced within the territory of Panama is subject to income taxes. Hence, if the sale of an aircraft is done in the fiscal territory of No. However, we would note that the Tocumen International Panama, it would be subject to payment of income tax (in the case Airport is building new facilities to expand its operations. of any income resulting from the sale) and movable assets transfer tax and services (ITBMS) (which is a goods and services tax). 2 Aircraft Trading, Finance and Leasing 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and 2.1 Does registration of ownership in the aircraft register Cape Town)? constitute proof of ownership? Panama is party to the Convention for the Unification of Certain Yes. The ownership in aircraft must be recorded at the Public Rules for International Carriage by Air, the Geneva Convention on Registry of Panama in order for such interest to be effective vis-à-vis The International Recognition of Rights in Aircraft and the Cape third parties. The Public Registry of Panama is a government entity Town Convention on Interests in Mobile Equipment and its Protocol. in which titles, mortgages and leases on Panamanian registered aircraft are recorded. 2.7 How are the Conventions applied in your jurisdiction?

2.2 Is there a register of aircraft mortgages and charges? They are adopted by Law and treated as such. Broadly speaking, what are the rules around the operation of this register? 2.8 Does your jurisdiction make use of any taxation The Public Registry of Panama is a substantive register governing benefits which enhance aircraft trading and leasing the recognition and priority of interests of owners, lessors and (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties secured parties. or similar, or favourable tax treatment on the disposal Under Panamanian law, an aircraft mortgage is effective between of aircraft? mortgagor and mortgagee upon its creation and becomes effective against third parties from the date it is filed for recordation at the Yes, Panama has adopted Double Taxation Treaties with several Public Registry of Panama and such registration is completed (i.e., jurisdictions, such as Ireland. Panama has also exchanged diplomatic

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notes with other jurisdictions such as the United States, in regards party to: (a) maintain or restore the status quo pending determination to treatment of certain taxes for aircraft/companies engaged in of the dispute; (b) take action that would prevent, or refrain from international transportation. taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; (c) provide a means of preserving assets from which a subsequent award may be satisfied; 3 Litigation and Dispute Resolution or (d) preserve evidence that may be relevant and material to the resolution of the dispute. 3.1 What rights of detention are available in relation to Contrary to interim measures that are issued after the tribunal has aircraft and unpaid debts? heard all interested parties, preliminary orders are requested and decided ex parte (without notice to any other party). Preliminary Panama In the default case for unpaid debts under a facility agreement or orders are orders whereby an arbitration tribunal directs a party not a lease agreement, the lender/lessor may take physical possession to frustrate the purpose of a requested interim measure. Preliminary of the aircraft if the counterparty does not oppose it and there is no orders shall expire after 20 working days from the date on which breach of the peace. In the absence of the foregoing conditions, they are issued by the arbitration tribunal. However, the arbitration the repossession by the lender/lessor must be authorised by our tribunal may issue an interim measure adopting or modifying the authorities (judicial proceedings and/or permission of a government preliminary order after the party against whom the preliminary order entity). If the counterparty does not consent to the repossession or is directed has been given notice and an opportunity to present its opposes the peaceful repossession of the aircraft, the lender/lessor case. may commence executory and/or summary proceedings in Panama Courts can issue interim measures as well as precautionary measures and may also ask for the attachment of the aircraft in order to gain such as: (i) attachment or seizure of assets; (ii) sequestration of the immediate possession of it. administration of the company of the counterparty; and (iii) measures to secure or obtain certain types of evidence, among others. 3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire 3.6 Are there any rights of appeal to the courts from the possession of the aircraft or enforce any of its rights decision of a court or arbitral tribunal and, if so, in under the lease/finance agreement? what circumstances do these rights arise?

Yes. Please see our answer to question 3.1 above. Parties are not entitled to appeal an arbitral award in Panama. For awards issued by arbitration tribunals seated in Panama, parties 3.3 Which courts are appropriate for aviation disputes? are only entitled to file a motion to set aside the award (to have it Does this depend on the value of the dispute? For declared null and void) which will be heard by the Fourth Chamber example, is there a distinction in your jurisdiction of the Supreme Court. regarding the courts in which civil and criminal cases In general terms, judgments and certain interim orders rendered are brought? by the judges at the first instance level are subject to appeal to a higher court. In the case of judgments or related orders issued by In our jurisdiction, commercial aviation disputes should be heard civil circuit judges, the affected party may appeal to the Superior by a civil circuit court. As to procedural rules, our courts will apply Tribunal. Our judicial procedure also establishes the right in certain the rules set forth in the Judicial Code. Given the current value instances for an affected party to recur against decisions of the of aircraft (even in the case of a single engine plane), it is very Superior Tribunal to our Supreme Court under an extraordinary likely that Civil Circuit Courts will have jurisdiction to hear cases recourse known as “casación” or “cassation”. involving aircraft.

3.4 What service requirements apply for the service of 4 Commercial and Regulatory court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties? 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? In general terms, there are no differences for serving process on domestic or foreign airlines. The same rules apply to local and Mergers and acquisitions of airlines or joint venture agreements foreign companies. It will depend where the defendant is located between airlines fall within a general merger control regime. (in Panama or abroad) or if its whereabouts are unknown. In case service of process has to be carried out outside of Panama, our There is no mandatory pre-merger control in Panama for the approval courts will resort to letters rogatory. of mergers or other forms of business combinations. However, our Antitrust Law establishes a voluntary notification process for potential mergers or economic concentrations with the Authority of 3.5 What types of remedy are available from the courts Consumer Protection and Defence of Competition (ACODECO). or arbitral tribunals in your jurisdiction, both on i) an If prior verification for the economic concentration is sought and interim basis, and ii) a final basis? approved, the economic concentration cannot be subsequently challenged (anti-trust immunity). In Panama, an arbitration tribunal is permitted to award two types of preliminary or interim relief: interim measures; and preliminary If the potential transaction involves a collaboration agreement orders. between airlines (i.e. interline agreement, code-sharing agreement, leasing agreement, fleet exchanges, route exploitation, among Interim measures are temporary measures that are issued in the form others) prior approval from the Civil Aviation Authority (CAA) of an award or in another form by which, at any time prior to the must be obtained. issuance of the final arbitral award, the arbitration tribunal orders a

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Also, airlines must notify the CAA of any changes related to (i) Information: the management and control of airlines, (ii) stockholders and the ■ general information on each of the Applicants; percentage of stock ownership, (iii) amendments to the constitutional ■ information of the participation of Applicants in the relevant documents, or (iv) any amendment of the operations manuals or market; technical information. ■ information on the representatives of the Applicants and their If advance verification for the economic concentration is sought respective powers to represent them; and approved, the economic concentration cannot be subsequently ■ a description of the concentration, its objectives, and type of challenged. In case no advance verification is sought, at any time operations; within the three years immediately following the effective date of ■ specific details of the timing and stages relating tothe the transaction, ACODECO may file an action seeking that certain

Panama concentration process; conditions be imposed on the parties to ensure competitiveness ■ an outline of any non-compete clauses and their justification; in the marketplace, in case ACODECO considers the economic ■ a description of main goods or services produced or offered concentration to unreasonably restrict or harm free competition. In by each Applicant, as well as (i) a list of the substitution extreme circumstances, the ACODECO may even request a partial goods or services, and (ii) information on the economic or complete divestiture of the concentration. agents who produce, distribute, or commercialise such goods or services in the Panamanian territory, including their market participation data; 4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the ■ legal and economic limitations, or of any other kind, which purposes of mergers and acquisitions? should be accounted for to enter the product market in which the Applicants participate; In order to determine the “relevant market” for a specific good or ■ information on the companies which have entered or exited service, the Authority of Consumer Protection and Defence of the market in the previous three years, if such information is Competition will consider two components: (1) “Product Market” known; (what are the competing goods in the relevant markets); and (2) ■ information of any participation, directly or indirectly, of the “Geographic Market” (what is the geographic area of the relevant Applicants in the capital, administration, or any other activity market). of any other economic agent that participates in the same market or activities as the Applicants; and principal suppliers and clients of the Applicant; 4.3 Does your jurisdiction have a notification system ■ notwithstanding the foregoing list, (i) the Applicants may whereby parties to an agreement can obtain submit any additional information they consider necessary regulatory clearance/anti-trust immunity from for purposes of the ACODECO analysis, and (ii) ACODECO regulatory agencies? reserves the right to request additional information it considers relevant within a span of 20 days after the initial filing. With Yes, please see our answer to question 4.1 above. respect to point (i), in order to better present the applicant’s arguments, although it is not strictly required, the information and data provided might be backed by an economic analysis 4.4 How does your jurisdiction approach mergers, which takes into account the areas that are covered by any acquisition mergers and full-function joint ventures? concentration guidelines issued by ACODECO (e.g. indexes, barriers to entry, economic benefits, etc.). With respect Please see our answer to question 4.1 above. to point (ii), it is very common for ACODECO to request further information as applicable specifically to the relevant market; and 4.5 Please provide details of the procedure, including time frames for clearance and any costs of ■ cost for notification might be between USD25,000 to notifications. USD30,000.

The filing consists of a written request before ACODECO, attaching 4.6 Are there any sector-specific rules which govern the the following documents or including the following information: aviation sector in relation to financial support for air operators and airports, including (without limitation) Documents: state aid? ■ a copy of the legal act (i.e., the JV agreement), identifying the names of the parties involved (the “Applicants”); No, there are no such sector-specific rules in Panama. ■ a copy of the financial statements for the last fiscal year with respect to each of the parties duly certified by authorised public accountants; 4.7 Are state subsidies available in respect of particular ■ Public Registry Certificate (or foreign-issued equivalent) routes? What criteria apply to obtaining these with respect to each of the Applicants certifying the following subsidies? information as applicable prior to the concentration: legal existence; good-standing; legal representation; and capital No, there are no subsidies in our country for any particular routes. structure;

■ Secretary Certificate issued by the Applicants describing: 4.8 What are the main regulatory instruments governing the capital structure and shareholder participation before and the acquisition, retention and use of passenger data, after the concentration; and of persons who have and will and what rights do passengers have in respect of have control post-concentration; and their data which is held by airlines and airports? ■ a copy of documents pertaining to the business project analysis and valuation. Our political Constitution provides that all personal information and documents are confidential and inviolable, and such information

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may only be given to a competent authority pursuant to an order. This constitutional mandate is applied to all data, information and 4.15 What global distribution suppliers (GDSs) operate in documents collected by airlines. your jurisdiction? Our country has adopted rules regarding the advance delivery of Amadeus, Galileo, Sabre, among others. PNR (passenger name record) information to authorities. In addition to the above, there is no specific regulation related to passenger data in our country. 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction?

4.9 In the event of a data loss by a carrier, what No, there are no ownership requirements pertaining to GDSs Panama obligations are there on the airline which has lost the operating in Panama. data and are there any applicable sanctions?

See our answer to question 4.8 above. 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

4.10 What are the mechanisms available for the protection There is no provision that prohibits the integration of the air operator of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? and airports. However, ACODECO might challenge or investigate this vertical integration in light of our antitrust laws in order to determine if there is an antitrust conduct. In general, intellectual property rights are subject to protection by the law of the Republic of Panama. Our law provides for the registration of trademarks, patents, industrial models and designs, 4.18 Are there any nationality requirements for entities utility models and/or copyright, depending on each case. The law applying for an Air Operator’s Certificate in your also provides for judicial and administrative remedies to owners of jurisdiction or operators of aircraft generally into and IP rights to safeguard their rights. out of your jurisdiction?

Please see our answer to question 1.6 above. 4.11 Is there any legislation governing the denial of boarding rights and/or cancelled flights? 5 In Future Yes. Law No. 21 of 2003 governs such scenarios.

5.1 In your opinion, which pending legislative or 4.12 What powers do the relevant authorities have in regulatory changes (if any), or potential developments relation to the late arrival and departure of flights? affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of There are no specific powers that relevant authorities have in this attention in the next two years or so? regard. At this moment, there are no pending legislative or regulatory changes that we are aware of, nor any potential development that 4.13 Are the airport authorities governed by particular may affect the aviation industry in our jurisdiction. legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? Acknowledgment Yes, Law No. 21 of 2003 and Law No. 23 of 2003 apply to airport authorities. Each airport has its own Operation Manual. Also, the The authors would like to thank Pilar Castillo for her invaluable ICAO annexes applies to airports. assistance in the writing of this chapter. Ms. Castillo joined the firm in 2010, and became a partner in 2017. As an active member of ARIFA’s aviation legal team, Ms. Castillo represents leasing 4.14 To what extent does general consumer protection companies and investors in the most complex transactions, as legislation apply to the relationship between the COPA, the Panamanian airline, expands its fleet of international airport operator and the passenger? transport based in Tocumen International Airport. Ms. Castillo has an LL.M. from Fordham University and an LL.B. from Santa Maria The Consumer Law applies to every economic agent that does La Antigua University. In 2016, Ms. Castillo was accepted as IAWA business and is located in the Republic of Panama. So, this law will member (International Aviation Women’s Association). apply to any airport operator in the Republic of Panama. Tel: +507 205 7000 / Email: [email protected].

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Roy C. Durling Sofía J. Cohen Arias, Fabrega & Fabrega Arias, Fabrega & Fabrega ARIFA Building, 10th Floor, West Boulevard ARIFA Building, 10th Floor, West Boulevard Santa Maria Business District Santa Maria Business District P.O. Box 0816-01098 P.O. Box 0816-01098 Panama Panama

Tel: +507 205 7041 Tel: +507 205 7000 Fax: +507 205 7001 Fax: +507 205 7001 Email: [email protected] Email: [email protected] URL: www.arifa.com URL: www.arifa.com Panama Joined the firm in 1991. Joined the firm in 1999. Became a partner in 2001. Became a partner in 2017. Member of the firm’s Executive Committee. Head of the Regulatory Practice Group. Head of the Aviation Practice Group. Having served in the Civil Aviation Authority of Panama, Sofía J. Cohen brings an abundance of experience in corporation and regulatory matters Head of the Business & Corporate Law Practice Group. for aviation and other transportation modes; transportation accident A versatile lawyer with skills in a wide range of corporate and commercial claims and aviation law to her legal practice in the aviation field. law areas, Roy Carlos Durling brings his many years of experience in 2010: asset-based financing to the firm, advising international clients onthe negotiation and structure of aviation financing deals. Recently, he ■■ Chief Negotiator of the Delegation of the Republic of Panama at the has advised international financial institutions on the sale and delivery ICAO Third Air Services Negotiation Conference (ICAN/2010). of aircrafts as COPA, the Panamanian airline, expands its fleet of ■■ Chief Negotiator of the Air Services Agreement with United Arab international transport based in Tocumen International Airport. Emirates. Mr. Durling has a J.D. from Cornell University and a B.A. from ■■ Represented the Republic of Panama at the General Assembly of Georgetown University. International Civil Aviation Organization (ICAO). 1986–1990: Worked for the law firm Haight, Gardner, Poor & Havens 2009–2010: Deputy General Director of the Civil Aviation Authority of (today, Holland & Knight LLP) in New York. He is admitted to practise in Panama. Panama and New York. 1992–1994, 1999: Director of Air Transportation of the Civil Aviation Authority of Panama. 1990–1991: Assistant District Attorney. Ms. Cohen has a Master of Business Law from the Latin American University of Science and Technology and an LL.B. from Santa Maria La Antigua University. Regulatory experience Ms. Cohen heads the Regulatory Work Practice Group, serving the needs of clients affected by a myriad of highly-technical, industry-specific and ever-increasing business regulations. Ms. Cohen is well regarded for her in-depth knowledge of the laws affecting regulated industries and for her experience and skills in dealing with regulatory agencies.

Arias, Fabrega & Fabrega’s (ARIFA) legal team experience in the aviation sector includes: advising airlines, aircraft owners, aircraft lessors and lessees, banks, and industry providers such as fuel suppliers, in the negotiation and drafting of complex aircrafts acquisition and leasing agreements; registration of aircrafts before the Civil Aviation Board; joint-venture agreements; international IPOs of leading commercial airlines in the region; as well as airport infrastructure project financing and fuel procurement contracts. ARIFA’s wide range of services in the area of aviation law also includes providing legal advice to industry providers competing in the public procurement and public-private partnerships field, with full understanding of the requirements of the aviation contracting authorities and the various stages of the awarding process. Over the last 20 years, ARIFA aviation group has been actively involved in the delivery, sale, and financing of aircraft leased to COPA Airlines, representing leasing companies and investors in the most complex transactions, as the Panamanian airline expands its fleet of international transport based in Tocumen International Airport.

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Romania Mihai Furtună

Furtună și Asociații Ioana Anghel

■ the structure of the company shall allow the state authority to 1 General enforce the provisions of (EC) Regulation no. 1008/2008 in respect of the operating licence; 1.1 Please list and briefly describe the principal ■ EU Member States and/or residents thereof shall own over legislation and regulatory bodies which apply to and/ 50% of the share capital in the company and shall exercise or regulate aviation in your jurisdiction. direct or indirect control thereon, except in the case of the existence of an agreement entered into with a third country, to which the EU is a party; In Romania, the general legal framework regulating aviation law is structured on three levels: national; European; and international. ■ compliance with the financial conditions set forth in Article 5 of the Regulation; Romanian aviation law is in compliance with EU/EUROCONTROL/ ■ compliance with the requirements provided in Article 11 of EASA Regulation. (EC) Regulation no. 785/2004; and The Romanian Civil Air Code (GO no. 29/1997, as further amended) ■ compliance with the requirements on goodwill set forth in represents the main regulation at the national level, setting forth Article 7 of the Regulation. general rules which are applicable in the field of civil aviation. An operating licence is available as long as the air carrier meets all The state authority in the aviation field is the Ministry of of the above-mentioned conditions. Transportation, which has delegated some of its duties to the The General Directorate of Civil Aviation is entitled at all times to Romanian Civil Aviation Authority. The Romanian Civil Aviation assess the financial outcomes of an air carrier to whom it granted Authority (RCAA)’s main duties include the application of national the licence, under which the authority may discontinue or cancel the aviation regulations and monitoring compliance therewith by operating licence in the event that it is doubtful whether such an air aeronautical operators, as well as the implementation of international carrier may comply with its existing or prospective obligations over covenants and agreements to which Romania must adhere. a 12-month term. Nevertheless, the competent authority may issue The RCAA, together with the Defence Ministry, coordinates the use a temporary licence for a maximum of 12 months until the financial of Romanian air space by civil and military aviation. restructuring of the community air carrier has been completed.

1.2 What are the steps which air carriers need to take in 1.3 What are the principal pieces of legislation in order to obtain an operating licence? your jurisdiction which govern air safety, and who administers air safety? At the European level, the required conditions for obtaining an operating licence are provided under (EC) Regulation no. 1008/2008 Air safety is governed by the European regulation related to air governing mutual rules for the operation of community air services. safety (in particular Regulation (EU) 2018/1139, Regulations (EU) Order no. 808/2011, issued by the Ministry of Transportation, sets no. 965/2012, no. 748/2012, (EU) no. 1321/2014, etc.) and also by forth the procedures to award, discontinue or withdraw the operating the national legislation, namely the Romanian Civil Air Code and licence at the national level. The application to obtain an operating secondary legislation implementing the European rules. licence shall be submitted to the Ministry of Transportation and The European Aviation Safety Agency (EASA), founded in 2002 by Infrastructure – General Directorate of Civil Aviation, and the the EU, is responsible for the proper functioning and development conditions that shall be met by the company with a view to obtaining of civil aviation safety and cooperates with the national authorities such a licence are enumerated hereunder: in air safety matters. ■ its main headquarters are located in Romania; In Romania, the body responsible for flight safety oversight is the ■ it owns an available air operator certificate (AOC); Romanian Civil Aviation Authority, having the following main duties: ■ it owns one or several aircraft, either in virtue of a property ■ drafting air safety regulations and overseeing the implementation title or under a dry lease agreement; of such regulations; ■ its main object of activity is either the exclusive operation of ■ air operator certification, aviation personnel licensing and air services or it may be combined with any other commercial aeronautical product, part and appliance certification; use of the aircraft or aircraft repair and maintenance activities; ■ aerodrome certification;

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

1.5 Are air charters regulated separately for commercial, From a European standpoint, the Regulation (EU) no. 996/2010 of cargo and private carriers? the European Parliament and the Council of 20 October 2010 on the investigation and prevention of accidents in civil aviation stipulates No, they are not. that each Member State has the obligation to set up a national safety investigation authority. 1.6 As regards international air carriers operating in your In the light of the Regulation (EU) no. 376/2014 of the European jurisdiction, are there any particular limitations to be Parliament and the Council of 3 April 2014 on reporting, analysis aware of, in particular when compared with ‘domestic’ and follow-up of occurrences in civil aviation, for air accidents and or local operators? By way of example only, incidents within the meaning of Regulation (EU) no. 996/2010, restrictions and taxes which apply to international but there is a reporting obligation towards the authorities responsible not domestic carriers. for aviation investigations.

According to the Romanian Civil Air Code, all aircraft operating The national legislation regulates air accidents under different acts, in the national air space are obliged to pay a fee in order to use air among which the most relevant are the Romanian Civil Air Code and navigation services. All such fees are non-discriminatory for the G.D. no. 741/2008 for the approval of the Regulation of 9 July 2008 same categories of civil flight, irrespective of the nationality of the on emergency management generated by civil aviation accidents. air operators or of the state where the aircraft was registered. The The Romanian Civil Air Code states that the Investigation and Ministry of Transportation has the right to temporarily deny access Examination Centre for Civil Aviation Safety is the authority to the national air space for aircraft operators who have failed to pay in charge of managing, coordinating and performing technical the fees to use air navigation services. investigations as a result of civil aviation events with a view to determining the facts, the causes and the circumstances that led to the accident, as well as identifying prevention measures. It should 1.7 Are airports state or privately owned? be noted that this technical investigation is independent from criminal or disciplinary investigation. Airports are both state and privately owned. Most airports in Romania operate under the authority of the Ministry of The Regulation of 9 July 2008 on the management of emergency Transportation or local county councils. Bucharest Banaesa situations caused by the occurrence of a civil aviation accident is a International Airport – ‘Aurel Vlaicu’ and Bucharest ‘Henri Coanda’ special regulation setting forth the procedure that must be complied International Airport are administered by the Bucharest National with, as well as the main institutions with duties in the management Airport Company, in which the Romanian state owns 80% of the of air accidents, namely: shares. Other airports are administered by state-owned companies, ■ the structures that provide alerting services (the Romanian for example Sibiu International Airport or Cluj ‘Avram Iancu’ Administration of Air Traffic Services – ROMATSA; the International Airport. National Company of Maritime Radio communications – RADIONAV S.A.; and the Special Communications Alexandru Podgoreanu Tuzla Airport is the only private airport in Service); and the country. ■ the units responsible for coordinating rescue operations depend on the place where the accident occurred. 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving Yes, they do. In Romania, according to the Civil Air Code, airport air operators and/or airports? administrators set certain charges for the use of facilities and services provided by airports. Nevertheless, there are certain aircraft which Among the most notable developments taking place in Romania in are exempt from the payment of such fees, for example: Romanian the last year we mention the following: military aircraft; foreign military aircraft which operate under ■ Romania ratified the Cape Town Convention of 16 November bilateral agreements (exemptions are applicable only to airports 2001, by Law no. 252 of 13 December 2017, endorsing where the Romanian state is the controlling shareholder); and both the Convention and the Protocol to the Convention aircraft that carry out humanitarian and emergency aid operations. on international interests in mobile equipment on matters If a civil aircraft fails to comply with these pecuniary obligations, specific to aircraft equipment; it is worth mentioning that the ratification was made with a declaration of reserve stating airfield administrators have the right to confine such an aircraft to that all the creditor’s rights according to the Convention must the ground until the debts are written off or until a satisfying security be exercised only with the Romanian courts’ approval. Any interest is given. proceedings outside the courts are excluded.

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■ The Romanian Government project for launching a public- clauses specific to lease agreements are applied as prescribed under private partnership to build Bucharest South Airport, both the Romanian Civil Code and special laws regulating financial lease for passengers and cargo – the airport could become a agreements under GO no. 51/1997. transit point for passengers travelling to the Asia-Pacific and Europe-America regions. The size of Bucharest South As regards lessors, the lease agreements entitle them to a writ of Airport is projected for a traffic of approximately 30 million execution, provided that the lease agreement is concluded in an passengers and will have a surface area of 600 ha. authenticated form. Consequently, in the event that the lessee is in ■ The construction of Brasov Airport – the airport’s investment default under the lease agreement, he/she may be executed against amounts to 57 million EUR and it is envisaged to be rent payment without the interference of the court. completed in 2020. It is estimated that the passenger flow will exceed one million persons.

2.4 As a matter of local law, is there any concept of title Romania ■ The establishment of the first private aviation high school annexation, whereby ownership or security interests in Romania, with double recognition both in Europe and the in a single engine are at risk of automatic transfer USA. Adolescents who graduate will have the specialisation or other prejudice when installed ‘on-wing’ on an of an aviation technician. aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to 2 Aircraft Trading, Finance and Leasing mitigate the risks?

The Romanian legislation does not provide the concept of title 2.1 Does registration of ownership in the aircraft register annexation, whereby ownership or security interests in a single constitute proof of ownership? engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft owned by another party. No, it does not. According to the national legislation, civil aircraft In such a situation, in practice, the legal status of the ownership/ registration does not entail the emergence of rights, and its sole effect security interests is conventionally regulated by the parties’ lies in the fact that the registered rights may be opposed to third parties. agreement, in compliance with the common law. Furthermore, Civil Romanian Air Regulation no. RACR-IA, However, the ratification of Romania to the Convention “Registering civil aircraft”, edition 1/2016, sets forth that the civil on International Interests in Mobile Equipment (Cape Town aircraft registration and the registration certificate do not constitute Convention) affords the opportunity for engine owners, lessors and proof of legal title or ownership of a civil aircraft in the case of financiers to register an ‘international interest’ in the asset with the litigation whose cause-at-issue is ownership of title in that particular International Registry of Mobile Assets. Following the registration aircraft. of the international interest against certain aircraft objects (engines, Proof of ownership of the aircraft may only be made by the actual airframes and helicopters), the holder is then entitled to exercise or legal owner thereof, and it may range from a title of property, a certain remedies in case the debtor defaults. sales agreement, a final court decision or any other legal document whereby ownership is transferred, to a title of ownership – whereby possession and a usage right in the aircraft are transferred. 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), 2.2 Is there a register of aircraft mortgages and charges? and b) documentary taxes such as stamp duty; and Broadly speaking, what are the rules around the (to the extent applicable) do exemptions exist as operation of this register? regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? Yes, according to the Civil Romanian Air Regulation no. RACR-IA, “Registering civil aircraft”, edition 1/2016, the register of aircraft In Romania, the GST is assimilated to value-added tax (VAT) and mortgages and charges is operated by the Romanian Civil Aviation according to the national tax law, VAT is not applicable for all aircraft Authority. purchased and used by airlines primarily engaged in international passenger and/or freight transport, namely (i) aircraft delivery, The mortgages and charges are registered in the above-mentioned modification, repair, lease, rent as well as aircraft equipment register based on the documentation submitted by the applicant to the delivery, modification, repair, lease, rent, and (ii) fuel delivery. For Romanian Civil Aviation Authority, which includes (i) the registration any other aircraft transaction, the VAT is 19%. request, (ii) the mortgage/charge title, and (iii) the proof of payment of the fee for the registration service (180 EUR per aircraft). The national legislation does not regulate documentary taxes such as stamp duty for aircraft trading. Unless otherwise stated, the first mortgage/charge registration, as well as the following modifications, are available for a five-year period, with the possibility of renewing the registration, based on 2.6 Is your jurisdiction a signatory to the main supporting documents. international Conventions (Montreal, Geneva and Cape Town)? The register of aircraft mortgages and charges is a public register, and, upon request, the authority may release information regarding mortgages and charges to the person concerned. Romania is a signatory to: ■ The Geneva Convention of 19 July 1948, to which it adhered following the enactment of Act no. 64 of 13 July 1994. 2.3 Are there any particular regulatory requirements ■ The Montreal Convention of 28 May 1999, ratified by GO no. which a lessor or a financier needs to be aware of as 107/2000, which was approved by Act no. 14/2000. regards aircraft operation? ■ The Convention on International Civil Aviation Organisation (ICAO), to which Romania adhered in 1965. There are no special requirements, as civil law provisions and

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■ The International EUROCONTROL Convention on air certain situations, a writ of judgment may be sought in the safety cooperation and the “Multilateral agreement regarding absence of litigation, provided that an application to court is air fees” (concluded in Brussels on 12 February 1981), to filed in less than 20 days. Finally, in the event that the court which Romania adhered in 1995. admits the issuance of a judgment writ, the beneficiary may ■ Cape Town Convention of 16 November 2001, recently be obliged to set a bail. ratified by Romania by Law no. 252 of 13 December 2017, endorsing both the Convention and the Protocol to the 3.2 Is there a regime of self-help available to a lessor Convention on international interests in mobile equipment on or a financier of an aircraft if it needs to reacquire matters specific to aircraft equipment. possession of the aircraft or enforce any of its rights under the lease/finance agreement?

Romania 2.7 How are the Conventions applied in your jurisdiction? No, there is not. The Romanian legislation does not provide any Acceding to the Romanian Constitution, the treaties ratified by the specific security interests for lessors or aircraft financiers. Parliament become part of the domestic legislation. Therefore, the As regards the repossession of a leased asset, the lease agreement provisions of the conventions to which Romania is a party are directly grants an execution writ over the asset in the event that such an applicable in the Romanian legislation on condition of being ratified obligation arises out of the termination of the agreement and not out by the Parliament. Compliance with and enforcement of the treaties of rescission. In the latter case, the action is brought in court. and conventions are provided through the court of jurisdiction. In respect of the financiers, according to GO no. 51/1997, lease agreements, as well as personal and real securities agreements 2.8 Does your jurisdiction make use of any taxation entered into in order to pledge the assumed obligations, are benefits which enhance aircraft trading and leasing considered writs of execution. As a result, unless otherwise (either in-bound or out-bound leasing), for example provided for under the agreement, in the event that the lessee/user access to an extensive network of Double Tax Treaties does not comply with the obligation to pay in full the rent for two or similar, or favourable tax treatment on the disposal consecutive months, the lessor/financier is entitled to rescind the of aircraft? lease agreement while the lessee/user is obliged to return the asset and pay the due amounts. In the event that the lessee fails to return Over time, Romania has concluded over 82 bilateral conventions the aircraft, the financier is entitled to commence the enforcement with a view to avoiding Double Taxation applicable also to aircraft proceeding against the lessee without resorting to court. trading and leasing. These treaties are public on the website of the national tax administration agency. As mentioned before, in respect to taxation benefits VAT is not applicable for all aircraft 3.3 Which courts are appropriate for aviation disputes? purchased and used by airlines primarily engaged in international Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction passenger and/or freight transport, namely (i) aircraft delivery, regarding the courts in which civil and criminal cases modification, repair, lease, rent as well as aircraft equipment are brought? delivery, modification, repair, lease, rent, and (ii) fuel delivery. For any other aircraft transaction, the VAT is 19%. Pursuant to the enforceable legislation, there are no specialised courts to deal with civil aviation disputes. National courts have the 3 Litigation and Dispute Resolution competence to adjudicate both civil and criminal cases in accordance with rules of general, material and territorial competence as provided by the Civil and Criminal Proceedings Codes. 3.1 What rights of detention are available in relation to In civil matters regarding pecuniary claims, the district courts have aircraft and unpaid debts? the competence to settle litigation claims that include a maximum value of 200,000 RON inclusive, whereas claims over a higher A creditor is entitled to commence the detention proceeding amount are adjudicated in the first instance by tribunals. against an aircraft. Romanian legislation provides several types of detention depending on the nature of the title on whose grounds such detention relies: 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic ■ Seizing the assets, as part of the enforcement proceeding, airlines/parties and non-domestic airlines/parties? entails the existence of an execution writ (court decision, arbitration decision or an agreement). The seizure is commenced by the bailiff in the absence of a court order. As regards natural or legal entities residing in Romania, the When under seizure, the aircraft is grounded, and it is summons and further procedural documents are served ex officio temporarily taken out of the civil circuit. In the event that the through procedural court agents. Parties who are abroad, but whose aircraft is mortgaged in favour of a third party, it may still be domicile or residence is known, are summoned, or procedural put under seizure as long as the rights of the mortgagor are documents are served upon by means of a recommended letter complied with. with declared contents and receipt confirmation. In the event that ■ Attachment is a proceeding which entails freezing the the domicile or the residence of the persons living abroad is not moveable assets of the debtor with a view to realising them known, these are served by means of advertisement (the summons once the creditor obtains an execution writ. Depending on is displayed on the door of the court, on the court’s portal or at the the nature of the debt, a bail may be needed whose value is last known domicile of the summoned person). Also, a curator is consistent with the reason for which a writ of attachment is appointed by the court to act as a lawyer who will represent the sought. interests of the summoned person. ■ A writ of judgment may be ordered against an aircraft in The above-mentioned service is identical to that used for both the event that the cause-at-issue of the litigation between the parties is represented by an alleged claim thereupon. In companies registered in the UK and those registered in other states.

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As regards the New York Convention of 10 June 1958, Romania 3.5 What types of remedy are available from the courts adhered thereto under Decree no. 186 of 10 July 1961. or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis? 4 Commercial and Regulatory In Romania, both courts and arbitration tribunals pass provisional and final decisions. 4.1 How does your jurisdiction approach and regulate The decisions held by the courts entail the examination on the joint ventures between airline competitors? merits of the alleged right, and they become final following the adjudication of incidental challenges (appeal and, in some cases, Our national legislation does not set forth special regulations for second appeal) or as a result of failure by the interested party to Romania joint ventures between air operators. Joint ventures are regulated challenge such decisions. by the national and European provisions, namely the Romanian Litigation commences once the complaint is filed with the court, Competition Act no. 21/1996, the Treaty on the Operation of the on the condition that it complies with the admissibility conditions. European Union and Council Regulation (EC) no. 1/2003 of 16 In the event that such conditions are met, the defendant is served December 2002 on the implementation of the rules on competition with the complaint in order to file a statement of defence. In cases laid down in Article 101 (ex. Article 81 TEC) and Article 102 (ex. where the complaint has certain flaws, these are communicated to Article 82 TEC) of the Treaty. the plaintiff who has the obligation to remedy them; otherwise, the complaint is annulled. Provided that the defendant submits a statement of defence (which is compulsory; non-compliance 4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the with this obligation shall lead to an interdiction on the part of the purposes of mergers and acquisitions? defendant to submit evidence and raise exceptions), this is served upon the plaintiff so that he/she could file an answer to the statement The competent authority to receive a merger notification is the of defence. This proceeding is solely carried out in writing and, Competition Council. In order to determine the relevant market, subsequent to the setting up of the first hearing and the summoning both the Competition Council and the courts of jurisdiction take into of the parties, the lawsuit itself is initiated and becomes final once account the market of the product or service on the one hand and the the court passes a ruling. Challenges to court rulings are subject geographical location on the other. The determination criteria are to the same proceedings as the complaint. The duration for a final specific to the aviation industry and are applied depending on each settlement of litigation differs depending on its complexity and may particular situation. For example, in the case of airports, the service range from one-and-a-half years to several years. market is represented by the main operations performed in an airport, The provisional decisions passed by the court are mainly aimed at namely those connected to its exploitation, and they comprise both ordering preservation measures. As a rule, these are ordered as a infrastructure services ( facilities, runways, etc.) and services result of a motion and they are enforceable until the merits of the envisaging passenger and merchandise management. case are settled. In the event that the parties choose arbitration, the arbitration award 4.3 Does your jurisdiction have a notification system is passed after the parties have exposed their claims and namely whereby parties to an agreement can obtain their defences. The award is final and it has the same applicability regulatory clearance/anti-trust immunity from with a view to enforcement proceedings as the decision passed by regulatory agencies? the court. Dispute resolution before an arbitration tribunal is a flexible proceeding and the parties have the possibility to choose the Yes, it does. Takeovers performed through the merger of two or procedural rules by means of an arbitration convention. The claims several undertakings must be notified by each of the involved parties. are settled faster, usually within six months. In all the other cases, the notification must be submitted by the party The arbitration court may also order provisional or attachment who gains the control over the undertaking. The transaction must be measures before or during arbitration and may ascertain certain notified before it takes effect and after the conclusion of the agreement. factual circumstances. Following the examination of the transaction, the Competition Council may render one of the following decisions: 3.6 Are there any rights of appeal to the courts from the ■ a resolution of non-objection when it is found that the merger decision of a court or arbitral tribunal and, if so, in does not fall under the scope of the Competition Law; or what circumstances do these rights arise? ■ a resolution to start an investigation because of doubts concerning compatibility with a normal competitive In respect of decisions of the court of jurisdiction, according to environment, in which case the authority can: (i) declare the the procedural Romanian rules, the decisions passed by the court merger incompatible with a normal competitive environment; are subject to different challenges. Depending on the nature of the (ii) render an authorisation decision if the merger does not litigation, the appeal may be the only challenge, or an appeal may be raise significant obstacles for effective competition on the Romanian market; or (iii) render a conditional authorisation followed by a second appeal which exclusively envisages reasons decision establishing the obligations and/or conditions which related to the illegality of the appealed decision. must be fulfilled so that the merger can be compatible with a Regarding arbitration, the Romanian lawmaker has excluded both normal competitive environment. ordinary and extraordinary challenges in cases of arbitration. Nevertheless, the Civil Procedure Code stipulates the procedure 4.4 How does your jurisdiction approach mergers, according to which an arbitral award may be annulled. The action of acquisition mergers and full-function joint ventures? the annulment may constitute files only on certain limited grounds, and the competence to rule on such grounds is vested in the Appeals There is no distinction in our domestic legislation between takeovers Court located where the arbitration took place. (mergers, acquisition mergers or full-function joint ventures).

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A merger takes effect when the long-term change of control For investment in airport infrastructure, the Guidelines set results from the merging of two or more previously independent percentages for the maximum amount of state aid going into airport undertakings or parts of undertakings, or one or more persons, who, infrastructure. The percentages depend on the size of an airport (for already holding control over at least one undertaking, or one or more an airport with passenger traffic of 3–5 million, up to 25% of the undertakings directly or indirectly, or by purchase of securities or investment costs; for an airport with passenger traffic of 1–3 million, assets, either by contract or other means, acquire control directly up to 50%; and for an airport with passenger traffic of less than 1 or indirectly over one or several undertakings or parts thereof. million, up to 75%), in order to ensure the right balance between The setting up of a joint venture company which operates like an public and private investment. autonomous economic entity also represents a merger. Operating aid to regional airports (with fewer than 3 million The obligation to notify the Competition Council applies to mergers passengers a year) is allowed only for 50% of the initial average Romania where the aggregate turnover of the undertakings concerned operating funding gap calculated as an average of five years exceeds the equivalent in RON of 10 million EUR and at least two preceding the transitional period of 10 years. To receive operating undertakings involved in the merger have an individual turnover of aid, airports need to work out a business plan paving the way towards the equivalent in RON of more than 4 million EUR. full coverage of operating costs at the end of the transitional period. For the analysis of any other kind of merger, the Competition Essentially, the new guidelines are intended to initially reduce, and Council decides, based upon the following criteria: a) if two or more then eliminate, as soon and as much as possible, the public funding holding companies keep running (to a significant degree more than of airports and airlines. 20% or 30%, as applicable), their operations on the same market as the joint venture, or on a market upstream or downstream from the 4.7 Are state subsidies available in respect of particular market of the joint venture, or on a market in close relation with this routes? What criteria apply to obtaining these market; or b) if, by setting up the joint venture, the undertakings subsidies? in question can eliminate competition for a significant part of the products or services in question. State subsidies may be granted for services of general economic interest (SGEI), but also in the case contemplated by Article 16 of 4.5 Please provide details of the procedure, including (EC) Regulation no. 1008/2008 regarding common norms for the time frames for clearance and any costs of operation of air services in the community. notifications. As a result, the public authorities may consider in some cases that certain economic activities performed by airports or air operators The notification procedure starts with Phase I and lasts: (i) 30 days fall in the category of services of general economic interest and from receiving a complete notification of a merger case, if the thus grant compensation for their performance. The subsidies are Competition Council concludes that the merger does not fall under under the form of compensation for public service obligation and the scope of the Competition Law; or (ii) 45 days from receiving a will be assessed in accordance with Decision 2012/21/EU of the complete notification of a merger case, if the Competition Council Commission. Additionally, state subsidies for certain routes may be will issue a decision of non-objection when it is found that the granted under the provisions of Article 16 of (EC) Regulation no. merger does fall under the scope of the Competition Law; and: 1008/2008 in the case of air routes between a community airport a) there are no serious doubts concerning compatibility with a and an airport situated on a peripheral or under-developed area on normal competitive environment; or b) serious doubts concerning its territory, or for low-traffic routes to any airport on its territory, if compatibility with a normal competitive environment have been such a route is essential to the social and economic development of removed through the commitments proposed by the undertakings the area where such an airport is located. and accepted by the Competition Council. Phase II has a maximum time schedule of five months from receiving 4.8 What are the main regulatory instruments governing a complete notification of a merger case, for which the Competition the acquisition, retention and use of passenger data, Council subsequently decides to start an investigation because and what rights do passengers have in respect of of doubts concerning compatibility with a normal competitive their data which is held by airlines and airports? environment. The notification fee is 1,061 EUR for each notification. Romanian Airlines and Airports shall process passengers’ data The national legislation stipulates also an authorisation fee for according with EU (Regulation (EU) 2016/679 of the European mergers. The fee is set between 10,000 and 50,000 EUR and the Parliament and of the Council of 27 April 2016 on the protection of final amount of the fee is determined by the Competition Council in natural persons with regard to the processing of personal data and on relation to the authorisation decision issued by the authority. the free movement of such data – GDPR) and also according with national regulation – Law no. 190/2018 on implementing measures for Regulation (EU) 2016/679. 4.6 Are there any sector-specific rules which govern the A passenger, as a data subject, can exercise his right of access, right aviation sector in relation to financial support for air operators and airports, including (without limitation) to data portability, right to object, right to rectification, right to state aid? erasure or right to restrict the processing of data processed by the Romanian Airlines and Airports. All the aforementioned rights can Although there are no national provisions in respect of financial be exercised only under the conditions provided by GDPR. support for airports and air companies, the European regulations are According to Romanian law, the supervisory authority is ANSPDCP applied, namely the European Commission Guidelines on state aid – The National Supervisory Authority for Personal Data Processing. to airports and airlines. The guidelines establish rules for state aid Data subjects may submit questions or complaints about their rights for airports and airlines, by three categories of state aid: investment and about national and European data protection legislation by in airport infrastructure; operating aid to regional airports; and start- submitting applications at the ANSPDCP – Assistance Office Desk up aid to airlines to launch new air routes. or by email at [email protected].

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damages of a fixed amount (consistent with the flight distance), 4.9 In the event of a data loss by a carrier, what assistance (refunding the cost of the ticket, transportation to his/her obligations are there on the airline which has lost the final destination by another airplane or means of transportation) and data and are there any applicable sanctions? accommodating services (meals, accommodation, transfer, two free- of-charge phone calls and fax or email messages). Regardless of his position as a controller or a processor, the carrier In case of flight cancellation for circumstances other than exceptional must have a strong procedure ready to be applied in case of a data loss. ones that could not have been avoided despite the adoption of all It is essential to determine whether the carrier is the controller or the possible measures, the passenger is entitled to damages (calculated processor in connection to lost data. based on flight distance), assistance (refunding the cost of the ticket, As a controller, the carrier should notify the supervisory authority transportation to his/her final destination by another aeroplane or no later than 72 hours after having become aware of the data means of transportation) and accommodating services (meals, Romania breach, and any notification after the 72 hours deadline should be accommodation, transfer, two free-of-charge phone calls and fax fundamentally justified. or email messages). In respect of the national authorities which As a processor, the carrier shall notify the controller without undue have competence in this area, please see the answer to question 4.12 delay after becoming aware of a personal data breach, remaining below. available to provide the necessary information to the controller and the authority. 4.12 What powers do the relevant authorities have in Depending on the nature of the lost data (potential high risk to the relation to the late arrival and departure of flights? rights and freedoms of the data subject) and excluding the exceptions provided for by the GDPR, the carrier shall also notify the personal In Romania, the National Authority for Consumer Protection is data breach to the data subject without undue delay. responsible for monitoring compliance with passengers’ rights as In the case of such data lost, the carrier may be subject to a sanction these are set out in (EC) Regulation no. 261/2004. applied by the National Authority if the loss is caused by the In the event that the parties fail to settle amicably, the passenger is violation of the applicable regulations. entitled to seek redress from the National Authority for Consumer Also, when establishing the sanction, the National Authority will Protection (if the incident occurred on the territory of Romania) assess the security measures taken, how the situation was managed or from the competent national authority in the country where the to reduce the effects caused and the availability of the carrier to incident took place. The complaint shall be made according to the cooperate with the National Authority. standard form issued by the European Commission and it must be solved within the 30-day legal term. The National Authority for Consumer Protection shall impose a fine on the air operator, 4.10 What are the mechanisms available for the protection provided that it finds, upon investigation, that it failed to inform of intellectual property (e.g. trademarks) and other passengers or did not grant the due compensation/damages. assets and data of a proprietary nature? In the event that the above-mentioned endeavours do not result in a The institutional and legal framework which acts as a safeguard is solution to the problem, the passenger may start legal proceedings mainly provided by two specialised institutions: State Office for against the air operator within two years as of the date of arrival at the Patents and Trademarks, which is the authority that grants protection destination, or as of the date on which the aircraft was supposed to for industrial property; and the Romanian Copyright Office, which have arrived, or as of the date on which the transportation terminated. is the authority with duties in respect of tracking, observance and investigation into the application of legislation on copyright and 4.13 Are the airport authorities governed by particular affiliated rights. legislation? If so, what obligations, broadly speaking, The protection of industrial property rights is mainly regulated are imposed on the airport authorities? by Act no. 64/1991 regarding patents, Act no. 84/1998 regarding trademarks and geographical indications and Act no. 129/1992 The obligations of airport administrators are provided both under regarding the protection of industrial design and models. Moreover, national and European legislation. Hence, at the national level, Romania transposed an important part of the European legislation in such obligations are regulated by the Order of the Ministry of respect of intellectual property. Transportation no. 161/2016 which approved the Romanian Civil Aviation Regulation with reference to the authorisation of civil Finally, in respect of legal remedies awarded by courts, there are airdromes, RACR-AD-AADC. The airport administrator, namely specialised panels adjudicating intellectual property cases, thus the natural or who runs and manages an airport in ensuring qualified platforms in protecting such rights. public or private property, has the following main duties: ■ to obtain and maintain proper conditions in terms of safety, 4.11 Is there any legislation governing the denial of regularity and efficiency of the air operations performed on boarding rights and/or cancelled flights? the airdrome under the provisions of air legislation; ■ to maintain the organisational structure, the facilities and The applicable legislation consists of the Convention to unify airdrome equipment, the operational framework and safety provisions regulating international air transportation, signed in management systems at the minimum level initially declared, Montreal in 1999, and (EC) Regulation no. 261/2004, which set out acknowledged and approved by the Romanian Civil Aviation joint provisions as regards compensation and passenger assistance Authority; and in the event of boarding denial, cancellation or prolonged delays. ■ to perform only the activities/services which have received In the event that the air operator denies the boarding of a passenger authorisation, and only under the specified conditions, abiding by the restrictions set forth in the Annex attached to due to reasons other than poor health, safety and security requirements the authorisation certificate. or inappropriate travel documents, the passenger is entitled to

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Therefore, the Romanian Civil Aviation Authority shall issue an 4.14 To what extent does general consumer protection AOC only for entities that have their principal place of business in legislation apply to the relationship between the Romania. airport operator and the passenger? Moreover, in order for an entity to obtain an operating licence it must, among others, have its main headquarters in Romania and The relationship between the passenger and the airport operator is own an available AOC. Please see above question 2.1. governed by (EC) Regulation no. 261/2004 and by common law regarding consumer protection, Act no. 296/2004 on Consumer Protection, Ordinance no. 21/1992 regarding consumer protection 5 In Future – in case they do not contain provisions contrary to the Regulation.

Romania In this respect, please see also the answer to question 4.12 above. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments 4.15 What global distribution suppliers (GDSs) operate in affecting the aviation industry more generally in your jurisdiction? your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? Amadeus, Sabre and Travelport operate in Romania. With the entry into force of the Regulation (EU) no. 1139/2018, 4.16 Are there any ownership requirements pertaining to the new EU common rules establishing and maintaining a high GDSs operating in your jurisdiction? uniform level of civil aviation safety in the Union created a common framework for drone operations. Therefore, in the next couple of There are no express provisions in the national legislation with years we are expecting the emergence of a new national legislation reference to ownership rights pertaining to GDSs. Nonetheless, for the operation of unmanned aircraft in accordance with Regulation we apply the provisions of (EC) Regulation no. 80/2009 regarding (EU) no. 1139/2018. a behaviour code for IT systems to reserve and abolish (EEC) Additionally, in November 2018, the Romanian Government Regulation no. 2298/89 of the Council. We must emphasise the adopted the New Air Code legislative draft, which probably will fact that this Regulation sets forth specific guidelines to ensure real be adopted next year by the Romanian Parliament. The draft competition between the participating carriers and the associated stipulates the following main changes: the applicability of the Air carriers, as well as ensuring compliance with non-discriminatory Code to military air operations as well as to civil air operations; principles among air carriers, irrespective of whether these are or articulating provisions concerning the competence of the airdrome are not party to a computerised reservation system. administrator to set airport fees as well as concerning the principles to impose such fees, namely transparency and non-discrimination; withdrawing the competence of the Ministry of Transportation to 4.17 Is vertical integration permitted between air operators grant exemption from payment of airport fees and granting such and airports (and, if so, under what conditions)? power to the airdrome administrator; provisions regarding the right of the civil aerodrome administrator air navigation service Vertical integration is not expressly forbidden. Nevertheless, it provider to retain to ground aircraft whose operator failed to pay must abide by the conditions imposed by legislation in order to the fees entitling him/her to use the aerodrome infrastructure or the ensure legal competition dynamics. fees for air navigation services, as well as the modality that such retention right operates; new rules for drone operations which sets 4.18 Are there any nationality requirements for entities out different drone categories (depending on the drone weight) and applying for an Air Operator’s Certificate in your specific operation rules in relation to these categories. jurisdiction or operators of aircraft generally into and out of your jurisdiction? Additionally, it is worth mentioning the airport infrastructure development especially on regional airports given to the General Transport Master Plan of Romania (adopted by the Romanian The national provisions regulating the conditions for obtaining Government in September 2016), which sets out the strategy an Air Operator Certificate (AOC) do not expressly state any for investment in airport infrastructure; namely, which airports requirements of nationality for the entities applying for an AOC. will benefit from public funds for investment, and what kinds of Nevertheless, pursuant to the Regulation (EC) no. 965/2012, the investment will be carried out. One of the main investments in application for an AOC shall be submitted before the competent airport infrastructure is a new terminal for Bucharest Henri Coanda authority and the same regulation states that the competent authority International Airport (the largest airport in Romania) with estimated exercising oversight over operators subject to a certification obligation building costs at 1 billion EUR. shall be for operators having their principal place of business in a Member State, the authority designated by that Member State.

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Mihai Furtună Ioana Anghel Furtună și Asociații Furtună și Asociații 56th Dionisie Lupu street 56th Dionisie Lupu street 1st floor, apartment 4 1st floor, apartment 4 Bucharest, 010458 Bucharest, 010458 Romania Romania

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

Mihai Furtună is a detail and solution-oriented professional with 20 years Ioana Anghel started specialising in aviation matters in 2011 along Romania of experience in the rapidly-changing legal environment of Romania. with the internships conducted during her studies. Her experience An experienced litigator and seasoned consultant in domestic and includes: drafting regulatory input for aviation legislation (e.g. updating international assignments, Mihai is the founder of Furtună și Asociații, the Romanian Air Code); litigation following aircraft accidents; advisory coordinating the firm’s aviation practice that covers work ranging from services on buying, selling and registration of aircraft for tax purposes; regulatory issues to the procurement of suppliers, to the drafting and and legal assistance and consulting for the procurement and building negotiating of various commercial agreements, to advising clients on all of airport and related facilities, as well as for the organisation of air related aspects of financing, leasing, selling and buying of aircraft, as shows. She is a member of the Bucharest Bar and speaks Romanian, well as litigation following aircraft accidents. He and the members of the English and Italian. firm’s Aviation practice currently provide counselling to private airports, airport service providers, associations of private aircraft operators, labour unions, as well as private individuals. Mihai Furtună is a sought-after speaker at industry-specific events organised by public authorities, chambers of commerce and professional associations in Romania. In addition, he is responsible for the ongoing professional training of the young lawyers of the firm and participates as a speaker at professional events organised by the top law schools in Romania. He is a member of the Worldwide Airports Lawyers Association (WALA), the European Business Aviation Association (EBAA), as well as the European Air Law Association (EALA). He is a member of the Bucharest Bar and speaks Romanian, English and French.

Furtună și Asociații is a law firm fresh on the Romanian market, founded by trend-setter professionals in Aviation and Airport Infrastructure. The team consists of experienced litigators and consultants united by the desire to creatively tackle complex legal issues with emphasis on technical law areas. The Aviation practice is best known for two things: a) the scope of aviation projects covered, i.e. investigation of aviation accidents (assistance and representation in civil and criminal proceedings), assistance with the financing, construction and authorisation of international airports, assistance with matters related to the manufacturing of aviation equipment, such as flight simulators, advisory services on buying, selling and registration of aircraft, legal clearance for aviation shows, as well as regulatory drafting; and b) the ability of the lead Partner Mihai Furtună to assemble and coordinate multidisciplinary teams of lawyers and technical experts (in metallurgy, aviation, physics, etc.) in order to successfully handle highly complex cases in civil and criminal proceedings.

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Russia Oleg Aksamentov

AEROHELP Law Office Ilona Tsimbal

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

1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ In accordance with the air legislation of the Russian Federation, or regulate aviation in your jurisdiction. only operators who have a valid licence to carry out air carriage of passengers or cargo, issued by the Federal Air Transport Agency, are In the Russian Federation, the aviation legislation consists of entitled to carry out commercial carriage. International Treaties adopted by the Russian Federation and a At the same time, not every operator can apply for the passengers’ system of the national aviation acts issued by different authorised air carriage licence or for the cargo air carriage licence. There are bodies, among them: three types of operator’s certificates that are provided by the Russian (1) Convention for the Unification of Certain Rules for air legistation: International Carriage by Air (Montreal, May 28, 1999); 1) Operator’s Certificate for carriage by air; (2) Convention on International Civil Aviation (Chicago, 2) Operator’s Certificate for aerial work; and December 7, 1944, entered into force for the USSR on 3) General Aviation Operator Certificate. November 14, 1970); Only an operator who has an Operator’s Certificate for carriage by (3) Convention on International Guarantees for Mobile air can apply for the passengers’ air carriage licence or for the cargo Equipment (Cape Town, November 16, 2001); air carriage licence. (4) Air Code of the Russian Federation; (5) Federal Rules for the Use of the Airspace of the Russian Federation (approved by the Decree of the Government of 1.3 What are the principal pieces of legislation in the Russian Federation of March 11, 2010 № 138); and your jurisdiction which govern air safety, and who administers air safety? (6) System of Federal Aviation Regulations approved by Acts of the Ministry of Transport of the Russian Federation (with different subjects). Flight safety in the Russian Federation is governed by the Rules for the development and use of air safety management systems, as Civil Aviation Authority: the Ministry of Transport of the Russian well as the collection and analysis of data on hazards and risks that Federation; the Federal Air Transport Agency; and the Federal pose a threat to the safety of civil aircraft in storing and sharing this Service for the Supervision of Transport. data, approved by the Government Decree of November 18, 2014 The Federal Air Transport Agency is a Federal Executive Body № 1215. responsible for providing State services and managing State property The format of data on hazards and risks is established by the in the field of air transport (civil aviation), using the airspace of the Ministry of Transport of the Russian Federation. The Federal Air Russian Federation, air navigation services for users of the airspace Transport Agency collects and analyses data on hazards and risks of the Russian Federation and aerospace search and rescue, public that threaten the safety of civil aircraft, and store and exchange services in the field of transport security in this area, as well as the this data in accordance with the international standards of the State register radios’ rights to aircraft and transactions within them. International Civil Aviation Organization. The Federal Service for the Supervision of Transport is a Federal Responsibility for compliance with the norms and requirements Executive Body in the field of transport, a specially authorised body of international and Russian legislation lies with the carrier. As in the field of civil aviation, performing, among other things, special noted in the Air Code of the Russian Federation, airlines must permit, control and supervisory functions assigned in accordance maintain their aircraft in good condition and ensure their repair and with the legislation of the Russian Federation. refuelling, as well as monitor the health of the crew and provide aircraft commanders with meteorological and aeronautical data.

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authorised authorities rather than by the airports themselves, and, as 1.4 Is air safety regulated separately for commercial, a rule, apply to domestic air carriers, and not to foreign air carriers. cargo and private carriers? To serve the flights of a foreign carrier, the airport and the operator apply the Standard Ground Handling Agreement. Airport charges No separate orders are provided. In all cases, air safety issues are and tariffs are set by the Federal Tariff Service of Russia. governed by the civil aviation legislation referred to in question 1.3.

1.9 What legislative and/or regulatory regime applies to 1.5 Are air charters regulated separately for commercial, air accidents? For example, are there any particular cargo and private carriers? rules, regulations, systems and procedures in place

which need to be adhered to? Russia No separate orders are provided. Air charter flights for both commercial and private carriers, as well as cargo or passenger The regulatory regime that applies to air accidents with civil aircraft charters are regulated by the Civil Code of the Russian Federation, is provided by the “Rules for the investigation of aviation incidents the Air Code of the Russian Federation and the Federal Rules for the and incidents with civil aircraft in the Russian Federation”, approved Use of Airspace of the Russian Federation. by the Decree of the Government of the Russian Federation dated June 18, 1998 № 609. 1.6 As regards international air carriers operating in your There is another regime for the investigation of accidents and jurisdiction, are there any particular limitations to be incidents with State aircraft which is provided by the “Rules for the aware of, in particular when compared with ‘domestic’ investigation of accidents and incidents with government aircraft in or local operators? By way of example only, the Russian Federation”, approved by the Decree of the Government restrictions and taxes which apply to international but not domestic carriers. of the Russian Federation dated December 2,1999 № 1329. To investigate accidents with civil aircraft or with State aircraft, Foreign air carriers must obtain appropriate licences when carrying an interdepartmental commission is created, which includes out international air carriage within the territory of the Russian representatives of the Interstate Aviation Committee, Civil Aviation Federation and/or performing aviation operations. Authorities (State Aviation Authorities) and agencies. With respect to foreign air carriers, a certificate of the operator or an equivalent document must be issued by an authorised body of the foreign country and must comply with the international standards, 1.10 Have there been any recent cases of note or other as well as the international treaties, recognised in Russia. notable developments in your jurisdiction involving air operators and/or airports? Foreign aviation enterprises may open their representative offices on Russian territory in accordance with the legislation of the Russian The Air legislation of the Russian Federation is constantly being Federation and/or international treaties of the Russian Federation. improved and is undergoing changes. Legislative authorities Foreign aviation enterprises, international operating agencies and are taking measures to improve the protection of the rights of foreign individual entrepreneurs are not entitled to: passengers, airlines and other market participants. ■ take passengers, baggage, cargo and mail from the Russian In accordance with Federal Law № 376 of December 5, 2017, the territory on an air carriage into the territory of a foreign State Air Code of the Russian Federation was supplemented by Article or vice versa, unless otherwise provided by an international treaty of the Russian Federation or issued in the manner 107.1. Amendments to the Air Code allow air carriers to form so- prescribed by the Russian Federation Government, e.g. one- called “Black Lists” – databases of persons whose rights to fly are time permits of the Civil Aviation Authority; and restricted. Blacklisting means that for a whole year violators will ■ accept passengers, baggage, cargo and mail to be flown within not be able to use the services of the airline. the territory of Russia or on the territory of Russia without the Also, it should be noted that one of the most significant events of recent permission of the Civil Aviation Authority issued in the manner years, Russia’s accession to the Montreal Convention dated May 28, established by the Government of the Russian Federation. 1999 (Convention for the Unification of Certain Rules for International Carriage by Air) entered into force for Russia on August 21, 2017, 1.7 Are airports state or privately owned? which significantly increased the maximum limits of compensation for flight delay, loss/damage to baggage, cargo, and founded the principle A complete list of State airports contains a list of airports of federal of full compensation for injury or passenger death. significance, approved by Act of the Government of the Russian In addition, amendments were designed to facilitate possible Federation dated April 20, 2016 № 726-p. Airports not included in disputes with airlines for airlines, e.g., the responsibility of the the list are private. carrier for the passenger. Previously, this responsibility would However, all existing airports must be registered in the “State begin from the moment of passing through security control at the Register of Civil Aerodromes and Heliports of the Russian airport and would end with the passenger’s departure from the Federation”. airport. Therefore, if something happened to him outside the plane, from a legal point of view, the airline would have to respond. The amendments exclude the possibility of a double interpretation by 1.8 Do the airports impose requirements on carriers limiting the responsibility of the airline for the passenger to the flying to and from the airports in your jurisdiction? moments of boarding and disembarking from the aircraft. Another point – deadlines. Now the limitation period begins with Carriers are governed by the provisions of the Air Code of the the arrival of the aircraft at its destination. Previously, it began Russian Federation, the Federal Aviation Regulations and other the next day after receiving a response to the refusal or partial acts of the air legislation. However, these acts are established by satisfaction of the claim.

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2 Aircraft Trading, Finance and Leasing 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or 2.1 Does registration of ownership in the aircraft register other prejudice when installed ‘on-wing’ on an aircraft constitute proof of ownership? owned by another party? If so, what are the conditions to such title annexation and can owners and financiers No, there are two public registers under the Russian Law: the State of engines take pre-emptive steps to mitigate the risks? Register of Civil Aircraft of the Russian Federation; and the State Register of Rights for Aircraft and Deals with them of the Russian Title issues for engines installed on the wing are governed by the

Russia Federation. Сivil Law of the Russian Federation, according to which the engine is Under the Civil Code of the Russian Federation, only registered considered as an independent thing prior to installation on the wing. aircraft is considered real estate. And under the Federal Legistative After installation, the engine becomes an integral part of the aircraft Act “On State Registration of Rights for Aircraft and Deals with and follows the legal fate of the aircraft. The owner of the aircraft Them” dated March 14, 2009 № 31-FZ, only after an aircraft has automatically becomes the owner of all its components. Ownership been registered in the State Register of Rights for Aircraft of the of the previous owner of the engine is transformed into a obligation Russian Federation will it constitute proof of ownership. law to the owner of the aircraft, until the obligation expires.

2.2 Is there a register of aircraft mortgages and charges? 2.5 What (if any) are the tax implications in your Broadly speaking, what are the rules around the jurisdiction for aircraft trading as regards a) value- operation of this register? added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as State registration of ownership and other property rights to an regards non-domestic purchasers and sellers of aircraft, restriction of these rights, their emergence, transfer and aircraft and/or particular aircraft types or operations? termination, as well as the establishment of the procedure for State registration and the grounds for refusal of State registration of rights When importing an aircraft, the declarant must pay customs duty to an aircraft and transactions with it are carried out in accordance and VAT. However, there are features in the calculation of customs with Article 131 of the Civil Code of the Russian Federation (part 9 duties and VAT, which depend on the number of seats on board the Article 33 of the Air Code of the Russian Federation). aircraft and the mass of the empty aircraft. Thus, the procedure for As mentioned above, Article 131 of the Russian Civil Code insists paying customs duties is determined by the Customs Code of the that aircraft is considered to be real estate. Under the Federal Eurasian Economic Union, which is adopted by Russia, Kazakhstan, Legistative Act “On State Registration of Rights for Aircraft and Belarus, Kyrgyzstan and Armenia, and the procedure for paying VAT Deals with Them” dated March 14, 2009 № 31-FZ, the rights to is determined by the Russian Tax Code. According to current Russian aircraft and deals with them are subject to State registration in the legislation, civil passenger aircraft are divided into seven groups, State Register of Rights for Aircraft. The State Register of Rights some of which are fully or temporarily exempted from import taxes, for Aircraft is a federal information system and is maintained by the others are subject to customs duty, which can be up to 100,000 rubles Federal Air Transport Agency. The Unified State Register of Rights (20%) and VAT (18%). For the release of civil aircraft from customs to Aircraft contains information on existing and terminated rights to duties and VAT, the aircraft must not be older than 12 years. aircraft, data on the said aircraft and information about the owners. There are no public registries of aircraft charges. 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)? 2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation? Russia is party to the Montreal Convention dated May 28, 1999 (Convention for the Unification of Certain Rules for International There are no special regulations under the Air Law of the Russian Carriage by Air), which has been ratified by Russia on June 22, 2016 Federaton for a lessor or a financier with regard to aircraft operation. and entered into force for Russia on August 21, 2017. At the same time, a lessor or a financier should know that piloted Russia is not party to the Geneva Convention dated June 19, 1948 civil aircraft, with the exception of ultra-light manned civil aircraft, (Convention on the International Recognition of Rights in Aircraft). are registered in the State Register of Civil Aircraft of the Russian Russia is party to the Cape Town Convention dated November 16, Federation with issuance of Certificate of State Registration or in 2001 (Convention on International Interests in Mobile Equipment), the State Register of Civil Aircraft of a foreign State subject to the which has been ratified by Russia on May 25, 2011 and entered into conclusion of an agreement on the maintenance of airworthiness force for Russia on September 1, 2011, as well as the Cape Town between the Russian Federation and the State of registration. Protocol on Aircraft Equipment dated November 16, 2001, which has been ratified by Russia on May 25, 2011 and entered into force for Russia on September 1, 2011.

2.7 How are the Conventions applied in your jurisdiction?

The Russian Constitution provides for direct application of the Treaties. The generally recognised principles and norms of International Law and International Treaties of Russia are an integral part of its legal system. If an International Treaty of the Russian

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Federation establishes other rules than those provided by the Federal The Cape Town Convention provides specific ways to protect the Legislative Act, then the rules of the International Treaty shall apply. rights of lessors in the event of insolvency (bankruptcy) of lessees: deregistration of the aircraft; and removal and the physical movement of aircraft from the territory in which they are located. A statement 2.8 Does your jurisdiction make use of any taxation benefits which enhance aircraft trading and leasing by the Russian Federation as the Member State to the Cape Town (either in-bound or out-bound leasing), for example Convention on the application of Article XIII “Authorization for access to an extensive network of Double Tax Treaties deregistration and removal” of the Cape Town Protocol on Aircraft or similar, or favourable tax treatment on the disposal Equipment, along with other (qualification) statements, is the basis of aircraft? for including the State whose borrowers are entitled to an additional (so-called Cape Town) discount of 10% for the purchase of aviation Russia Russia is a party to bilateral agreements on Double Tax Treaties with objects in the Cape Town list. different countries. Tax preferences are always granted on the basis of Reciprocity. As mentioned above, according to current Russian 3.3 Which courts are appropriate for aviation disputes? legislation, civil passenger aircraft are divided into seven groups, Does this depend on the value of the dispute? For some of which are fully or temporarily exempted from import taxes, example, is there a distinction in your jurisdiction others are subject to customs duty, which can be up to 100,000 regarding the courts in which civil and criminal cases rubles (20%), and VAT (18%). are brought?

An aircraft registered in the Russian Federation is equal to real 3 Litigation and Dispute Resolution estate (Article 130 of the Civil Code of the Russian Federation), i.e. the legal regime applicable to real estate also applies to aircraft. 3.1 What rights of detention are available in relation to Thus, aviation disputes can be resolved in the courts of general aircraft and unpaid debts? jurisdiction, as well as in arbitration courts. In the Russian Federation, there is no distinction between courts that Aviation entities, airports and tax authorities are entitled to detain consider civil cases and courts that handle criminal cases; courts of any property held by the aircraft operator (including aircraft operated general jurisdiction administer justice in such cases. by such operator) in the event that it fails to fulfil its obligations to Criminal liability of entities under Russian Law is not provided. In make the appropriate payments. the case of any criminal offences (fraud, etc.), the persons involved in committing a crime (for example, the management or employees 3.2 Is there a regime of self-help available to a lessor of the relevant legal entity) are brought to criminal responsibility. or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement? 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties? The rights of the parties to the lease agreement are regulated by the Civil Code of the Russian Federation and the Federal Legislation Requirements for judicial notice in internal disputes are established Act on Financial Lease dated October 29, 1998 № 164. by Article 113 of the Civil Procedure Code of the Russian Federation The lessor has the right to financial control over the activities of the for arbitration proceedings – by Chapter 12 of the Arbitration lessee in that part, which relates to the leased asset, the formation Procedure Code of the Russian Federation. of the financial results of the lessee’s activities and the fulfilment by Another procedure is established for legal proceedings where the the lessee of obligations under the leasing agreement. party is a foreign carrier. Article 417.6 of the Civil Procedure Article 13 of the Federal Legislation Act on Financial Lease Code of the Russian Federation and Article 256.6 of the Arbitration regulates the securing rights of the lessor. Procedure Code of the Russian Federation contain the rules and If the lessee fails to transfer the lease payments more than twice in procedure for sending and delivering notifications and other a row after the payment period specified by the leasing agreement, procedural documents to a foreign State. they are debited from the account of the lessee in an uncontested manner by sending the lessor to the bank or other credit organisation 3.5 What types of remedy are available from the courts where the account of the lessee is opened to withdraw funds from or arbitral tribunals in your jurisdiction, both on i) an his account within the limits of overdue lease payments. The interim basis, and ii) a final basis? indisputable withdrawal of funds does not deprive the lessee of the right to appeal to the court. In accordance with Article 91 of the Arbitration Procedure Code of The lessor has the right to demand the early termination of the the Russian Federation, interim measures may be: lease agreement and the return of the property by the lessee within 1) the imposition of an arrest on cash (including cash that will a reasonable time in cases provided for by the legislation of the be credited to a bank account) or other property owned by the Russian Federation and the lease agreement. defendant and held by him or other persons; In this case, all costs associated with the return of property, including 2) prohibition to the respondent and other persons to perform the cost of its dismantling, insurance and transportation, are borne certain actions concerning the subject of the dispute; by the lessee. 3) imposing on the defendant the obligation to perform certain actions in order to prevent damage or deterioration of the Among other things, Russia is a party to the Cape Town Convention condition of the disputed property; dated November 16, 2001 (Convention on International Interests in Mobile Equipment) and the Cape Town Protocol on Aircraft 4) the transfer of disputed property for storage to the plaintiff or another person; Equipment dated November 16, 2001, in accordance with the regime of self-defence rights.

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5) the suspension of the penalty under the executive or other in accordance with Chapter 7, are united by a common term – document disputed by the plaintiff, the penalty for which is “Economic Concentration”. Deals that are the subject of this chapter carried out in an indisputable (without acceptance) procedure; are subject to State control. Economic concentration requires prior and approval or notification of the Federal Antimonopoly Service. 6) suspension of the sale of property in the event of a claim for However, some deals, including intragroup transactions of the same release of property from arrest. group of persons, are not an economic concentration and, therefore, A decision taken by the relevant court in relation to a decision are exempt from the need to obtain prior consent of the Federal rendered by the arbitral tribunal shall be considered as the final Antimonopoly Service or notify it after the fact. remedy available to the parties, taking into account the right of the

Russia parties to appeal the court/arbitral award. 4.5 Please provide details of the procedure, including time frames for clearance and any costs of 3.6 Are there any rights of appeal to the courts from the notifications. decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? In order to obtain the prior consent of the antimonopoly authority, the following applicants can apply to the appropriate authority – the Civil and arbitration proceedings in the Russian Federation include Federal Antimonopoly Service: three stages: first instance; appellate instance; and cassation instance. 1) a person or one of the persons engaged in an economic Thus, the decision rendered by the court of first instance may be concentration; appealed to a higher court within the time limits established by law. 2) persons purchasing shares, property, assets of economic entities, rights in relation to economic entities; and 4 Commercial and Regulatory 3) persons who, in accordance with Article 31 of the Federal Legislative Act on Protection of Competition, are obliged to notify the antimonopoly authority of deals and other actions. 4.1 How does your jurisdiction approach and regulate A petition or notification may be submitted to the antimonopoly joint ventures between airline competitors? authority in electronic form, as well as by the applicant’s representative. When making a decision on the implementation of There is no special legal regime governing joint ventures between deals, such as other actions subject to State control, the State duty competing airlines. Thus, regulation is carried out on the basis of shall be paid in the amount and manner established by the legislation the Civil Code of the Russian Federation, as well as the Federal of the Russian Federation on taxes and fees. Legislative Act dated July 26, 2006 № 135 on Protection of Simultaneously, with regard to the petition or notification of Competition, according to which the creation and reorganisation deals, and other actions subject to State control, documents are of commercial organisations, and the conclusion of agreements submitted to the antimonopoly body in accordance with the list between economic competitors on joint activities is carried out with given in paragraph 5 of Article 32 of the Federal Legislative Act on prior consent of the antimonopoly authority. Protection of Competition. Applicants must provide information about the petition to the 4.2 How do the competition authorities in your Federal Antimonopoly Service for their approval and consent jurisdiction determine the ‘relevant market’ for the to the transaction, and any other action should be posted on the purposes of mergers and acquisitions? official website of the Federal Antimonopoly Service in the Internet information and telecommunications network. Interested persons There are no authorities in the Russian Federation entitled to are entitled to submit to the antimonopoly body information on the determine the “relevant market” for various deals. Control over impact on the State of competition of such a deal or other action. the implementation of mergers, acquisitions and other types of economic concentration is carried out in a notification-permit procedure, a procedure that starts with an application submitted by 4.6 Are there any sector-specific rules which govern the companies which are going to make the relevant deal. aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid? 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain The possibility of granting State or municipal preferences is provided regulatory clearance/anti-trust immunity from by the Federal Legislative Act on Protection of Competition dated regulatory agencies? July 26, 2006 № 135. More favourable conditions of activity are created for individual economic entities by transferring State or The procedure for obtaining permission from the Federal municipal property, other objects of civil rights, or the granting of Antimonopoly Service or notifying the Federal Antimonopoly property benefits. Moreover, preferences can be granted to all small Service of economic concentration (for more details see the answer and medium-sized businesses, regardless of their activities. to question 4.4) is contained in Article 32 of the Federal Legislation Act dated July 26, 2006 № 135 on Protection of Competition. The State is taking complex measures to help regional aviation. Substantial assistance is provided to ground the infrastructure of airports as part of subsidies to federal State unitary enterprises. 4.4 How does your jurisdiction approach mergers, In addition, regional airlines that support fleet maintenance are acquisition mergers and full-function joint ventures? supported. Also, on the basis of the Federal Legislative Act on Financial Lease Cases of mergers, acquisitions, takeovers and the organisation of (Leasing) dated October 29, 1998 № 164, funding is provided joint ventures are regulated, as mentioned above in question 4.1, from the Federal Budget and State guarantees are provided for by the Federal Legislative Act on Protection of Competition and,

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the implementation of leasing projects (Development Fund of the While booking a seat, the passenger’s obligation to provide the Russian Federation), including the participation of non-resident necessary information about his personal data arises from the air firms. carriage contract and in Russia is enshrined in the Federal Aviation Rules “General Rules for Carriage of Passengers, Baggage, Cargo and Requirements for Servicing Passengers, Consignors, 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these Consignees” dated June 28, 2007 № 82. subsidies? The main law governing the processing of personal data in Russia is the Federal Legislative Act on Personal Data, which is based In accordance with the Decree of the Government of the Russian on the Convention on the Protection of Individuals in Automated

Federation dated March 2, 2018 № 215 “On approving the Rules Processing of Personal Data. Russia for granting subsidies from the Federal Budget to air transport This Federal Legislative Act prohibits personal data operators and organizations in order to ensure the availability of carriage by air other persons who have access to personal data from disclosing to to the population and on recognizing as invalid some acts of the third parties and distributing personal data without the consent of Government of the Russian Federation”, air transport subsidies the subject of personal data or in the absence of special conditions are provided for flights to the Far East region of Russia, tothe provided for by federal law. Republic of Crimea (Simferopol), to Kaliningrad and regional One of the conditions for the processing of personal data of routes established by the Government Decree dated December 25, passengers of an aircraft is the need to achieve the goals stipulated 2013 № 1242 “On subsidies from the federal budget air transport by an international treaty of the Russian Federation or the law in organisations in the implementation of regional air carriage of order to exercise the functions, powers and duties assigned by the passengers on the territory of the Russian Federation and the legislation of the Russian Federation to the operator (see clause 2, formation of a regional route network of the Russian Federation”. part 1, Article 6 of the Federal Legislative Act on Personal Data). The right to receive subsidies is granted to the air transport With the consent of the passenger, the operator’s functions of organisation: processing his personal data to a third party are also made. a) having entered into an agreement on the provision of a From clause 6 of the General Rules for the Air Carriage of Passengers, subsidy with the Federal Air Transport Agency in accordance Baggage, Cargo and Passenger Service Requirements, Consignors, with the standard form approved by the Ministry of Finance Consignees, approved by the Act of the Ministry of Transport of the of the Russian Federation; Russian Federation dated June 28, 2007 № 82, it follows that the b) registering special tariffs for routes and conditions for their carrier has the right to transfer the obligations or part of them under use in accordance with clause 16 of these Rules, within seven the air transportation agreement, carried out on behalf of the carrier days from the date of conclusion of the contract, publishing them in the prescribed manner and opening sales of air booking, sale and seat registration on shipping documents, and is carriage at special tariffs; and responsible for its actions (inaction) to the passenger. c) carrying out air carriage of passengers at a special fare by If the operator transfers the personal data of passengers to a third own flights or which provided such carriage by flights carried party for other purposes not specified above in paragraph 6 of out under its commercial code by air transport organisations the General Rules for the Carriage of Passengers by Air, then the that are subsidiaries of an air transport organisation that has operator must obtain the passenger’s consent to such a transfer. entered into an agreement.

4.9 In the event of a data loss by a carrier, what 4.8 What are the main regulatory instruments governing obligations are there on the airline which has lost the the acquisition, retention and use of passenger data, data and are there any applicable sanctions? and what rights do passengers have in respect of their data which is held by airlines and airports? Airlines are obliged to ensure the protection of personal data. In case of loss of personal data of passengers, the airlines may The processing of passengers’ personal data from aircraft travel in incur the liability under civil law (a claim for damages, including Russia is carried out on the basis of the following basic legal acts: moral damage, may be brought against the company), as well as ■ Constitution of the Russian Federation. administrative law or . ■ Convention on the Protection of Individuals in Automated Processing of Personal Data (adopted in Strasbourg, January 28,1981). 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other ■ Civil Code of the Russian Federation. assets and data of a proprietary nature? ■ Federal Legislative Act “On Personal Data” dated July 27, 2006 № 152-FZ. The main ways to protect intellectual property are patent, copyright ■ Article 85.1 of the Air Code of the Russian Federation. and protection of trade secrets. ■ Article 11 of the Federal Legislative Act “On Transport Ensuring the protection of intellectual property today is possible Security” dated February 9, 2007 № 16-FZ. through the use of the following methods: civil law; administrative ■ Decree of the Government of the Russian Federation “On law; and criminal law. approval of requirements for the protection of personal 1. Civil law measures – means of intellectual property data when they are processed in personal data information protection, used in case it is necessary to restore the violated systems” dated November 1, 2012 № 1119. or challenged right. Such measures are regulated primarily ■ Decree of the Government of the Russian Federation “On by the Civil Code of the Russian Federation. Recognition of Approval of the Regulation on Peculiarities of Processing the right, restoration of the situation before the violation of Personal Data Performed Without Using Automation Tools” rights, compensation for damages, compensation for moral dated September 15, 2008 № 687. harm, confiscation of equipment, devices and materials that can be used in order to violate exclusive rights to the

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results of intellectual activity, termination or change of legal basis and operates such aerodrome or heliport in order to ensure relationship, publication of the court decision on the violation. takeoff, landing, taxiing and parking of civil aircraft. 2. Administrative and legal measures. The implementation of The requirements for the civil aviation aerodrome operator and these measures is carried out quite simply and in a short time. the civil aviation heliport are established by the Federal Aviation Administrative protection is necessary, therefore the Code of Regulations, which are approved by the Ministry of Transport of Administrative Offenses of the Russian Federation contains an Russian Federation. impressive list of violations in the field of intellectual property rights. The main measure of administrative liability is a fine. It is worth noting that in the Russian Federation a separate legislative 3. Measures of criminal liability. The Criminal Code of the body is dedicated to ensuring transport security. Thus, the airport Russian Federation protects almost all intellectual property: administration is obliged to ensure compliance with the rules for the Russia copyright and related law (Article 146 of the Criminal Code); protection of airports and their infrastructure. inventive and patent law (Article 147 of the Criminal Code); trademarks and service marks, appellation of origin (Article 180 of the Criminal Code); consumer rights to reliable 4.14 To what extent does general consumer protection information (Article 182 of the Criminal Code); and know- legislation apply to the relationship between the airport operator and the passenger? how, protected in the mode of commercial secret (Article 183 of the Criminal Code). The contract of passenger air carriage by an airline is a type of Today, there are organisations that are engaged in the protection contract for the provision of services, therefore legal relations in of intellectual property, such as the court of intellectual property this area are regulated by the Legislative Act “On Protection for and arbitration. The obligation of the court for intellectual property Consumer Rights” dated February 7, 1992 № 2300-1. The contractor rights is to consider disputable situations in the field of protection of is obliged to provide the service in due time and of good quality. intellectual rights. At the same time, this body acts as a court of first and cassation instances. A passenger who is not satisfied with the quality of transportation is entitled to make demands in accordance with Article 29 of the Legislative Act “On Protection for Consumer Rights” and they may 4.11 Is there any legislation governing the denial of choose between: boarding rights and/or cancelled flights? ■ elimination of deficiencies of the service during the trip; Termination of the contract for the carriage of passengers by air ■ reduction of the price of the service after detection of defects in it or arrival at the destination; and on the carrier’s initiative for the operation of the contract for the carriage of goods by air is governed by Article 107 of the Air Code ■ reimbursement of expenses incurred in the process of carriage of the Russian Federation. for the elimination of deficiencies of the service on its own or by third parties. The General Rules for Air Carriage of Passengers, Baggage, Cargo The passenger also has the right to demand compensation for losses and Passenger Service Requirements, Consignors, Consignees, incurred by him as a result of the provision of services of inadequate approved by the Act of the Ministry of Transport of the Russian quality by the carrier. Consumer requirements are stated in the form Federation dated June 28, 2007 № 82, contain rules which concern of a written claim. Features, terms of filing and consideration of the denial of boarding rights and/or cancelled flights. claims are governed by Articles 124–127 of the Air Code of the Russian Federation. 4.12 What powers do the relevant authorities have in In addition to the right to provide carriage services of proper quality, relation to the late arrival and departure of flights? the passenger has the following rights: ■ The right to security of the service provided (Article 7 of the The authorities do not carry out preventive measures regarding late Legistative Act “On Protection for Consumer Rights”). If arrivals and departures of flights. Sanctions are established by the during the transportation of a passenger damage to the life, Air Code of the Russian Federation, as long as the provisions of health or property of the passenger was caused, the contractor the Montreal Convention of 1999 and EU Regulation 261/2004 are will be liable for property (Article 14 of the Legistative Act taken into account. “On Protection for Consumer Rights”). The Federal Air Transport Agency has retrospective power in the ■ The right to information about the service provided (Articles event of a systematic violation of established flight schedules. Thus, 8–10 of the Legistative Act “On Protection for Consumer in established cases, it is responsible for the suspension, restriction Rights”). of validity and revocation of licences for carriage and operators’ ■ The right to provide services within a specified time (Articles certificates. 27, 28 of the Legistative Act “On Protection for Consumer Rights”). ■ The right to safe transportation of cargo and baggage. 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, In addition, Article 15 of the Legistative Act “On Protection for are imposed on the airport authorities? Consumer Rights” provides for the obligation to compensate consumers (passengers) for moral harm. The activities of airports, as participants in aviation activities, are governed by the sectoral legislation, as mentioned earlier in question 4.15 What global distribution suppliers (GDSs) operate in 1.1. your jurisdiction? Operation of the airfield of civil aviation, the heliport of civil aviation and their compliance with the requirements of the federal There are four major international global distribution air ticket booking aviation regulations is provided by an operator who is recognised as systems (GDSs) available in the Russian market: Amadeus; Saber; the person who owns a civil aviation aerodrome or a civil aviation Galileo; and Gabriel SITA; as well as the Russian system, Sirena heliport by right of ownership, on lease terms or on any other legal Travel.

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commander, and on the conditions under which an employment 4.16 Are there any ownership requirements pertaining to contract can be entered into with specified foreign citizens. GDSs operating in your jurisdiction? The certificate of a foreign State issued to a person from among the aviation personnel is recognised in the Russian Federation as valid, There are no legal requirements for GDS ownership in Russia. provided that this certificate complies with international aviation standards recognised by the Russian Federation and federal aviation 4.17 Is vertical integration permitted between air operators regulations. and airports (and, if so, under what conditions)?

There are no legal restrictions on vertical integration between air 5 In Future Russia operators, and airports do not provide any, under the condition that it does not contradict the antimonopoly legislation. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments 4.18 Are there any nationality requirements for entities affecting the aviation industry more generally in applying for an Air Operator’s Certificate in your your jurisdiction, are likely to feature or be worthy of jurisdiction or operators of aircraft generally into and attention in the next two years or so? out of your jurisdiction? There are many different legislative and regulatory changes planned The certificate of the operator is issued by the Federal Air Transport in the air legislation of the Russian Federation in the coming Agency to applicants who meet the certification requirements years. The changes relate to current aviation issues, such as the established by the Ministry of Transport of Russia, regardless of use of unmanned aircraft, the protection of personal data, and the citizenship. improvement of the carrier’s liability to passengers for injury, health and other issues. Russia is a Member State of the International The Federal Air Transport Agency determines the quota in respect of Civil Aviation Organization, and therefore, the air legislation of foreign persons who wish to replace the position of the commander the Russian Federation, if it provides the interests of Russia, must of the aircraft. On the basis of statements by Russian airlines, the comply with the requirements of the Standards and Recommended Federal Air Transport Agency issues orders on the maximum number Practice of the ICAO Council. of foreign citizens that can be hired to fill the position of the aircraft

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Oleg Aksamentov Ilona Tsimbal AEROHELP Law Office AEROHELP Law Office 7-ya liniya V.O., 44, letter A 7-ya liniya V.O., 44, letter A St. Petersburg, 199004 St. Petersburg, 199004 Russia Russia

Tel: +7 812 961 6196 Tel: +7 812 961 6196 Email: [email protected] Email: [email protected] URL: www.aerohelp.ru URL: www.aerohelp.ru Russia Oleg Aksamentov graduated from the Law Faculty at the St. Petersburg In 2017, Ilona Tsimbal graduated from the Law Faculty at the National State University (2000), and from the full-time postgraduate school Research University “Higher School of Economics” (St. Petersburg). at the Department of Commercial Law at the St. Petersburg State In 2018 she completed a short-term training programme at the Institute University (2003). of Air and Space Law AEROHELP, “Passenger rights protection under From September 2000 to December 2014 he was a professor of Air the International air law and the EU law”. Law at the St. Petersburg State University of Civil Aviation. From From 2017 to February 2018 she was a legal adviser in the law firm, December 2014 to present, he was visiting professor of Air Law at the having been promoted to a lawyer in the AEROHELP Law Office. Her same University. current practice is corporate law, Russian and International air law, Oleg Aksamentov is a founder and the Director of the Institute of Air and claims of passengers. and Space Law AEROHELP. Since 2011, he is a member of the Russian Association of International Law. Since 2012, he is a member of the European Air Law Association (EALA). Since 2013, he has been a member of the Coordination Council at the Interstate Aviation Committee (IAC) for the preparation of aviation specialists of the Member States to the Agreement on Civil Aviation and Use of Airspace. He is a permanent Secretary of the Organizing Committee of the annual St. Petersburg Air Law Conference (since 2010). Oleg Aksamentov is a founder and the Director of the AEROHELP Law Office. Has participated within working groups in research projects on the drafting of Federal Legislative Acts, Decrees of the Government of the Russian Federation, Acts of the Transport Ministry of the Russian Federation.

The main objective of AEROHELP Law Office is the provision of legal services in civil aviation. We work with Russian and foreign airlines and airports, providing legal support to the aviation business, as well as providing legal assistance to aviation personnel. All lawyers and experts of the AEROHELP Law Office have legal degrees, and many of them are also active lecturers of aviation and law schools of different countries. We provide services both in Russia and abroad. AEROHELP Law Office has offices in St. Petersburg and Moscow, as well as in Tallinn, which allows us to provide legal services in the countries of the European Union both directly and through a partner network all over the world. We accompany international projects on the principle of “one stop shop”, which means coordinating the work of lawyers working on projects in different countries.

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South Africa Chris Christodoulou

Christodoulou & Mavrikis Inc. Antonia Harrison

1.2.1 International air service licence 1 General An application to the Council in the prescribed format is required. An applicant who wishes to use an aircraft other than a South 1.1 Please list and briefly describe the principal African aircraft in providing an international air service must satisfy legislation and regulatory bodies which apply to and/ the council that an appropriate certificate of airworthiness has been or regulate aviation in your jurisdiction. issued in respect of the aircraft concerned in the country in which that aircraft is registered. 1.1.1 Principal legislation 1.2.2 Domestic air service licence ■ The Carriage by Air Act No. 17 of 1946 (as amended) gives The granting of a licence is founded on the applicant’s ability to effect to the Convention for the Unification of Certain Rules for International Carriage by Air, signed in Montreal on 28 satisfy the Council that the air service will be operated in a safe May 1999, and for the unification of certain rules relating to and reliable manner; at least 75% of the voting rights are held by international carriage by air. residents of the Republic; the person referred to will be actively and ■ The Air Services Licensing Act No. 115 of 1990 and the effectively in control of the air service; and the aircraft is a South International Air Services Act No. 60 of 1993 provide for African registered aircraft. the establishment of Air Service Licensing Councils for the licensing and control of domestic and international air services. 1.3 What are the principal pieces of legislation in ■ The Convention on the International Recognition of Rights your jurisdiction which govern air safety, and who in Aircraft Act No. 59 of 1993 provides for the application of administers air safety? the Convention on the International Recognition of Rights in Aircraft. The SACAA has overall safety and security oversight functions, ■ The Convention on International Interests in Mobile exercised in terms of the Civil Aviation Act, 2009 and the Civil Equipment Act No. 4 of 2007 enacts the Convention on Aviation Security Regulations, 2011. International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile The Act provides for the establishment of an independent Aviation Equipment on Matters Specific to Aircraft Equipment. (The Safety Investigation Board in compliance with Annexure 13 of the Cape Town Convention.) Chicago Convention. (See more at question 1.9 below.) ■ The Civil Aviation Act No. 13 of 2009 and the Regulations, 2011 provide for the control and regulation of aviation within 1.4 Is air safety regulated separately for commercial, the Republic. cargo and private carriers? ■ The Air Traffic and Navigation Services Company Act No. 45 of 1993, and Regulations, 1976, provide for air No, all modes of air transport (except for defence) are regulated in traffic navigation services. the same manner. 1.1.2 Regulatory bodies ■ The South African Civil Aviation Authority (the SACAA). 1.5 Are air charters regulated separately for commercial, ■ The Air Service Licensing Council, for domestic air service cargo and private carriers? and the International Air Services Licensing Council, for international air services. Yes, passenger charters are classified as a non-scheduled public air ■ The Air Traffic and Navigation Services Company Limited transport service, (defined as a public air transport service rather (ATNS). than a scheduled public air transport service), and in connection with which a specific flight or a specific series of flights is undertaken. 1.2 What are the steps which air carriers need to take in Domestic air charters are regulated under the Domestic Air Services order to obtain an operating licence? Regulations, 1991, issued under Section 29 of the Air Services Licensing Act, 1990. Domestic and international air services are governed by the Air Services Licensing Act No. 115 of 1995 and the International Air Services Act No. 60 of 1993, respectively.

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Subject to the provisions of the South African Maritime and 1.6 As regards international air carriers operating in your Aeronautical Search and Rescue Act, 2002 (Act No. 44 of 2002) jurisdiction, are there any particular limitations to be and the Convention, the South African Police Service have rights of aware of, in particular when compared with ‘domestic’ prior access to any scene of an aircraft accident or aircraft incident. or local operators? By way of example only, restrictions and taxes which apply to international but not domestic carriers. 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving The limitations to be considered are as follows: air operators and/or airports? ■ Shareholding – no shareholding restrictions or limitations are imposed on international air carriers operating in South Africa. Recent changes involving air operators and airports include: ■ Slot availability – the Airport Slot Coordination Regulations ■ Export Development Canada and Another v Westdawn South Africa of 2012 makes provision for the appointment of a Coordinator Investments Proprietary and Others. All SA 783 (GJ) (the ATNS) allocating, monitoring and enforcing the use of (21 March 2018), relating to an interim interdict to have slots at airports and ensuring that the capacities of coordinated an aircraft grounded and returned to a safe location to be airports are not exceeded. stored. The case has important implications on the concept of ■ Airport charges – the Airports Company South Africa “expeditious handling of matters”, provided for in the Cape Limited (ACSA) levies airport charges that comprise landing, Town Convention under Article 13 (1). parking and passenger service charges, which are regulated ■ Comair Limited v South African Airways (Pty) Ltd. All SA by the Regulating Committee. There is a differentiation in 78 (GJ) (15 February 2017); which involved a damages action airport charges for flights landing at an ACSA airport where to determine whether the South African Airways incentive the airport of departure of that aircraft was outside of South schemes, which were found to have had an anti-competitive Africa, but those charges apply equally to both foreign and exclusionary effect on rival airlines in the domestic airline locally owned carriers. market by the Competition Tribunal under the Competition ■ Air traffic service charges – ATNS levy air traffic service Act, caused Comair Limited a loss of profits as it alleges and, charges which are regulated by the Regulating Committee if so, the quantum of that loss. established by Section 11 of the Airports Company Act. ■ Comair Limited v Neluheni NO (in her capacity as Differentiation in charges apply in respect of flights Chairperson of the Air Services Licensing Council) (6 undertaken by an aircraft (regardless of whether the carrier September 2017). Comair sought an order to review and set is foreign or locally owned) where either the airport of aside the Council’s decision to suspend the air services licence, departure or the airport of arrival of the aircraft is within any which arose out of a complaint that Comair’s shareholding State other than South Africa, and the other airport is within did not meet the 75% voting rights requirements of Section South Africa or elsewhere. 16 (4) (c) of the Air Services Licensing Act.

1.7 Are airports state or privately owned? 2 Aircraft Trading, Finance and Leasing

Airports are both State and privately owned. ACSA owns and 2.1 Does registration of ownership in the aircraft register operates nine major domestic and international airports. Lanseria constitute proof of ownership? International Airport (HLA) is privately owned, as are a number of other smaller airports. Registration of an aircraft and the issuing of a certificate of registration under the Civil Aviation Regulations does not confer or imply true 1.8 Do the airports impose requirements on carriers ownership over an aircraft. In terms of Section 8 of the Civil Aviation flying to and from the airports in your jurisdiction? Act of 2009, the registered owner of an aircraft is deemed to be the owner for purposes of liability for damages caused by the aircraft in Airports do not impose requirements save for “conditions of use” certain circumstances. Registration of ownership is obtained by filing agreements. the necessary form (CAR47A-2) with the SACAA. Foreign aircraft must be operated in terms of: The legal effect of registration is to designate aircraft registered on the ■ the International Air Services Transit Agreement (the Chicago South African Civil Aircraft Register as being deemed to have South Convention); African nationality. ■ a bilateral air transport service agreement; Proof of ownership is satisfied by either a Deed or Bill of Sale, or ■ a foreign licence; or an Aircraft Purchase Order or a similar agreement, supported by a ■ a foreign operator’s permit. deregistration certificate issued by the SACAA if the aircraft was previously registered. The legal effect of registration is to designate aircraft registered on 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular the South African Civil Aircraft Register as being deemed to have rules, regulations, systems and procedures in place South African nationality. which need to be adhered to? Proof of ownership is satisfied by either a Deed of Sale or Aircraft Purchase Order or a similar agreement, supported by a deregistration The SACAA regulates all aspects of aircraft accidents and certificate issued by the SACAA if the aircraft was previously investigations and the independent Aviation Safety Investigation registered. Board conducts independent investigations through the Director of Investigations who has exclusive authority to direct the conduct of investigations on behalf of the Aviation Safety Investigation Board under this Act in relation to aircraft accidents and aircraft incidents.

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the International Air Services Council or the Domestic Air Services 2.2 Is there a register of aircraft mortgages and charges? Council, as applicable, for recordkeeping purposes. The oversight Broadly speaking, what are the rules around the responsibilities in respect of a dry lease of a foreign-registered operation of this register? aircraft may be fully or partially transferred in terms of an Article 83bis Agreement from the appropriate authority of the State of 2.2.1 The mortgage register under the Geneva Convention Registry to the appropriate authority of the State of the Operator. Section 4 of the Convention on the International Recognition of When the conditions, contemplated in sub-regulation (3) (d) of Part Rights in Aircraft Act No. 59 of 1993 provides for the opening of 48.03.1 are not met, the aircraft to be dry leased must be registered a mortgage register with the SACAA which makes it possible for a in the Republic as prescribed in Part 47 of the regulations, and: creditor to register a mortgage over an aircraft or a share therein or (a) the aircraft shall be subject to the airworthiness certification, in respect of aircraft over any spare part including engines. maintenance, and inspection procedures prescribed by the 2.2.2 Registration procedure regulations in respect of South African-registered aircraft; South Africa Registration is on application to the SACAA with the filing of the (b) the responsibility or custody of the aircraft and control of all prescribed form (MAR 2.1), and payment of the prescribed fee. operations shall be vested in the lessee operator; The prescribed form identifies the mortgagor and mortgagee, the (c) the responsibility for the airworthiness and maintenance of cause of indebtedness, and the amount secured. The application is the aircraft shall be vested in the lessee operator; and usually accompanied by the instrument giving rise to the debt or (d) the registration of the aircraft shall be valid only for the finance transaction together with a company resolution authorising duration of the lease agreement, and for as long as the aircraft the registration. is operated in accordance with the regulations, the terms If the mortgage is to be registered under a Power of Attorney from a or conditions specified in the lessee operator’s operating non-resident, the Power will have to be notarised and apostilled and certificate, the related operations specifications, and the lessee operator’s operations and maintenance control manuals. filed with the SACAA. The conditions of approval referred to in sub-regulation (3) must be The certificate of mortgage does not authorise any mortgage to be made a part of the lease agreement. made in the Republic or by any person not named in the certificate and contains the prescribed particulars and also a statement of (As regards the right to retake possession of the aircraft either on any registered mortgages or certificates of mortgage affecting the breach or at the end of the contract, the comments in questions 3.1 aircraft or share in respect of which the certificate is given. and 3.2 below apply.) 2.2.3 Registration under the Cape Town Convention In terms of the Convention on International Interests in Mobile 2.4 As a matter of local law, is there any concept of title Equipment Act No. 4 of 2007, the SACAA is designated in annexation, whereby ownership or security interests accordance with Article 18 (5) of the Convention as the entry point in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft through which the information required or registration may be owned by another party? If so, what are the conditions transmitted to the International Registry. to such title annexation and can owners and financiers 2.2.3.1 Fees payable (in South African Rand) of engines take pre-emptive steps to mitigate the risks?

(a) The recording of a mortgage in the R 1,731 register of aircraft mortgages The common law does not allow the automatic transfer of any rights (b) A notification of the discharge of a in an asset, including a component thereof, and a court order is R 1,100 mortgage required in all cases. See more at question 3.1 below. (c) A transfer of mortgage by deed of R 1,100 It is also not possible for an owner or operator’s rights in a single cession engine to be separately registered and can only be registered together (d) A declaration of transmission of rights in R 1,100 with an interest in the airframe to which it is affixed. A solution may a mortgage be the registration of a notarial bond over a moveable asset. (e) A certificate of mortgage R 820 (f) Access to the register of aircraft R 140 mortgages 2.5 What (if any) are the tax implications in your (g) The furnishing of information from the (R 1 per page up to a jurisdiction for aircraft trading as regards a) value- register of aircraft mortgages maximum of R 200) added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of 2.3 Are there any particular regulatory requirements aircraft and/or particular aircraft types or operations? which a lessor or a financier needs to be aware of as regards aircraft operation? The tax implications in South Africa are as follows: In terms of Part 48 of the Civil Aviation Regulations of 2011, all ■ Sale of Aircraft – VAT is levied at the effective rate of 15.4%. aircraft lease agreements involving South African air service ■ Exported aircraft – a sale of an aircraft that is exported operators, South African-registered aircraft and foreign-registered should not attract any VAT, and the transaction is zero rated for aircraft operated by South African air service operators, or any the purposes of VAT. If the zero rating is not accepted by the South African operator who enters into a financial or capital lease Revenue Authority, due in part to inadequate documentation, agreement as lessee in respect of an aircraft, must provide the etc., there is a possibility that the non-resident purchaser may apply to be exempt from registering for VAT. Director of the SACAA with a certified copy thereof, and adhere to the provisions of the Convention on the International Recognition of ■ Imported aircraft – other than on a temporary basis attracts Rights in the Aircraft Act, 1993, where applicable. VAT at 15%. ■ Leases – aircraft imported for the purposes of a lease will Where a dry lease involving a foreign operator is approved by the attract VAT on the value of the aircraft based according to Director, a copy of the duly completed form must be forwarded to

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the ‘blue book’ value. If the lessor is a non-resident and the Other than the form of self-help provisions contained in the Cape lessee a South African resident, this may result in the lessor Town Convention (see, however, the comments at question 3.2 having to register for VAT purposes. below), the creditor will in the normal course have to approach the ■ There are no documentary taxes or costs, nor is stamp duty Court for an order to seize and detain the aircraft. Urgent and ex parte applicable to aircraft trades. (without notice) orders are available to the creditor in regard to the formal proceedings referred to above. 2.6 Is your jurisdiction a signatory to the main Where a debtor is a peregrinus (foreigner) to a local court, assets international Conventions (Montreal, Geneva and belonging to the debtor within the jurisdiction of the local court may Cape Town)? be attached in order to find or confirm jurisdiction and to secure the creditor’s claim. South Africa is a signatory to: South Africa ■ The Geneva Convention by means of the Convention on the 3.2 Is there a regime of self-help available to a lessor International Recognition of Rights in Aircraft Act No. 59 of or a financier of an aircraft if it needs to reacquire 1993 (date of commencement: 1 January 1998). possession of the aircraft or enforce any of its rights ■ The Cape Town Convention by means of the Convention under the lease/finance agreement? on International Interests in Mobile Equipment Act No. 4 of 2007 (effective date: 1 May 2007). No general remedies of “self-help” are available to financiers or ■ The Montreal Convention by means of the Carriage by Air lessors, who have to resort to the courts in the event of default Amendment Act No. 15 of 2006 (Commencement: 19 June or breach of an agreement by means of formal action or motion 2007). proceedings. South Africa has made the necessary Declaration under the Cape 2.7 How are the Conventions applied in your jurisdiction? Town Convention to include the availability of nonjudicial remedies for a lessor seeking to re-acquire possession of the aircraft either 2.7.1 The Geneva Convention at the end of the contract or upon the breach thereof under the A mortgage register with the SACAA is open for a creditor to Convention; however, practical implementation has yet to be register a mortgage over an aircraft or in respect of aircraft over any enforced due to the inconsistency between certain provisions of the spare part, including engines. Convention and local laws. The Airline Working Group is currently 2.7.2 The Cape Town Convention hard at work in assisting local authorities to overcome the issues. The SACAA is the designated entry point through which the information required for registration may be transmitted to the 3.3 Which courts are appropriate for aviation disputes? International Registry. Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction For the purposes of Article 53 of the Convention, the High Court regarding the courts in which civil and criminal cases of South Africa is the court that has jurisdiction, as contemplated in are brought? Chapter XII of the Convention. As aforesaid, practical implementation of the Convention has yet to be Specialised aviation courts are not available in South Africa. The achieved due to the inconsistencies in the local laws and regulations. most appropriate courts for hearing aviation disputes are the superior courts for amounts over R 200,000, and which consist of the High Court of South Africa, Provincial and Local Divisions which have 2.8 Does your jurisdiction make use of any taxation review and appellate jurisdiction in criminal and civil matters. benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example The Apex courts are the Constitutional Court and the Supreme Court access to an extensive network of Double Tax Treaties of Appeal, which cannot be approached as a court of first instance. or similar, or favourable tax treatment on the disposal The rules of jurisdiction relating to the value of a claim and of aircraft? geographical area are important considerations in approaching the correct superior or inferior court. South Africa is a signatory to a number of double taxation agreements for the avoidance of double taxation. 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic 3 Litigation and Dispute Resolution airlines/parties and non-domestic airlines/parties?

Service of court proceedings is obligatory and is affected by the 3.1 What rights of detention are available in relation to Sheriff of the Court. aircraft and unpaid debts? The Court Rules require personal service in matters affecting In terms of the common law, a creditor may seize an aircraft for debts status or in sequestration proceedings or on a residence or place owing to the creditor by the debtor by means of formal proceedings of business of the Defendant, or on a person who is apparently in in the High Court, which has a discretion to order the release of charge of the premises at the time of service and is not younger than the aircraft against the provision of security for the creditors’ claim 16 years of age. together with costs and interest. Service at a place of employment or at a chosen address (domicilium In addition, the holder of a debtor/creditor or salvage and citandi), or at the registered office is also permissible as is substituted improvement lien over a debtor’s property is regarded as a secured service or by edictal citation where the details are unknown to creditor on insolvency of the debtor. initiate legal proceedings.

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If other cartel members wish to come clean on their involvement 3.5 What types of remedy are available from the courts in the same cartel, the Commission will also encourage such or arbitral tribunals in your jurisdiction, both on i) an cooperation outside the scope of the CLP, which can eventually interim basis, and ii) a final basis? result in a reduction in the fine to be paid in a settlement agreement. Any member of a cartel can apply for leniency and must comply Interim orders interdicting and preventing an aircraft from being with the requirements set out in the CLP. removed pending the final determination of a court are available and Parties to intermediate and large mergers are required to notify can be extended to include preservation and control of the aircraft. the Commission in the prescribed format, and the parties to such Article 13 of the Cape Town Convention makes provision for mergers may not implement them until they have been approved by similar interim orders. the Commission. Final orders are made in the normal course of events once a matter Parties to a small merger may implement the merger without the South Africa has been decided upon by the arbitral tribunal or the Court. approval of the Commission (and, as such, are not obliged to notify the Commission of that merger). 3.6 Are there any rights of appeal to the courts from the An may be requested from the Commission decision of a court or arbitral tribunal and, if so, in by external parties to provide guidance on the position that the what circumstances do these rights arise? Commission is likely to take in respect of certain transactions, agreements or practices (on the payment of a fee of R 2,500). An Rights of appeal from the higher courts are to the Supreme Court Advisory Opinion is not binding on the Commission. of Appeal and in applicable cases to the Constitutional Court. A judicial review of a decision of a Court or a tribunal may be 4.4 How does your jurisdiction approach mergers, brought under the Promotion of Administrative Justice Act, 2000 acquisition mergers and full-function joint ventures? (PAJA). Decisions of the Director of Civil Aviation may be appealed to the Mergers are generally regulated by the Competition Act; however Civil Aviation Appeal Committee, and thereafter to the High Court. where an airline is concerned and foreign ownership results, aviation legislation rather than the Competition Act comes into play. 4 Commercial and Regulatory If the applicant is not a natural person resident in the Republic, at least 75% of the voting rights of a domestic carrier must be held by residents of the Republic (Section 16(4)(c)(ii) of the Air Services Licensing Act, 4.1 How does your jurisdiction approach and regulate 1990), and the aircraft which will be used in operating the air service is joint ventures between airline competitors? a South African-registered aircraft (Section 16(4)(e) of the Air Services Licensing Act, 1990). The voting rights in respect of a South African- Joint ventures fall within the ambit of the Competition Act 89 of licensed international carrier need to be substantially held by residents 1998 (the Competition Act). Competitors are normally regarded of the Republic, and the aircraft which will be used in operating the as being in a horizontal relationship. In terms of Section 4(1) of air service is a South African-registered aircraft (Sections 17(5)(a) and the Act, an agreement between, or concerted practice by firms, or 17(5)(c) of the International Air Services Act, 1993). a decision by an association of firms, is prohibited if it is between Joint ventures will probably be dealt with under the provisions of parties in a horizontal relationship and if the joint ventures prevents the Competition Act dealing with restrictive practices – horizontal or reduces competition or alternatively constitutes a merger in a and vertical (Sections 4 and 5) rather than a merger, unless they are manner contemplated in the Competition Act. constructed in a special purpose vehicle (company), in which case the merger provisions would apply. 4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the 4.5 Please provide details of the procedure, including time purposes of mergers and acquisitions? frames for clearance and any costs of notifications.

The “relevant market” is determined primarily with a specific focus 4.5.1 Procedure on the aviation sector but there is scope for a narrower focus as to the specific type of aviation sector in which the transaction occurs, if A notification must be made in a single filing by one of the primary distinguishable (e.g. cargo transport). Until now, there has not been firms, and must include: any cases in terms of which a narrower view of a specific type of (i) A Merger Notice in Form CC 4 (1), which must declare sector within the aviation industry was applicable. the names of the primary acquiring and target firms and whether, in the opinion of the filing firm, the merger is small, intermediate or large. 4.3 Does your jurisdiction have a notification system (ii) For each of the primary acquiring firm and the primary target whereby parties to an agreement can obtain firm, a Statement of Merger Information in Form CC 4 (2). regulatory clearance/anti-trust immunity from regulatory agencies? (iii) All the required documents must be provided together with payment of the fees. The Commission’s Corporate Leniency Policy (CLP) offers a cartel 4.5.2 Timing member the possibility to disclose information on a cartel to the The Competition Act does not prescribe a specific time limit within Commission in return for immunity from prosecution and fines. which a merger must be notified. As the parties to a merger may Immunity is only available to the first cartel member to approach not implement the merger until it has been approved by the relevant the Commission. competition authority, the parties have an incentive to notify the merger as soon as possible.

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The Commission has an initial 20 business days to investigate Data Protection Directive, although the Act has not been fully intermediate and small mergers and can extend the investigation by implemented. 40 business days. With regard to large mergers, the Commission The Constitution of South Africa Act No. 108 of 1996 and the common has an initial 40 business days to investigate, and can extend by a law continue to provide for the right to privacy and impose certain maximum of 15 days. restrictions on the processing and disclosure of personal information. Under non-binding, indicative Service Standards issued by the Commission, the timeframes given are: 4.9 In the event of a data loss by a carrier, what ■ Phase 1 cases (non-complex) – 20 business days. obligations are there on the airline which has lost the ■ Phase 2 cases (complex) – 45 business days. data and are there any applicable sanctions? ■ Phase 3 cases (very complex) – 60 business days.

South Africa 4.5.3 Fees No mandatory breach notification procedure exists. Individuals’ rights are enforced, and damages are claimed through the common A filing fee of R 100,000 is required for the notification ofan law and the Constitution, and enforced by the courts. Normal intermediate merger, and R 350,000 is required for the notification appeal procedures are available to a carrier against whom damages of a large merger. are granted, as set out in question 3.5 above.

4.6 Are there any sector-specific rules which govern the 4.10 What are the mechanisms available for the protection aviation sector in relation to financial support for air of intellectual property (e.g. trademarks) and other operators and airports, including (without limitation) assets and data of a proprietary nature? state aid?

Trademarks and Patents are protected by the Trade Marks Act and No State aid provisions exist in the Competition Act for air operators the South African Patents Act 57 of 1978 and are registered with or airports. the Companies and Intellectual Property Commission. An action Government domestic air transport policy includes undertakings for infringement may be brought in the Court of the Commissioner to create a competitive domestic air transport market to level the of Patents (an ad hoc court set up under the High Courts of South playing field, and equal treatment of State-owned airlines ina Africa). Unregistered trademarks may be defended in terms of competitive market, as opposed to a market that is reserved for a common law. State-owned and controlled monopoly. South Africa is a signatory to the Paris Convention, and therefore The Domestic and International Air Services Council normally protection is afforded to trademarks that are well known, even if they requires a “guarantee” for consumer protection with regard to cash are not registered in South Africa. South Africa is also a member of receipts for flights not yet undertaken. the Patent Co-operation Treaty (PCT). Copyright is protected under the Copyright Act 98 of 1978. 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these 4.11 Is there any legislation governing the denial of subsidies? boarding rights and/or cancelled flights?

No State subsidies are available at this time. The Airlift Strategy The Consumer Protection Act 68 of 2009 (CPA) applies to the 2006 does, however, create a framework for public service promotion and supply of goods and services concluded in the obligations and national interest considerations: ordinary course of business between suppliers and consumers and ■ Consistent with the spirit of sound commercial operations, air provides some protection to passengers in the event of a denial of carriers should have no obligation to provide services below boarding under certain circumstances. cost to any institutions whether Government or otherwise, unless such intervention is required based on national The Act provides for the reasonableness test for overselling and interest considerations and subject to appropriate financial overbooking. In terms of this test, a supplier may not accept compensation. payment for goods or services where it has no reasonable intention In terms of the Government’s public service obligations, air transport to supply the goods or services. services on routes that are not economically viable should be invited With regard to damages suffered as a result of a supplier’s inability through a transparent public tender process. to supply goods or services due to overbooking or overselling, the CPA provides for a refund of the amount paid plus interest (usually, this would be the deposit plus interest), as well as any consequential 4.8 What are the main regulatory instruments governing damages that directly resulted from the breach of contract. the acquisition, retention and use of passenger data, and what rights do passengers have in respect of No specific legislation governs the cancellation of flights; however, their data which is held by airlines and airports? some of the aforementioned remedies may be applicable.

There is currently no dedicated data protection legislation in South 4.12 What powers do the relevant authorities have in Africa, although other legislation does provide some protection, relation to the late arrival and departure of flights? these being the Consumers Protection Act, the National Credit Act, the Promotion of Access to Information Act, the Electronic There is no applicable legislation or sanction available to authorities Communications and Transactions Act and the Regulation of at this time. It is worth noting that Article 19 of the Warsaw Interception of Communications and Provision of Communications Convention as incorporated in terms of the Carriage by Air Act is Related Information Act. applicable to carriers. The Protection of Personal Information Act of 2013 is the closest thing to a dedicated data protection legislation of the EU

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4.13 Are the airport authorities governed by particular 4.18 Are there any nationality requirements for entities legislation? If so, what obligations, broadly speaking, applying for an Air Operator’s Certificate in your are imposed on the airport authorities? jurisdiction or operators of aircraft generally into and out of your jurisdiction? State airports are governed by the Airports Company Act No. 44 of 1993, which imposes levies and airport charges with the permission Operating a domestic air service is subject to the provisions of the of the Regulating Committee and is restricted from having any Air Services Licensing Act No. 115 of 1990. Section 16 (4) (c) and financial interest, either directly or indirectly, in the provision of (d) which states that, subject to the provisions of subsection 15 (5), any air service and may not unduly discriminate against or among the applicant: various users or categories of users of any company airport. (i) is a natural person, is a resident of the Republic; or

The Airports Company is obliged to conduct its business in such a (ii) if the applicant is not a natural person, is incorporated in the South Africa manner as to ensure that it does not: engage in any restrictive practice as Republic and at least 75% of the voting rights in respect of defined in Section 1 of the Maintenance and Promotion of Competition such person is held by residents of the Republic; and Act No. 96 of 1979; may not change the level or modify the structure (iii) that the person referred to in paragraph (c) will be actively of any airport charge more than twice within a financial year; must and effectively in control of the air service. publish any airport charge at least three months prior to the coming “Resident of the Republic” is defined in the Licensing Act as “a into operation of such charge; and ensures that relevant activities are person who has his or her ordinary residence in the Republic and performed subject to any relevant activity service standards which who is a South African citizen by virtue of the provisions of the shall conform to internationally accepted and recommended practices. South African Citizenship Act, 1995” (Act No. 88 of 1995). The Air Traffic and Navigation Services Company (Act No. 45of Subsection 15 (5) makes provision for the Domestic Air Services 1993) transferred certain assets and functions of the State to a public Licensing Council to “exempt an applicant on the conditions company responsible for the provision and control or operation of determined by the Minister (of Transport) from the provisions of air navigation infrastructures, air traffic services and air navigation subsection 16 (4) (c), if the Minister after considering an application services. The ATNS Company is entitled to levy air traffic service directs the Council to exempt such applicant”. charges by virtue of a permission issued by the Regulating Committee. (Refer also to question 1.6 regarding slot allocations and the introduction of the Airport Slot Coordination Regulations of 2012.) 5 In Future

4.14 To what extent does general consumer protection 5.1 In your opinion, which pending legislative or legislation apply to the relationship between the regulatory changes (if any), or potential developments airport operator and the passenger? affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? The CPA, as stated in question 4.11 above, applies to the promotion and supply of goods and services to consumers within South Africa The proposed amendments to the Civil Aviation Regulations of 2011 and thus generally applies to the relationship between the airport are expected to progress through the passage of the Civil Aviation operator and the passenger. Amendment Bill and the Air Services Amendment Bill through If a passenger were to cancel a flight, he/she would be entitled Parliament in 2019. to a refund of the airport taxes included in the air fare under the Amendments to the Civil Aviation Regulations of 2011 are still to be provisions of the CPA. forwarded to the Minister of Transport for promulgation including changes to Part 111. There will also be a need to make changes to 4.15 What global distribution suppliers (GDSs) operate in the parts of the Act that deal with the National Aviation Security your jurisdiction? Programme. The Amendment Bill to the Convention on International Interests in The major global distribution suppliers operating in South Africa Mobile Equipment Act No. 4 of 2007 which gives effect to the Cape are: Amadeus; Galileo (Travelport); Sabre; and Worldspan. Town Convention is also expected to overcome the inconsistent civil aviation regulations dealing with the implementation of the 4.16 Are there any ownership requirements pertaining to Convention concerning the AWG’s model IDERA regulations, to be GDSs operating in your jurisdiction? broadly tailored for South Africa. The Air Service Licencing Bill is also expected to be submitted There are no ownership requirements placed upon GDSs operating sometime in late 2018/2019. in South Africa. The White Paper on National Civil Aviation Policy 2017 has been published, which covers a wide range of issues and includes a 4.17 Is vertical integration permitted between air operators policy statement on ownership and control in respect of domestic air and airports (and, if so, under what conditions)? services to mean at least 50% plus one member of the Board should be South African residents and that the Chairperson of the Board or In terms of Section 5 of the Competition Act, an agreement between entity should be a South African resident. It also provides that the parties in a vertical relationship is prohibited if it has the effect of headquarters and principal place of business (registered) of the air substantially preventing or lessening competition in a market, unless carrier should also be in South Africa. a party to the agreement can prove that any technological, efficiency or other pro-competitive gain resulting from that agreement outweighs that effect.

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Chris Christodoulou Antonia Harrison Christodoulou & Mavrikis Inc. Christodoulou & Mavrikis Inc. Suite 3A, 5 Fricker Road, Illovo Suite 3A, 5 Fricker Road, Illovo Johannesburg, 2196 Johannesburg, 2196 South Africa South Africa

Tel: +27 11325 4201 / +27 82377 6631 Tel: +27 11325 4201 Email: [email protected] Email: [email protected] URL: www.cm-attorneys.com URL: www.cm-attorneys.com

Areas of practice: Aviation Law; Corporate & Commercial Law. Antonia is a Senior Associate with Christodoulou & Mavrikis Inc. and has South Africa been with the firm since January 2015. She achieved the Certificate of Qualifications: B.A. LL.B. (Witwatersrand, RSA). LL.M. in Air & Space Merit in the Law of Delict at University and was awarded the Bowman Law (King’s College, University of London). Solicitor of England & Wales Gilfillan Award for Insurance Law. 1997 (non-practising). Antonia attended the AERIAL Training & Development Conference in 2016 History: Chris is a dual-qualified Solicitor in England & Wales anda on Aviation Law & Practice and has had the opportunity to represent South African Attorney, specialising in aviation and commercial law. He clients in all aspects of litigation including aircraft repossessions, airline has advised local and international aviation clients including owners and operations, maintenance contracts and employment issues, and general operators, maintenance organisations, lessors and lessees, investment commercial practice. companies and third-party suppliers in all aspects of aviation law and has rendered Legal Opinions in numerous aircraft acquisition transactions for She has litigated in the Constitutional Court, Appeal Court, High Courts, foreign counsel. Labour and Magistrates Courts. He served as a Non-Executive Director of a commercial airline and is currently a Member of the South African Civil Aviation Authority Appeal Committee, having been appointed by the Minister of Transport in 2017. Chris is the Contributor of the South African Chapters of: International Commercial Debt Collection (Ed. David Franklin (Thomson Carswell, 2007)); The Statute of Limitations in International Commercial Claims (Thomson Reuters, 2016); The Aviation Law Review (Law Business Research Limited, 2014–2016); and The International Comparative Legal Guide to: Aviation Law 2017. Chris has been named one of the world’s leading Aviation lawyers by Who’s Who Legal: Aviation since 2016.

Christodoulou & Mavrikis Inc. is a corporate and commercial law firm established in Johannesburg in 1991, with particular expertise in aviation law and with solid commercial law, litigation and dispute resolution capabilities. The firm provides a full range of aviation law services including liability and contentious issues, drafting and negotiating aviation lease agreements and other commercial aspects of aviation, including aircraft repossessions, acquisitions and registrations. Recent aviation matters include: securing the release of an aircraft attached by judicial means; providing various Letters on behalf of a US financed sale and lease and on the local nationality requirements for an aircraft operating licence; advising on certain aspects of a large-scale helicopter acquisition by a sovereign; and advising on the VAT implications of a private jet sale and numerous employee-related disputes. The firm has a presence in Greece which is managed by Mr. George Mavrikis. Visit www.cm-attorneys.com for more information.

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Sweden

IUNO Aage Krogh

1 General 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety? 1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction. As a member of the EU, air transport safety in Sweden is governed by the implementation of the general provisions of EC Regulation No 2018/1139 on common rules in the field of civil aviation. The Swedish Transport Agency has authority in areas of transport by The Swedish Aviation Act and the Swedish Aviation Ordinance air, sea, rail and road. The Civil Aviation and Maritime Department constitute the main Swedish national legislation. Furthermore, the is the part of the Swedish Transport Agency that monitors and Swedish Transport Agency issues regulations (TSFS). regulates civil aviation in Sweden. Within the scope of its assignment, the authority issues regulations pertaining to aviation, See also question 1.1 above. examines and issues permits relating to aviation, administers aircraft registrations and supervises aviation rules. The authority also 1.4 Is air safety regulated separately for commercial, assesses civil aviation, focusing primarily on safety and security. cargo and private carriers? The Swedish Aviation Act and the Swedish Aviation Ordinance are important pieces of legislation for granting the Swedish Transport The Swedish Transport Agency provides detailed safety regulations Agency authority in civil aviation. which apply to non-commercial and non-public transport operations. As Sweden is a member of the European Union (EU), the Swedish Holders of relevant documentation (e.g. pilot’s licence, aircraft Transport Agency only has authority to certify aircraft and aircraft registration, certificate of airworthiness, etc.) are normally not materials pertaining to aircraft listed in Annex I to EC Regulation obliged to retain additional permits to carry out such operations. No 2018/1139, on common rules in the field of civil aviation. Certain non-commercial aerial operations do require specific The European Aviation Safety Agency (EASA) is otherwise the permits, such as for flight training or surveillance purposes, the regulating body, whose authority has been established in the EC latter of which should be referred to as aerial work. Regulation including amendments. The European Aviation Safety For helicopter operations, aerial work has previously been highly Agency also conducts oversight of the Swedish Transport Agency in regulated in Sweden in a European context. This changed with the several aspects pertaining to civil aviation. introduction of common EU regulations, with the introduction of Part-SPO, which is a part of EU Regulation No 965/2012. These are not only applicable to helicopters. 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? As for private flights, the regulations also contain Part-NCC and Part-NCO, which will regulate non-commercial flights. The conditions of obtaining an operating licence are stipulated in As for commercial flights, including cargo, Part-CAT is applicable. EC Regulation No 1008/2008, as amended by EU Regulation No The standards for commercial operations are higher than those for 2018/1139, specifically Article 4. private operations. There are two types of operating licence: ■ Category A – pertaining to aircraft with a maximum 1.5 Are air charters regulated separately for commercial, certificated take-off mass of 10 MTON or more and/or fewer cargo and private carriers? than 20 or more seats. ■ Category B – pertaining to aircraft with a maximum Charter operators need a specific operating permit. The Swedish certificated take-off mass of less than 10 MTON and/or fewer Transport Agency has also issued regulation TSFS 2017:70, applicable than 20 seats. to charter flights. The Swedish Transport Agency issues form BSL141242, stipulating all documents needed for the application of an operating licence. Less documentation is needed for category B compared to category A.

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1.6 As regards international air carriers operating in your 2 Aircraft Trading, Finance and Leasing jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, 2.1 Does registration of ownership in the aircraft register restrictions and taxes which apply to international but constitute proof of ownership? not domestic carriers. A registration of ownership can lead to the presumption that the EC Regulation No 1008/2008 on common rules for the operation registered owner is the owner of the aircraft, but in some cases, it of air services in the Community regulates access to the Swedish does not constitute proof of ownership by itself. Ownership will market. The regulation stipulates that any operator who has been be determined case by case and depends on the specific details Sweden granted an operating licence which has been issued in any EU or regarding the aircraft. EEA Member State is granted access to most routes in Sweden See also question 2.2 below. and the rest of the EEA area. In order to gain access to the market regarding routes between Sweden and States outside of the EEA, the operator must apply for the Swedish Transport Agency’s permission. 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the The same applies for operators holding operating licences issued in operation of this register? a State outside the EEA. The Swedish Transport Agency administers a register over acquisitions, 1.7 Are airports state or privately owned? leasing rights and mortgages in which the owners of aircraft may choose to register relevant information about their aircraft, provided The Swedish Government indirectly owns 10 major Swedish airports that the aircraft is registered in the Swedish Civil Aircraft Register, through the corporate group Swedavia. There are several smaller resulting in a perfected interest which is thereby better protected airports which are owned by local/regional municipalities, by local against other, unregistered corresponding interests of third parties. private enterprises or as joint ventures by both public and private International interests are registered in the International Registry interests and investors. of Mobile Assets as according to the Cape Town Convention. The registry is recognised by all ratifying States and priority is determined 1.8 Do the airports impose requirements on carriers on a first-to-file basis. Registration of interest serves as a notification flying to and from the airports in your jurisdiction? and is considered best practice for owners, creditors, debtors, lessors, lessees, agents and others in protecting their financial interest. Access to airports in Sweden is primarily governed by the licence that the Swedish Transport Agency has issued for the relevant 2.3 Are there any particular regulatory requirements airport. Other operational limits could apply and there might have which a lessor or a financier needs to be aware of as to be an allocation of slots. EC Regulation No 1008/2008 stipulates regards aircraft operation? that EU air carriers generally have access to all routes within the Community. An aircraft may be registered in the Swedish Civil Aircraft Register if the owner of the aircraft is an EU or EEA national or entity. Further, aircraft owned by foreigners from outside the EU or EEA, 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular and where the aircraft is operated within or from Sweden may apply rules, regulations, systems and procedures in place for registration in the Swedish Civil Aircraft Register. The register which need to be adhered to? is administered by the Swedish Transport Agency.

The investigation of most air accidents is conducted by the Swedish 2.4 As a matter of local law, is there any concept of title Accident Investigation Authority. The result of the investigation is annexation, whereby ownership or security interests often used by the police and public prosecutor. EU Regulation No in a single engine are at risk of automatic transfer 996/2010 stipulates that all involved persons who have knowledge or other prejudice when installed ‘on-wing’ on an of an accident or serious incident in Sweden must, without undue aircraft owned by another party? If so, what are the delay, report the occurrence to the Swedish Transport Agency. conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks? 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving As a main rule, a single engine mounted on an aircraft is part of the air operators and/or airports? aircraft. Since 1 April 2016, the Cape Town Convention has been in force in Sweden through Law 2015:860, making it possible to Since 1 April 2018, airlines and business air charter companies with register rights to aircraft engines. flights from Sweden are obliged to declare and pay an Aviation Tax. The tax applies to aircraft with a seating capacity of more than 10. The tax rate depends on the passenger’s final destination and ranges 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- from 60 SEK to 400 SEK per passenger. The tax is paid by the added tax (VAT) and/or goods and services tax (GST), passenger through an increase in ticket pricing. and b) documentary taxes such as stamp duty; and See also question 5.1 below. (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?

According to the Swedish Value Added Tax Law, the sale of an

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aircraft which is intended to be used by an air carrier that mainly engages in international air traffic is exempt from VAT. Parts and 3.2 Is there a regime of self-help available to a lessor equipment plus services related to parts and equipment for such or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights aircraft are also exempt from VAT. under the lease/finance agreement?

2.6 Is your jurisdiction a signatory to the main No; in order to reacquire possessions of the aircraft or enforce any international Conventions (Montreal, Geneva and of its rights under the lease/finance agreement, the Swedish laws on Cape Town)? enforcement and debt in recovery apply. The Swedish Enforcement Authority is the competent authority. Sweden is signatory to, among others, the following Conventions: Sweden ■ The 1999 International Convention of Montreal, ratified 29 April 2004. 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For ■ The 1929 Warsaw Convention, ratified 3 July 1937. example, is there a distinction in your jurisdiction ■ The Hague Protocol for the amendment of the Warsaw regarding the courts in which civil and criminal cases Convention 1955, ratified 3 May 1963. are brought? ■ The 1944 Chicago Convention, ratified 7 November 1946. ■ The 1948 Geneva Convention, ratified 16 November 1955. Any negative decision by the Swedish Transport Agency in respect of traffic licences may be further enforced. ■ The Cape Town Convention, ratified 1 April 2016. Decisions by The Swedish Transport Agency regarding licences, authorisations or other decisions which are negative to an applicant 2.7 How are the Conventions applied in your jurisdiction? may be appealed by the applicant to the Swedish administrative court. Civil and penal cases normally have jurisdiction in the local district The Conventions can either be ratified and then implemented in court as the court of first instance. It is the same court that handles Swedish law or there can be a specific law that directly incorporates both civil and penal cases. a Convention into Swedish law. A Convention is not applicable law in Sweden just by its mere ratification. 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic 2.8 Does your jurisdiction make use of any taxation airlines/parties and non-domestic airlines/parties? benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties Normally, a Swedish court would informally use the same or similar, or favourable tax treatment on the disposal procedure for service abroad as within Sweden and send out court of aircraft? documentation with a request for the receiving party to sign and return an evidence of service. If this does not work, EC Regulation Swedish Double Tax Treaties are based on the OECD Model No 1393/2007 can be applied on the service in the Member States of Tax Convention. The convention stipulates that profits from the judicial and extrajudicial documents in civil or commercial matters. operation of aircraft in international traffic, i.e. leasing and trading, is taxable only in the Contracting State in which the place of 3.5 What types of remedy are available from the courts effective management of the enterprise is situated. or arbitral tribunals in your jurisdiction, both on i) an Some Swedish Double Tax Treaties may have a provision stating interim basis, and ii) a final basis? that the above-mentioned rule only applies to the Swedish shares of the Nordic airline SAS. The two standard remedies that can be used are the following: ■ A physical or judicial person must perform as established; e.g., make a payment. 3 Litigation and Dispute Resolution ■ A physical or judicial person has something established; e.g., it has been established that the person has entered into a specific agreement or has had something delivered. 3.1 What rights of detention are available in relation to aircraft and unpaid debts? It is possible to apply for interim sequestration awaiting a final . The applicant needs to produce a bond covering the possible The operator of an airport has a right of detention of an aircraft damage caused to the other party by the sequestration. if the fees for the aircraft’s most recent landing are unpaid. The In arbitration, unless the parties have agreed otherwise, the arbitrators right of detention allows the operator of the airport to hinder the may, at the request of a party, decide that, during the proceedings, take-off of the aircraft. Further, aircraft located in Sweden may be the opposing party must undertake a certain interim measure to detained within the scope of the enforcement procedure for unpaid secure the claim which is to be adjudicated by the arbitrators. debts. Such detention requires a court order and the applicant may be ordered to post a bond covering any damages the detention may 3.6 Are there any rights of appeal to the courts from the cause if the application is successfully disputed. decision of a court or arbitral tribunal and, if so, in Aircraft may under certain circumstances be detained in accordance what circumstances do these rights arise? with Swedish civil law, for instance in the event of unpaid maintenance services. There are three national instances for courts having jurisdiction of civil and penal cases, and three national instances for administrative courts. There are also special courts, where other rules apply.

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A litigant can always appeal a case, but whether the case will be Authority shall bring the case before the Stockholm district court tried in a higher court depends on the individual case and if a leave within three months. That time frame can be extended if any of the of appeal is required and granted. parties agree or if there are extraordinary circumstances.

4 Commercial and Regulatory 4.6 Are there any sector-specific rules which govern the aviation sector in relation to financial support for air operators and airports, including (without limitation) 4.1 How does your jurisdiction approach and regulate state aid? joint ventures between airline competitors? There is no sector-specific competition regulation for aviation in Sweden There are several options available to the competition authorities Sweden. Instead, general competition regulations apply. The main for remedying concerns, inter alia: surrender of slots to a new regulation is the Swedish Competition Act, which implements EU competitor; pricing constraints; access to a frequent flyer programme; legislation. an agreement to enter into interline; special prorate agreements with new competitors; agreements to enter into intermodal agreements; 4.7 Are state subsidies available in respect of particular a frequency freeze; pricing constraints; and sale of certain assets. routes? What criteria apply to obtaining these subsidies? 4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the Effective as of March 2014, the European Commission has changed purposes of mergers and acquisitions? its guidelines on State aid to airports. State aid for investments and operation of an airport is allowed if it is necessary to ensure The competition authorities generally tend to follow the European transportation to and from a region. The possibilities for State aid Commission’s market definitions for the purpose of assessing a merger are better for smaller airports and airports in rural or non-densely or an acquisition. The point of origin and the point of destination, in populated areas. Aid to air carriers for new routes is allowed practice a specific route, could specify a relevant market. provided that the aid is limited in time. Air carriers starting a new route are permitted to receive State aid only if they can show prospects of being profitable within three years or make an 4.3 Does your jurisdiction have a notification system irrevocable commitment to operate that route for a period not led whereby parties to an agreement can obtain than the period for which the State aid is given. regulatory clearance/anti-trust immunity from regulatory agencies? 4.8 What are the main regulatory instruments governing For mergers, an application to the Swedish Competition Authority is the acquisition, retention and use of passenger data, needed if at least two of the companies individually have an annual and what rights do passengers have in respect of turnover in Sweden of at least 200 million SEK and the companies their data which is held by airlines and airports? together have an annual turnover in Sweden of at least 1 billion SEK. There could be an obligation for the application even if one of the As of 25 May 2018, the EU General Data Protection Regulation (GDPR) companies does not have an annual turnover in Sweden of at least is directly applicable under Swedish law: passengers have numerous 200 million SEK. If competition could affect several EU countries rights under GDPR; the data subject’s rights of access; the data subject’s and the companies’ turnover exceeds 5 billion EUR or in some cases right to rectification; the right to be forgotten; the data subject’s right 2.5 billion EUR, an application is to be made to the EU Commission. to restriction of processing; the right to be informed; the right to data portability; and the right to object and the data subject’s right to not be subject to a decision based solely on automated processing. 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? Furthermore, Sweden has transposed Directive (EU) 2016/681 on the use of passenger name record (PNR) data for the prevention, The main concern is to determine that a transaction would not detection, investigation and prosecution of terrorist offences and substantially lessen competition within the relevant market. For serious crime. the competition assessment, non-stop/non-stop, non-stop/indirect and indirect/indirect routes that overlap should be taken into 4.9 In the event of a data loss by a carrier, what consideration when assessing the competition. Hub-to-hub routes obligations are there on the airline which has lost the get a higher level of scrutiny. Several factors are considered; data and are there any applicable sanctions? inter alia, restriction of market power, market entry conditions and regulations. The dominance of two or more operators and the In the event of a personal data breach, GDPR requires that the data possible positive effect of increased efficiency following a merger controller notifies the Swedish Data Protection Authority without are also considered. undue delay and, where feasible, not later than 72 hours after having become aware of the breach. Before the agency is notified the data controller is obliged to carry out thorough investigations to ensure 4.5 Please provide details of the procedure, including that the nature of the breach is known. If the data breach poses a time frames for clearance and any costs of notifications. high risk to those individuals whose data has been affected, they should be informed about the breach without undue delay. As for mergers, the decision needs to be made by the Swedish If a data loss is caused by any non-compliance with GDPR, the Competition Authority within 25 days. If a party suggests an data controller may be subject to penalties by the Swedish Data obligation, the timeframe is extended to 35 days. If the Swedish Protection Authority and be liable for damages towards the data Competition Authority decides to start a special investigation, the subjects involved.

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4.10 What are the mechanisms available for the protection 4.16 Are there any ownership requirements pertaining to of intellectual property (e.g. trademarks) and other GDSs operating in your jurisdiction? assets and data of a proprietary nature? There are no specific Swedish regulation requirements pertaining to The Swedish Patent and Registration Office is an appointed authority GDS ownership. for the protection of patents, design and trademarks. The Office for Harmonisation in the Internal Market registers Community Trade 4.17 Is vertical integration permitted between air operators Marks in the European Union. and airports (and, if so, under what conditions)? Sweden 4.11 Is there any legislation governing the denial of In principle, vertical integration between air operators and airports is boarding rights and/or cancelled flights? permitted. Conditions for that integration are adherence to applicable competition laws, and that all regulations and requirements are EC Order No 261/2004 regulates matters relating to compensation fulfilled individually by both the airport and the air operator. and assistance to passengers in the event of delays, cancellations, and denied boarding. 4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your 4.12 What powers do the relevant authorities have in jurisdiction or operators of aircraft generally into and relation to the late arrival and departure of flights? out of your jurisdiction?

The Swedish Consumer Agency supervises airlines’ provision of To obtain a Swedish AOC, the applicant must submit an application to adequate information about passenger rights in accordance with EC the CAA. The entity must, among other things, submit documentation Regulation No 261/2004. that the company’s principal place of business is located in Sweden. Furthermore, the company will be required to supply a variety of financial information pursuant to EC Order No 1008/2008, articles 4.13 Are the airport authorities governed by particular 5 and 8. legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? A third-country operator (i.e. a non-EU and non-EFTA State) that intends to perform commercial air transport operation into an EU In order to establish and operate a public airport, the permissions Member State or an EFTA State requires a Third Country Operator of, and licence from, the Swedish Government or the Swedish (TCO) Authorisation issued by EASA. Transport Agency is required. When deciding whether to grant a licence to an airport, an overall assessment is made which includes 5 In Future the public interest in the establishment, as well as considerations regarding air safety, the environment, etc. By implementation of EC Directive 2009/12 on airport charges, the 5.1 In your opinion, which pending legislative or two major Swedish airports, Stockholm-Arlanda and Gothenburg- regulatory changes (if any), or potential developments Landvetter, are economically regulated by the Swedish Government affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of through the Swedavia group and are bound to set the airport fees in attention in the next two years or so? accordance with the principles set forth in ICAO Doc 9082. The Swedish Aviation Tax has already influenced Swedish air traffic 4.14 To what extent does general consumer protection noticeably and we expect that it will have further influence in the legislation apply to the relationship between the future. The CAA, Transportstyrelsen, has published a prognosis for airport operator and the passenger? Swedish air traffic for the years 2018–2024 and they expect that the tax will cause a yearly decrease of 700,000 passengers travelling The principal aviation-specific passenger protection legislation is from Sweden. provided by the EU. The general principles of the Consumer Sales The tax affects not only passengers but also the air carrier. The Act and the Consumer Services Act may also apply. carrier Norwegian has already decreased its flights from Sweden and increased its departures in Denmark. Mainly routes to and from 4.15 What global distribution suppliers (GDSs) operate in North America are affected but routes to and from Asia are also your jurisdiction? expected to be affected further in the future.

The main GDSs are Armadeus, Galileo, Sabre and Worldspan by Travelport.

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Aage Krogh IUNO Grev Turegatan 30 Stockholm,114 46 Sweden

Tel: +45 5374 2719 Email: [email protected] URL: www.iuno.dk Sweden Aage Krogh is head of the transport and aviation team at IUNO. He is a specialist in aviation law and he represents some of the world’s largest and most prominent airlines. Aage is recognised in The Legal 500 as one of Denmark’s leading lawyers within transport law. He is recognised by his clients for his ability to communicate complex matters and for his thorough understanding of how aviation law works in practice. Aage is a certified member of the Danish Association of Board Attorneys, and he frequently speaks to networking groups within aviation law.

IUNO is an internationally-oriented law firm. With the newest technology and untraditional approach, we provide highly specialised advice in the most important business law areas to clientele, consisting mainly of large and medium-sized companies in Denmark and abroad. IUNO can assist air carriers with the many requirements and restrictions that apply to aviation. In case of injuries to passengers, damage to luggage or the aircraft, we are by your side right from the initial claim, and if necessary, all the way until the Supreme Court has handed down a ruling.

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Switzerland Urs Haegi

VISCHER AG Dr. Thomas Weibel

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

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1.3 What are the principal pieces of legislation in 1.9 What legislative and/or regulatory regime applies to your jurisdiction which govern air safety, and who air accidents? For example, are there any particular administers air safety? rules, regulations, systems and procedures in place which need to be adhered to? Switzerland has adopted Regulation (EC) No 216/2008 of the European Parliament and of the Council of 20 February 2008 The Swiss Transportation Safety Investigation Board (STSB) is on common rules in the field of civil aviation and establishing a the state authority of the Swiss Confederation having a mandate to European Aviation Safety Agency. It is the main source of Swiss investigate accidents and dangerous incidents involving, inter alia, aviation safety legislation. EASA Rules on Air Operations (OPS) aircraft. and Implementing Rules (IR) will be applicable in Switzerland. The principal legislation relating to the investigation of air accidents

Switzerland Furthermore, Switzerland has implemented safety management includes: systems as provided for in ICAO Annexes 6, 11 and 14. ■ Art. 26 and Annex 13 of the Chicago Convention; The FOCA administers air safety in Switzerland. ■ Regulation (EU) No 996/2010 of the European Parliament and of the Council of 20 October 2010 on the investigation and prevention of accidents and incidents in civil aviation; 1.4 Is air safety regulated separately for commercial, cargo and private carriers? ■ Regulation (EU) No 376/2014 of the European Parliament and of the Council of 3 April 2014 on the reporting, analysis and follow-up of occurrences in civil aviation; No, it is not. ■ Art. 22 et seq. of the Federal Civil Aviation Act; and ■ Ordinance on Aviation Accidents and Severe Incidents. 1.5 Are air charters regulated separately for commercial, cargo and private carriers? Any accident or severe incident must be reported to the STSB immediately. No. The Swiss Federal Administrative Court has, however, accepted that the operational regulation of Zurich Airport stipulates a 1.10 Have there been any recent cases of note or other departure prohibition after 10 p.m. solely applicable to air charters notable developments in your jurisdiction involving (DFAC 2011/19). air operators and/or airports?

Recently, Switzerland has seen several cases of air carriers once 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be again being temporarily or permanently relieved of their operating aware of, in particular when compared with ‘domestic’ licence, due to their inability to show sufficient economic viability. or local operators? By way of example only, In late August 2018, SkyWork Airlines Ltd (SkyWork) announced restrictions and taxes which apply to international but its bankruptcy and ceased its operations. Insolvency proceedings not domestic carriers. were initiated on 6 September 2018. The FOCA had already declared in October 2017 that the operating licence of ‘SkyWork’ No. Airport concession holders are obliged to grant access to all would only remain valid until the end of October 2017, as SkyWork national and international airlines entitled to fly to Switzerland (Art. had not been able to guarantee the financing for its winter flight plan 36a of the Federal Civil Aviation Act). Any restrictions must be for 2017/2018. detailed in the operational regulation of the airport and must not The second case concerned the air carrier Darwin Airline Ltd be discriminatory. The operational regulation is subject to FOCA (Darwin) that – after takeover by Slovenian carrier Adria Airways approval. following Etihad’s exit in summer 2017 – operated under the name Adria Airways Switzerland. After Darwin had filed for a 1.7 Are airports state or privately owned? moratorium (Nachlassstundung) on 27 November 2017, the FOCA annulled Darwin’s operating licence on 28 November 2017. As Both models exist. Zurich Airport is owned by a publicly traded the annulment only concerns the operating licence, Darwin is still company (at least ⅓ of the shares of which the canton of Zurich permitted to operate flights on behalf of other air carriers (wet- is legally bound to hold), whereas EuroAirport Basel-Mulhouse- lease). Freiburg and Geneva Airport are owned by public corporations. Further, at end of October 2017, Belair Airlines Ltd (Belair) followed its bankrupt parent company, Air Berlin, after the main 1.8 Do the airports impose requirements on carriers shareholder, Etihad, had withdrawn financial support. Apparently, flying to and from the airports in your jurisdiction? insolvency-related legal issues effectively prevented Belair from being sold to an investor. As it ceased operations and was finally Yes. The most notable requirement is the payment of airport put into liquidation, Belair had to return its operating licence to the charges (Art. 39 of the Federal Civil Aviation Act). In addition, FOCA. every airport has its own operational regulation which can contain On 3 September 2018, Zurich Airport published a media release certain requirements regarding safety, environmental issues, noise stating that its safety zone plan, which stems from the year 1978, protection, slots, etc. does no longer comply with the ICAO requirements and was thus revised. The plan is currently subject to public consultation.

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On 16 August 2017, the Swiss Federal Council approved the signing the Aircraft Register. Furthermore, lease agreements with a period of an agreement aimed at linking the Swiss and European aviation of validity of more than six months can be registered in the Aircraft emission trading scheme (ETS) systems. Once the agreement is Record (Luftfahrzeugbuch). Such registration gives the lessor signed, and as emissions generated by aviation will be included and the lessee priority over all rights and agreements recorded under the joint ETS system, the linkage will offer Swiss aviation subsequently (except for statutory liens). However, the lessor companies who operate flights from Switzerland to the EEA and/or may unilaterally allow the registration of a mortgage, unless this is within Switzerland the possibility to trade with the corresponding explicitly excluded in the lease agreement. emissions throughout the European ETS system.

2.4 As a matter of local law, is there any concept of title 2 Aircraft Trading, Finance and Leasing annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an Switzerland aircraft owned by another party? If so, what are the 2.1 Does registration of ownership in the aircraft register conditions to such title annexation and can owners constitute proof of ownership? and financiers of engines take pre-emptive steps to mitigate the risks? No. The Swiss Aircraft Register (Luftfahrzeugregister) relates to the administrative registration of the aircraft (permit to fly, Pursuant to Art. 22 para. 1 of the Federal Act on the Aircraft Records airworthiness certificate, noise type certificate, nationality of Register, engines that are specifically designated as such and ownership, call sign, etc.). Although the owner is registered in the registered jointly with an aircraft in the Aircraft Record are deemed Aircraft Register, the certificate of registration does not constitute to be part of such aircraft, regardless of whether they are installed proof of ownership. In addition, aircraft can be registered in the ‘on-wing’ or not. Furthermore, there is the possibility of specifically Swiss Aircraft Record (Luftfahrzeugbuch), which registration excluding an engine from a registration, which will render its fate constitutes proof of ownership. independent from that of the aircraft. By consequence, if an engine is registered along with an aircraft in the Aircraft Record, a mortgage 2.2 Is there a register of aircraft mortgages and charges? on the aircraft will also affect the engine. If this is not desired, the Broadly speaking, what are the rules around the engine must be specifically excluded when registering the aircraft in operation of this register? the Aircraft Record.

Yes; ownership and mortgages can be registered in the Aircraft 2.5 What (if any) are the tax implications in your Record (Luftfahrzeugbuch). In respect of ownership, the registration jurisdiction for aircraft trading as regards a) value- is voluntary. added tax (VAT) and/or goods and services tax (GST), Registration of any right will only be made upon application by and b) documentary taxes such as stamp duty; and the owner and is only permissible for aircraft already registered (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of in the Aircraft Register. Mortgages can only be set up, and will aircraft and/or particular aircraft types or operations? only become effective, upon registration in the Aircraft Record. Any entry will first be published in the Swiss Official Gazette of The key question with respect to VAT handling of aircraft transactions Commerce (SOGC) and is subject to an objection period of 30 days. in Switzerland (sale/purchase/lease) is whether the aircraft in question This 30-day period has to be borne in mind in any aircraft financing is imported into Switzerland and, if so, whether an exemption based project. The Swiss FOCA, which runs the Aircraft Record, is rather on Art. 23 para. 2 no. 8 and Art. 53 para. 1(e) of the Federal Law on swift in handling the applications. Requests are usually handled Value Added Tax (VATL) applies. If a Swiss registered aircraft is within a few days. imported into Switzerland by a Swiss-domiciled international air- Once a right is registered in the Aircraft Record, it can only be altered carrier who professionally operates transportation or chartered air or deleted by amending the respective registration. In other words, traffic, and whose turnover from international flights exceeds that once registered in the Aircraft Record, any transfer of ownership by of domestic air traffic, the sale, purchase, or lease as well as a list of necessity requires an amendment of the registration. other services provided to such air-carrier may be exempt from VAT pursuant to Art. 53 para. 1(e) in connection with Art. 23 para. 2 no. 2.3 Are there any particular regulatory requirements 8 VATL. The Federal Tax Administration maintains a list of carriers which a lessor or a financier needs to be aware of as domiciled in Switzerland who qualify for such exemptions. Foreign regards aircraft operation? air-carriers who are able to demonstrate that they comply with the requirements of Art. 23 para. 2 no. 8 VATL may also, under certain Mortgages circumstances, apply for VAT exemptions on certain services. If Certain claims are granted priority over a registered mortgage, an aircraft is imported by any other person/company who is not although Swiss legislation is more restrictive than foreign law exempted, VAT is applied to any sale, purchase, or lease transaction when it comes to accepting preferred security rights (see Art. 47 involving the aircraft. The same applies for any aircraft imported of the Federal Act on the Aircraft Records Register). There are no into Switzerland and sold, purchased, or leased to a party (other maintenance or mechanic’s priority rights. than a commercial carrier exempted from VAT pursuant to Art. 23 para. 2 no. 8 VATL), regardless of whether the parties involved in Leases the transaction are foreign parties and the aircraft is situated outside The lessee of an aircraft can be registered in the Aircraft Register, of Switzerland. Aircraft that are not imported into Switzerland assuming that all the other requirements for a registration in the (e.g., when staying under custom supervision in connection with Aircraft Register (apart from legal ownership) are fulfilled. In the maintenance and repair) are generally not subject to Swiss VAT on case of long-term lease agreements under which a Swiss lessee imports. Similar rules apply, due to various multilateral agreements operates the aircraft, a non-Swiss owner may also be registered in (e.g., GATT or the Free Trade Agreement with EU and EFTA) to

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customs duty; accordingly, the import of aircraft or of spare parts produce an enforceable title. However, the following aircraft shall is exempted from customs duty if such an agreement is applicable. not be subject to seizure: 1. governmental aircraft (which are designated or actually used by public authorities on an exclusive basis); 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)? 2. aircraft actually in service on scheduled flights of a public carrier (and its reserve aircraft); and Chicago Convention 1944 3. any other passenger or cargo aircraft ready to depart in such transportation, unless the debt for which the seizure is Switzerland ratified the Convention on 6 February 1947, prior to its requested was incurred for, or has become due in the course effective date of 4 April 1947. of, that specific leg. Geneva Convention 1948 Switzerland Switzerland ratified the Convention on 3 October 1960, prior to its 3.2 Is there a regime of self-help available to a lessor effective date of 1 January 1961. or a financier of an aircraft if it needs to reacquire Montreal Convention 1999 possession of the aircraft or enforce any of its rights under the lease/finance agreement? Switzerland ratified the Convention on 7 July 2005, prior to its effective date of 5 September 2005. No, this is not admissible under Swiss law (other than under the Cape Town Convention 2001 Cape Town Convention). The Convention has so far not been ratified by Switzerland. 3.3 Which courts are appropriate for aviation disputes? 2.7 How are the Conventions applied in your jurisdiction? Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases As Switzerland follows the so-called monistic system, international are brought? treaties are incorporated into the Swiss legal order without further legislation. A treaty can be directly applicable (“self-executing”) There are no special courts (of any type) for aviation disputes. provided that its provisions are litigable, i.e., its content must be sufficiently precise and clear to constitute the basis for a decision Civil proceedings in a specific case. Civil claims in relation to aviation disputes must be brought before the ordinary civil courts. Four cantons (Aargau, Bern, St. Gallen, and Zurich) have specialised commercial courts competent if (i) 2.8 Does your jurisdiction make use of any taxation benefits which enhance aircraft trading and leasing the dispute is to be considered a commercial dispute, and (ii) the (either in-bound or out-bound leasing), for example value threshold of CHF 30,000 is exceeded, which will, in aviation access to an extensive network of Double Tax Treaties disputes, almost invariably be the case. or similar, or favourable tax treatment on the disposal Debt enforcement of aircraft? Enforcement of mortgages is carried out by the competent Debt Enforcement and Bankruptcy Office (Betreibungsamt). The same There is no specific benefit available to profits achieved by way of applies to the enforcement of financial claims if the creditor is in aircraft trading or leasing. Under the current tax legislation, however, possession of an enforceable title. If he does not hold such title, a company that trades with aircrafts abroad, i.e., whose turnover he may still initiate the enforcement procedure; however, in such is basically achieved abroad, may qualify for the mixed company cases the debtor may raise objection against the enforcement, and privilege; as a result, the profits from aircraft trading will be taxed at the creditor will then have to obtain a court order before being able less than 10%, depending on the canton of domicile. This tax status to proceed with the enforcement procedure. will be abolished in the course of the termination of the existing ring fencing schemes, as part of the so-called Tax Proposal 17, which is Criminal proceedings currently under discussion in the Swiss Parliament. The new law is Criminal charges are handled by the competent public likely to enter into force in 2020 or 2021. A company that currently and criminal courts, respectively. benefits from a special tax status will be eligible for doing atax Administrative proceedings neutral step up on its assets in the difference between book value Rulings (Verfügungen) by a federal authority (e.g., FOCA) can be and fair market value. Any such hidden reserves will benefit from a challenged in administrative proceedings before the Swiss Federal preferred tax rate if realised within five years after the new law will Administrative Court. have entered into force. Whether or not an aircraft trading or leasing company will be eligible for such step up, i.e., whether or not it has such hidden reserves, will have to be determined in any specific 3.4 What service requirements apply for the service of case, based on a state of the art valuation report. court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

3 Litigation and Dispute Resolution Service on domestic (Swiss) defendants is made via post (registered mail) or in person by court bailiffs. Defendants in jurisdictions with which Switzerland has concluded a Treaty dealing with the service 3.1 What rights of detention are available in relation to aircraft and unpaid debts? of documents (in particular, the Hague Conventions) are served according to the standards provided for in the respective Treaty. Defendants in all other jurisdictions will be served with documents Pursuant to Art. 80 et seq. of the Federal Civil Aviation Act, a via consular or diplomatic channels. creditor, a mortgagee, or the owner (e.g., the lessor) of an aircraft can apply for seizure of the aircraft even if the claimant cannot

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However, only the document instituting the proceedings (or its Switzerland is a Member State of the New York Convention on the equivalent) must be served upon foreign defendants via these channels enforcement of arbitral awards. (and, thus, usually in a translated version). Foreign defendants are invited, according to Art. 140 of the Civil Procedure Rules, to appoint a Swiss domiciled recipient – usually a law firm – for all 4 Commercial and Regulatory future communications. Defendants who fail to do so are served via publication in newspapers or the Swiss Official Gazette of Commerce 4.1 How does your jurisdiction approach and regulate (SOGC), which often results in default judgments. Communications joint ventures between airline competitors? from courts must therefore invariably be taken seriously. All agreements between undertakings, decisions by associations of undertakings, and concerted practices, including joint-ventures, 3.5 What types of remedy are available from the courts Switzerland or arbitral tribunals in your jurisdiction, both on i) an which may affect trade between Switzerland and the EC and which interim basis, and ii) a final basis? are aimed at, or result in, the prevention, restriction or distortion of competition within the territory covered by the Agreement Interim basis between the European Community and the Swiss Confederation on Seizure of aircraft pursuant to Art. 80 et seq. of the Civil Aviation Act Air Transport (EU-CH Agreement), are prohibited. Contravening (see question 3.1): even if the court is ex officio held to take all the decisions or agreements are null and void. Exemptions are possible necessary precautions to make sure that the seizure will have effect, under the conditions foreseen by the EU-CH Agreement. it may still be advisable to explicitly request the court to deliver a This wording, as provided for in Art. 8 of the EU-CH Agreement, notice of seizure to the Aircraft Register (FOCA), to Skyguide, to the corresponds to the applicable EU competition law (Art. 101 and 102 airport where the aircraft is currently positioned, and to the owner of the Treaty on the Functioning of the European Union (TFEU)). of the aircraft (if the seizure was not directed against him, but, e.g., Switzerland has therefore, in fact, adopted the EU competition law. against a lessee). On the rare occasion that the rules on the seizure of On 1 December 2014, the Agreement between the European Union and aircraft are not applicable, a freezing injunction (Arrest), as provided the Swiss Confederation concerning cooperation on the application of for in the Debt Enforcement and Bankruptcy Act, may be obtainable. their competition laws came into force. It facilitates and strengthens Arbitral tribunals: if a dispute is subject to arbitration, the creditor the cooperation between European and Swiss authorities. may choose to apply for seizure at the state court or at the arbitral tribunal. The arbitral tribunal is only competent to grant injunctions 4.2 How do the competition authorities in your such as a seizure once it has been constituted; the Swiss Rules on jurisdiction determine the ‘relevant market’ for the International Arbitration therefore provide for the appointment of an purposes of mergers and acquisitions? Emergency Arbitrator. Final basis According to the EU-CH Agreement, the European Union A court judgment or arbitral award can order specific performance institutions and not the Swiss competition authorities are competent of contractual or other duties, award compensation for damages, or to control concentration between undertakings (the “one-stop-shop can be a declaratory judgment. principle”). The Swiss authorities only remain competent if the thresholds, as defined in the EC Merger Regulation, are not reached (i.e., generally, a combined aggregate worldwide turnover of EUR 5 3.6 Are there any rights of appeal to the courts from the billion and an aggregate EU-wide turnover of each of at least two of decision of a court or arbitral tribunal, and, if so, in what circumstances do these rights arise? the undertakings concerned of more than EUR 250 million). Therefore, in most cases, the relevant market is not to be determined Yes, decisions from a court of first instance can be appealed. by Swiss authorities but by the EU institutions. A brief overview (exceptions are not mentioned): In the rare cases that remain within the Swiss competence, the relevant market is determined based upon the “O&D” approach Civil proceedings (“point of origin/point of destination”) as applied by the EU Decisions of state courts in civil proceedings can be challenged. The Commission. This approach is applied both to charter and scheduled appeal has to be filed with the upper cantonal court, whose decision airlines (see LPC 2008/4, p. 677). can then be appealed before the Swiss Federal Supreme Court. However, decisions of commercial courts (see above, question 3.3) are not subject to appeal before an upper cantonal court; they can 4.3 Does your jurisdiction have a notification system only be appealed before the Swiss Federal Supreme Court. whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from Criminal proceedings regulatory agencies? Decisions of state courts in criminal proceedings can be challenged. The appeal has to be filed with the upper cantonal court, whose decision Again, in most cases the EC Merger Regulation will apply (see can then be appealed before the Swiss Federal Supreme Court. above, question 4.2). However, if Swiss law applies, the answer is Administrative proceedings yes, the Swiss Cartel Act provides for a notification system. Decisions rendered by the Federal Administrative Court can be appealed before the Swiss Federal Supreme Court. 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? Arbitral proceedings

Arbitral awards can only be appealed on the basis of very limited See above, question 4.1. grounds, e.g., if certain procedural rights such as the right to equal treatment, the right to be heard, or the Swiss ordre public have been violated.

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4.5 Please provide details of the procedure, including 4.8 What are the main regulatory instruments governing time frames for clearance and any costs of the acquisition, retention and use of passenger data, notifications. and what rights do passengers have in respect of their data which is held by airlines and airports? Notification of a planned concentration of undertakings must be made to the Swiss Competition Commission (COMCO). The General rules commission then has to decide within one month whether an The main regulatory instrument in Switzerland governing the examination is to be initiated. During that month, the concentration acquisition, retention and use of (passenger and other) data is the must not be implemented. After expiration of the one-month period, Federal Act on Data Protection (FADP). The FADP embodies the applicant will receive either a clearance or the information that fundamental rules concerning the processing of personal data by both

Switzerland an investigation will be initiated. If no such notice is given within the public and the private sector. The FADP is currently under revision that time period, the concentration may be implemented without and shall, to a large extent, be adapted to the level of protection reservation. provided by the Regulation (EU) 2016/679 on the protection of In the event of an investigation being initiated, the Competition natural persons with regard to the processing of personal data and on Commission must decide within a four-month period whether the the free movement of such data (GDPR), which entered into effect on concentration will be cleared. 25 May 2018. The GDPR is not only directly applicable in the EU, The legal effect of a concentration that has to be notified is suspended. but has extraterritorial application to any entity outside the EU that is either established within the EU or that targets data subjects in the EU. For the preliminary investigation of one month, the Secretariat of the COMCO charges a flat fee of CHF 5,000. For the in-depth Under both regulations, the data subject generally has the right to access investigation, filing fees are charged on a time-spent basis. The and to correct false, incomplete, or erroneous data. Under certain hourly rates are between CHF 100 and CHF 400, depending on the circumstances, the data subject can also request deletion of his or her urgency of the case and the level of seniority of the case-handlers. personal data. The collection of the data and the purpose for which it is processed must be readily identifiable by the person concerned and the data subject must be actively informed if particularly sensitive 4.6 Are there any sector-specific rules which govern the personal data is involved. Violations of the FADP and the GDPR can aviation sector in relation to financial support for air lead to criminal proceedings and high fines. Furthermore, the data operators and airports, including (without limitation) subject enjoys all remedies generally available under civil procedure state aid? rules (i.e., injunctions, right to , or right to claim damages).

Yes. The EU-CH Agreement stipulates an aviation-specific aid Aviation-specific rules scheme (Art. 13). This scheme corresponds almost literally to the Aviation-specific rules are, for one, incorporated in the Federal regulation in the EU (Art. 107 TFEU). Act on Foreign Nationals (FNA). According to the Schengen and As a general rule, the EU-CH Agreement prohibits state aid which Dublin Association Agreements, the Council Directive 2004/82/ distorts or threatens to distort competition. Exceptions are provided EC of 29 April 2004 on the obligation of carriers to communicate for in the EU-CH Agreement. passenger data is applicable in Switzerland. The Directive was implemented in the FNA, which was significantly revised in 2014. The decision as to whether state aid is permissible under the The State Secretariat for Migration (SEM) determines the flights aforementioned regulations lies with the Swiss authorities, who for which air carriers are required to transmit the personal data are obliged to inform the EU authorities on such aid. Although not of the passengers (see Art. 104 FNA). The affected carriers must expressly provided for in the Agreement, the Swiss authorities are transmit the Advance Passenger Information (API) of all passengers likely to follow the recent practice of the European Union (see the to the Swiss authorities. Details on how and where the data is to be 2014 Aviation Guidelines of the EU Commission, OJ C 99, 4 April delivered can be found under www.bfm.admin.ch/dam/data/bfm/eu/ 2014, pp. 3 to 34). schengen-dublin/apischnittstellenspezie.pdf. Further, the Federal Customs Administration can oblige the carriers 4.7 Are state subsidies available in respect of particular and airport operator to transmit personal data of the passengers for routes? What criteria apply to obtaining these up to six months after the transport was carried out (see Art. 151 of subsidies? the Customs Ordinance). The affected carriers or airport operators are obliged to transmit the name, first name, address, date of birth, The criteria are set out in Regulation (EC) No 1008/2008 of the passport number, places of origin, transit and final destination of the European Parliament and of the Council of 24 September 2008 on passengers as well as the name of the travel agency who booked the common rules for the operation of air services in the Community, flights (if applicable). which is also applicable in Switzerland. Art. 21f FCAA stipulates that passenger data must be made Subsidies for particular routes may be granted to an undertaking available by carriers to the competent prosecution authorities upon carrier operating a particular route under a public service obligation, their request for up to six months after the transport has been carried as provided for in Art. 16 et seq. of the Regulation. Before deciding out. The personal data concerned encompasses the name, last name, on such a public service obligation, the other Member States, the EU address, date, time and number of the flight, places of origin, transit Commission, the airports concerned, and other air carriers operating and final destination of the passengers, data on any accompanying on that particular route must be consulted. persons, information on the payment method used as well as the name of the travel agency who booked the flight (if applicable).

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The passenger report form is available under www.bazl.admin.ch 4.9 In the event of a data loss by a carrier, what (Air Passenger Rights). obligations are there on the airline which has lost the data and are there any applicable sanctions? 4.13 Are the airport authorities governed by particular The FADP (see question 4.8 above) imposes the obligation on any legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? entity which collects data to put in place adequate security measures against data loss. If the loss of data is caused by insufficient security measures, the carrier may become liable for damages. Airports can only be run based on a concession by the federal government. Such concessions are based on the Federal Civil Unauthorised access to sensitive data can be prosecuted. Aviation Act and the Ordinance on the Aviation Infrastructure. The airport operators are licensed either for 50 years in the case of Switzerland 4.10 What are the mechanisms available for the protection national airports, or 30 years in the case of regional airports. of intellectual property (e.g. trademarks) and other The concession entails the right to run an airport commercially and assets and data of a proprietary nature? to raise fees. On the other hand, the airport operator is obliged to open the airport to all aircraft, as provided for in the operational Intellectual property rights are enforced by court action. Each of regulation of the airport (see question 1.6 above), and to maintain an the 26 cantons of Switzerland has a single cantonal instance with infrastructure guaranteeing safe operations. overall jurisdiction for intellectual property and related disputes. In The operation of the airport must be in line with the Sectoral the cantons of Aargau, Bern, St. Gallen, and Zurich, competence lies Aviation Infrastructure Plan (SAIP), and the applicant must have the with the commercial court. management skills, technical knowledge, and funds necessary for the A separate, exclusive jurisdiction has been granted to the newly operation of the airport, as provided for in the operational regulation. created (2012) Federal Patent Court, as the first instance for patent All details regarding the operation of the airport are then to be disputes, including action for infringement and claims concerning specified in the operational regulation, which is subject to FOCA the existence or validity of a patent. For other civil actions related approval. Typical contents of the operational regulation are the to patents, the cantonal courts have concurrent jurisdiction. organisation of the airport, operational hours, departure/arrival An important and effective tool to efficiently prevent acts of procedures, ground handling, slots coordination, further commercial infringement under intellectual property law is injunctive relief. and non-commercial use of the airport, environmental issues, If certain conditions can be demonstrated, a court injunction can an aerodrome design and operational manual according to ICAO be obtained relatively quickly. The claimant must demonstrate a standards, and a Safety Management System. valid cause of action, an infringement, a resulting disadvantage that cannot be readily remedied, and urgency. Injunctive relief must be confirmed in the framework of subsequent ordinary court 4.14 To what extent does general consumer protection proceedings unless the parties settle. legislation apply to the relationship between the airport operator and the passenger? Furthermore, intellectual property infringements may constitute a criminal offence. There is no consumer protection legislation specifically governing the relationship between airport operators and passengers. 4.11 Is there any legislation governing the denial of As regards the general consumer protection legislation (e.g., the boarding rights and/or cancelled flights? Unfair Competition Act), it must be noted that there is typically no contractual relationship between passengers and airport operators. Switzerland has adopted Regulation (EC) No 261/2004 regarding passenger rights in the event of denied boarding and of cancellation or long delay of flights. 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? In the event of overbooking, the carrier may first determine whether passengers are willing to offer their seat against an indemnification All the major GDSs operate in Switzerland, e.g., Travelport, to be agreed upon. If no such volunteers can be found, the carrier Amadeus, Sabre, etc. (not taking into account the many suppliers must compensate those passengers denied boarding with a payment of Front-End Tools). of up to EUR 600, depending on the distance of the flight. The Regulation requires airlines to offer the relevant passenger meals, refreshments, and hotel accommodation as appropriate whilst 4.16 Are there any ownership requirements pertaining to waiting for a rearranged flight. They must also cover any costs of GDSs operating in your jurisdiction? transport between the hotel and the airport. No. However, Switzerland has adopted Regulation (EC) No 80/2009 The passenger rights under Regulation (EC) No 261/2004 must be of the European Parliament and of the Council of 14 January 2009 on a enforced before the ordinary civil courts. Code of Conduct for computerised reservation systems. According to In 2012, a civil court of first instance ruled that Regulation (EC) No this Regulation, a system vendor shall publicly disclose, unless this is 261/2004 does not apply to a flight from Zurich to a non-EU country. otherwise made public, the existence and extent of a direct or indirect capital holding of an air carrier or rail-transport operator in a system 4.12 What powers do the relevant authorities have in vendor, or of a system vendor in an air carrier or rail-transport operator. relation to the late arrival and departure of flights?

It is possible to file a passenger report with the FOCA, which can initiate administrative fine proceedings and impose fines of up to CHF 20,000 (Art. 91 para. 4 of the Federal Civil Aviation Act).

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

5.1 In your opinion, which pending legislative or This is not specifically regulated in Switzerland. As long as the regulatory changes (if any), or potential developments competition rules are respected and all the conditions for the affecting the aviation industry more generally in approval of the airport operational regulation are fulfilled (especially, your jurisdiction, are likely to feature or be worthy of in this constellation, non-discrimination), an integration between air attention in the next two years or so? operators and airports should be permissible. As regards all fields of economy in trade in Europe and worldwide, the implications of an upcoming Brexit, if and when it shall occur, 4.18 Are there any nationality requirements for entities Switzerland applying for an Air Operator’s Certificate in your remain to be seen, also with respect to civil aviation in Switzerland. jurisdiction or operators of aircraft generally into and Moreover, Switzerland is, and remains, at the forefront of the out of your jurisdiction? development of Unmanned Aerial Vehicles (UAVs), also known as (civil) drones, and as with many other fields, regulations in this field In order for it to qualify as a commercial operator under Swiss follow the highly-paced and dynamic technological developments law and to obtain a licence for commercial flights in Switzerland, of this topic. Regulations in this domain are likely to follow the a carrier must be registered in the Swiss commercial register with developments in the European Union, where the European Aviation the purpose of operating commercial air traffic. Further, it must Safety Agency is in the course of creating a drone regulation be controlled and majority-owned by Swiss citizens. Exceptions framework for all EASA Member States. A final draft of such can be granted to foreigners or foreign companies that are treated regulation framework is expected to be submitted to the European as Swiss citizens or Swiss companies based on intergovernmental Commission at the end of 2017. agreements (see Art. 27 FCAA and Art. 103 FCAO). In August 2017, the Sectoral Aviation Infrastructure Plan (SAIP), which constitutes the government’s planning and coordination instrument for civil aviation, setting out the purpose, required perimeter, main aspects of use, equipment, and general operating conditions for every aerodrome, was amended. The amendments address, amongst other things, the optimisation of landing and take-off routes at Zurich Airport and regulations on new take-off routes in case of windy or foggy weather conditions (so-called “south approach route”).

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

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

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

VISCHER is an influential, innovative Swiss law firm dedicated to providing effective legal solutions to business, tax and regulatory matters. Our attorneys, tax advisers and public notaries are organised under the direction of experienced partners in practice teams, covering all areas of commercial law. Our breadth of practice ensures we have the right team available for every mandate and client. Our clients demand and deserve impartial, unbiased advice. Our conflict standards set us apart from other firms. The fact that VISCHER is not tied to an association of law firms or attorney network means that our ability to select and instruct counsel in international transactions is not compromised. We have spent decades building up networks with attorneys and firms that meet our standards. VISCHER can choose freely from those networks, according to the demands of the matter at hand. VISCHER advises and represents airline companies in their core business and also in associated fields such as catering. We regularly advise on questions at a cantonal and federal level, handle damage and insurance cases of all types, and assist in contract negotiations with travel offices, air-traffic authorities, and airport operators. In addition, we advise on leasing, buying and selling aircraft and also have a wealth of experience in aircraft completion and all types of aviation-related dispute resolution. VISCHER received the Finance Monthly 2016 award “Aviation Law Firm of the Year – Switzerland”. Our offices are located in Zurich and Basel, the two largest business centres in Switzerland.

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Thailand

Weerawong, Chinnavat & Partners Ltd. Nattaporn Pengkul

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

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under the Business Security Act B.E. 2558 (2015). The security 1.7 Are airports state or privately owned? receiver must be a Thai financial institution or any other person as prescribed in a ministerial regulation. Currently, foreign banks Airports in Thailand are both state- and privately-owned. outside Thailand are not qualified to be a security receiver unless While most of the airports outside Bangkok are owned by the it provides a facility in the form of a syndication with commercial DOA, Airports of Thailand Public Company Limited (which is a banks in Thailand. state-owned enterprise) owns Suvarnabhumi Airport, Don Mueang Airport, Chiang Mai Airport and Phuket Airport. 2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation? 1.8 Do the airports impose requirements on carriers Thailand flying to and from the airports in your jurisdiction? Age of an aircraft that can be leased/financed to Thai airlines Apart from obtaining route permission from the CAAT, airport On the date of application for registering an aircraft in the Thai operators themselves do not impose any restriction or requirement aircraft registry, an aircraft must not be over 16 years old. However, on flying to and from the airports in Thailand. if an operator will only operate such aircraft for cargo operations, the aircraft must not be over 18 years old. A helicopter, on the date of application, shall not be over five years old. 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular Deregistration of the aircraft rules, regulations, systems and procedures in place In general, an aircraft can only be deregistered by the person which need to be adhered to? who registered the aircraft. Originally, as a foreign entity cannot register an aircraft in Thailand, only the Thai operator that originally The Air Navigation Act is the main regulation that governs air registered the aircraft is able to apply for the voluntary deregistration accidents. The Air Accident Investigation Committee is responsible of the aircraft. However, following the recent implementation of the for the investigation of any accident in relation to an aircraft. new rule of the CAAT, an owner may apply for deregistration in its own right as owner of the aircraft in certain circumstances although 1.10 Have there been any recent cases of note or other it did not register the aircraft in Thailand. Such circumstance is, for notable developments in your jurisdiction involving example, where the Thai lessee ceased to have the right to possess the air operators and/or airports? aircraft due to a termination of the lease and the owner (as lessor) has submitted an irrevocable deregistration power of attorney with the As part of addressing significant safety concerns (“SSC”) raised application to export the aircraft to the CAAT. It should still be noted by the International Civil Aviation Organisation, a number of laws that the decision to permit deregistration of the aircraft under such and regulations have been enacted, including the regulations on re- rule is still under the discretion of the Director General of CAAT. certification of air operators. Please note that a financier still cannot apply for deregistration of aircraft in its own right. 2 Aircraft Trading, Finance and Leasing In practice, a Thai lessee would normally be required to grant at the outset a deregistration power of attorney for unilateral deregistration upon the termination of the lease by the owner or lessor. In reality, 2.1 Does registration of ownership in the aircraft register the enforcement of such a power of attorney is uncertain given the constitute proof of ownership? revocability of a power of attorney under Thai law and the fact that the CAAT and other Thai authorities may still require a Thai lessee’s As Thailand has an operatory registry, the registration of an aircraft confirmation or cooperation on such deregistration process. which is evidenced by the Certificate of Registration does not constitute an absolute proof of ownership. The ownership over the 2.4 As a matter of local law, is there any concept of title aircraft can be proven by documents that show the transfer of title of annexation, whereby ownership or security interests the aircraft to the owner (e.g. a bill of sale). in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft owned by another party? If so, what are the 2.2 Is there a register of aircraft mortgages and charges? conditions to such title annexation and can owners Broadly speaking, what are the rules around the and financiers of engines take pre-emptive steps to operation of this register? mitigate the risks?

The concepts of aircraft mortgage and charges are not recognised In a situation in which engines or parts of an aircraft are removed and under Thai law. Mortgages and security interests governed by foreign installed on another aircraft which is owned by another person, there law cannot be registered in Thailand, as Thailand does not have a is one important principle of law which needs consideration. Where central registration system of legal interests in respect of the aircraft. several movables belonging to different persons become joined in It is possible to pledge an aircraft under Thai law. The owner would such a manner as to become component parts or invisible, then the pledge the aircraft to the lender, as the pledgee, and the owner and relevant owners become co-owners in the composite property (in the pledgee would agree that the third-party operator of the aircraft proportion to the value of that person’s component part). However, shall act as custodian of the aircraft for the pledgee. There is no if one of the component elements would be considered as the registration requirement in relation to the pledge. “principal” part – the owner of the principal part becomes the sole It should also be noted that, since July 2015, an aircraft could be owner of the entire property, but at the same time becomes liable to granted as a security under Thai law by way of a business security pay to the owner(s) of the “subsidiary” parts the value of those parts.

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There was a court case decades ago in which it was deemed that the car frame is the “principal” property and that the engine is a subsidiary 2.8 Does your jurisdiction make use of any taxation part thereof. At that time, the court considered that, without an engine, benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example even though the form of the car frame remained the same, it could not access to an extensive network of Double Tax Treaties by its nature be considered a car, given that it would no longer be or similar, or favourable tax treatment on the disposal capable of propulsion. Nevertheless, there has been no court case of aircraft? in relation to an airframe and aircraft engine regarding this issue, or any recent cases in respect of such principle of law. The issue to be Thailand has entered into a number of Double Tax Treaties which considered is whether, taking into account the business circumstance help to facilitate cross-border transactions. Tax benefits relating to and engine/parts pooling agreement to date, the engines and parts are each transaction need to be ascertained on a case-by-case basis, as Thailand deemed to be component parts or invisible parts of the airframe. the tax benefits under each Double Tax Treaty may not be the same. Possible ways to protect against that risk could be (i) a written agreement included in the lease agreement that ownership over an engine or any significant parts is vested to the owner at all times 3 Litigation and Dispute Resolution irrespective of installation on another party’s airframe, (ii) requiring the lessee to furnish a letter of recognition of rights signed by the 3.1 What rights of detention are available in relation to owner of the other airframe in which an engine or any significant aircraft and unpaid debts? parts is installed, and (iii) clearly marking on the engine and any other significant parts that they are subject to the ownership interest of the An aircraft may be detained in certain circumstances as set out owner. below. Right of retention 2.5 What (if any) are the tax implications in your A right of retention allows a person who has possession of an jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), aircraft to retain it until any obligation relating to the aircraft (e.g. and b) documentary taxes such as stamp duty; and repairer’s charge) is performed. The right may be exercised until the (to the extent applicable) do exemptions exist as obligation is wholly performed. regards non-domestic purchasers and sellers of Airport charges aircraft and/or particular aircraft types or operations? In principle, an aircraft may be seized if there is a violation of An entity which is or is deemed to be resident, domiciled or carrying on the provisions of the Air Navigation Act relating to the aircraft. any commercial activity or business in Thailand for Thai tax purposes However, the meaning of the term “provisions ... relating to the is subject to the general tax regime (e.g. income tax and VAT). aircraft” is not precise. Airport charges include airport charges to be collected from passengers using the airport (or departure passenger In a transaction contemplated by the lease/financing of an aircraft, service charges) and airport charges to be collected from an aircraft there is documentary stamp duty as detailed below if the documents using the airport, including landing and parking charges. are executed in Thailand or their originals are brought into Thailand. While an airport charge is still outstanding, a competent officer may 1. A lease of aircraft is not subject to stamp duty. However, if a consider there to have been a violation of the provisions concerning lease is categorised as a hire purchase agreement, ad valorem stamp duty applies. the aircraft and, therefore, seize the aircraft. 2. An aircraft pledge agreement is subject to ad valorem stamp Other matters duty unless the underlying loan documents secured by the An aircraft may be intercepted (and its use suspended) by a military pledge agreement have been duly stamped. officer having the authority as specified in the anti-air warfare 3. Each power of attorney (including but not limited to the plan under Air Navigation Contraventions law. Furthermore, tax, deregistration power of attorney) is subject to stamp duty. criminal and public interests are also factors that could see an 4. Each duplicate and counterpart of any dutiable instrument is aircraft inspected or detained by the competent officers. also subject to stamp duty.

3.2 Is there a regime of self-help available to a lessor 2.6 Is your jurisdiction a signatory to the main or a financier of an aircraft if it needs to reacquire international Conventions (Montreal, Geneva and possession of the aircraft or enforce any of its rights Cape Town)? under the lease/finance agreement?

The Geneva Convention was ratified by Thailand on 10 October As there are no “self-help” remedies under Thai law, if a lessee acts 1967, and the Montreal Convention was ratified on 4 August 2017. contrary to the terms of the lease/financing arrangement, the lessor However, Thailand is not a party to the Cape Town Convention. or the financier may notify the lessee to comply with the agreement. If the lessee still fails to comply, the lessor or the financier may terminate the lease/financing arrangement and demand that the 2.7 How are the Conventions applied in your jurisdiction? lessee return possession of the aircraft. If the lessee refuses to return possession, a court order will be required for the aircraft to Under Thai law, becoming a party to an international convention be seized by the court. In order for the lessor or the financier to does not automatically make such treaty a part of Thai law. To do take possession of an aircraft following a default under the lease/ so, the provisions of the convention must specifically be enacted. financing agreement, the lessor or the financier must prove to the The Montreal Convention has been applied by the International Air satisfaction of the Thai court the existence of the lease agreement, Carriage Act B.E. 2558 (2015) (as amended). However, in relation the default and that it is the lessor’s or the financier’s right to take to the Geneva Convention, no such act has yet been enacted and, possession upon such default. Various documents must be furnished therefore, registration of rights over aircraft is not available. to the court, such as the executed lease agreement.

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The lessor’s or the financier’s right to take possession of the aircraft will also be subject to and limited by the provisions of laws of 4 Commercial and Regulatory general application relating to or generally affecting the enforcement of the parties’ rights and remedies, including the provisions of any 4.1 How does your jurisdiction approach and regulate applicable laws relating to bankruptcy, insolvency, reorganisation joint ventures between airline competitors? or moratorium. A joint venture will not be regulated if it does not result in (i) a 3.3 Which courts are appropriate for aviation disputes? foreign entity being allowed to have control over a Thai licensed Does this depend on the value of the dispute? For airline, or (ii) the creation of either a monopoly or a business operator example, is there a distinction in your jurisdiction with a dominant position; or may substantially lessen competition. Thailand regarding the courts in which civil and criminal cases A code share arrangement is allowed provided that an approval from are brought? CAAT is obtained.

Generally, aviation disputes between the offshore financier/lessor and Thai airlines are under the jurisdiction of the Civil Court and 4.2 How do the competition authorities in your the Central Intellectual Property and International Trade Court. jurisdiction determine the ‘relevant market’ for the However, the Administrative Court will have jurisdiction over a purposes of mergers and acquisitions? case where there is a dispute over an order exercised by the MOT, the CAAT and/or the DOA. As the Trade Competition Act B.E. 2560 (2017) (the “TCA”) has only recently come into force (5 October 2017) the determination of the regulations of the Trade and Competition Commission (the 3.4 What service requirements apply for the service of “TCC”) regarding the determination of the relevant market are court proceedings, and do these differ for domestic currently being drafted and it is not yet final nor implemented. airlines/parties and non-domestic airlines/parties?

As a general rule, a notice of court proceeding must be served to a 4.3 Does your jurisdiction have a notification system place where the concerned party is domiciled. whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies? 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an Merger control is governed by the TCA which divides regulated interim basis, and ii) a final basis? mergers into two categories: those which require approval (pre- merger filing) from the TCC and those which only require Under Thai law, there are two types of expedited procedure, i.e. (i) notification to the TCC (post-merger notification). Essentially, procedure for a “petty case”, and (ii) procedure for a civil case. A submission of a pre-merger filing will be required if the merger may petty case procedure is expedited quicker than ordinary civil cases result in the creation of either a monopoly, or a business operator because fewer procedures are required. In a petty case, the court, at with a dominant position. On the other hand, the merging entity (or its discretion, can order the parties to proceed with a reconciliation merging entities) must notify the TCC after the completion of the and a hearing on the same day. merger if the merger may substantially lessen competition. A case will be considered as a petty case if (i) the relief applied for in such case is an amount not exceeding THB 300,000, or (ii) it 4.4 How does your jurisdiction approach mergers, is a case involving the eviction of any person from an immovable acquisition mergers and full-function joint ventures? property with a rental of not exceeding THB 30,000 per month. However, we have not yet come across a case where the courts agree Please refer to our response to question 4.3 above. With respect to accept lease repossession proceedings as a “simple case”. to foreign ownership, not only are foreigners not permitted to own Where there are pending procedures in the courts of Thailand, over 49% of shares in the Thai airline, but they shall also not have interim proceedings (i.e. protective measures or an injunction) any effective control over the airline. necessary to safeguard an asset until the substantive dispute is finally resolved, can be taken. 4.5 Please provide details of the procedure, including time With respect to arbitration, Thailand is a party to the New York frames for clearance and any costs of notifications. Convention, which allows an arbitral award from internationally recognised arbitration institutions to be enforced (providing they For a pre-merger filing, once the parties have submitted the required fulfil certain criteria, notably that they must not contradict public data and documents to the TCC, the TCC will then have 90 calendar order or the good morals of the people of Thailand) through the Thai days (plus a possible extension of 15 calendar days) from the date of courts upon registration, thereby avoiding the need for a re-trial. submission to issue its decision. On the other hand, a post-merger The foreign arbitration venue may be any other appropriate country notification is required to be submitted within seven days after the that is a party to the New York Convention. transaction has been completed.

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

Subject to legal restrictions (e.g. value threshold of the dispute), the parties of each dispute can appeal to the Court of Appeal and the Supreme Court, respectively.

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4.6 Are there any sector-specific rules which govern the 4.13 Are the airport authorities governed by particular aviation sector in relation to financial support for air legislation? If so, what obligations, broadly speaking, operators and airports, including (without limitation) are imposed on the airport authorities? state aid? Airport authorities are subject to the Air Navigation Act and any A state bail-out for an airline does not exist under Thai law. However, regulation, notification, rule or order issued thereunder. certain tax exemption or reduction is granted if the airline obtains a business promotion from the Board of Investment of Thailand. 4.14 To what extent does general consumer protection legislation apply to the relationship between the

Thailand 4.7 Are state subsidies available in respect of particular airport operator and the passenger? routes? What criteria apply to obtaining these subsidies? Please refer to our response to question 4.11 and 4.12 above.

No state subsidies are available. 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, FedEx, UPS and DHL are major GDSs operating from and to and what rights do passengers have in respect of Thailand. their data which is held by airlines and airports?

There is no specific law in relation to personal data protection under 4.16 Are there any ownership requirements pertaining to Thai law because the Thai Personal Data Protection Act has not yet GDSs operating in your jurisdiction? been enacted. It is still to be submitted to the Cabinet for approval. However, as a general rule, airlines and airports are prohibited from If a GDS does not register as a Thai air carrier, no ownership disclosing passenger data without prior consent from the passengers. requirement applies. However, an offshore GDS, when operating in Thailand, should take into account the regulations relating to a business conducted by a foreign company. 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the data and are there any applicable sanctions? 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? Please refer to our response to question 4.8 above. Vertical integration is possible provided that it does not trigger the conditions set out in our response to questions 4.3 and 4.4 above. 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? 4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your Thailand has a registration system for intellectual property (e.g. jurisdiction or operators of aircraft generally into and trademarks and patents). The Central Intellectual Property and out of your jurisdiction? International Trade Court is the competent court for disputes relating thereto. An air operator who has its headquarters situated in Thailand may apply for an Air Operator Certificate in Thailand. However, in general practice, prior to the application for the Air Operator 4.11 Is there any legislation governing the denial of Certificate under Thai law, such air operator is required to obtain the boarding rights and/or cancelled flights? Air Operator Licence which only a Thai national can obtain.

Yes, there is. If a passenger has checked in within the required time period and does not contravene any safety regulations, denial of 5 In Future boarding by the airline is prohibited. If it occurs, such passenger must be compensated. In a case where the flight is cancelled, the airline is required to either reimburse the amounts paid by the 5.1 In your opinion, which pending legislative or passengers or provide an alternative flight for the passengers. The regulatory changes (if any), or potential developments affecting the aviation industry more generally in airline is also required to provide free of charge any appropriate your jurisdiction, are likely to feature or be worthy of assistance to the passengers (i.e. water, food, accommodation) and attention in the next two years or so? pay the passengers’ compensation. Currently, there are plans to further amend the existing Air 4.12 What powers do the relevant authorities have in Navigation Act. The draft of the amendment to the Air Navigation relation to the late arrival and departure of flights? Act has been approved by the Cabinet and Parliament and the draft will be proposed to the National Legislative Assembly of Thailand. Passengers are protected by the regulation issued by the MOT. One of the key changes is that the CAAT will be empowered to issue An airline has a duty to compensate the passengers in the manner a separate regulation in relation to the deregistration of an aircraft prescribed under the regulation. (which the CAAT currently does not have authority to do so).

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Whilst the above draft amendment to the Air Navigation Act has not been finalised, the CAAT has just issued the new rule regarding the Nattaporn Pengkul registration of aircraft in Thailand which came into effect in August this Weerawong, Chinnavat & Partners Ltd. year. Under such rule, if the operator refuses to cooperate to deregister 22nd Floor, Mercury Tower 540 Ploenchit Road, Lumpini, Pathumwan the aircraft for the lessor, such regulation opens the opportunity for Bangkok 10330 the lessor to request that it deregisters the aircraft itself. Although Thailand the decision to permit deregistration of the aircraft under regulation is Tel: +66 2 264 8000 still at the sole discretion of the Director General of CAAT, it could be Fax: +66 2 657 2222 considered that this signifies progress in relation to deregistration of Email: [email protected] aircraft upon termination of the relevant lease agreement. However, URL: www.weerawongcp.com the necessary practical steps and clear guidelines of the CAAT in Ms. Nattaporn Pengkul is a partner in the projects and banking Thailand relation to this deregistration are still awaited. practice group at Weerawong, Chinnavat & Partners Ltd. She advises From our discussion with the CAAT, there is no plan for Thailand to banks, corporations and other clients in domestic and cross-border transactions. Nattaporn has expertise in many industry sectors, join the Cape Town Convention in the near future. including: banking and financial services; commercial and residential real estate; power and renewable energy; and transportation and infrastructure. Nattaporn was named as one of the ‘top 40 under-40’ lawyers in the region by Asian Legal Business in 2016. She has an LL.B. degree from Chulalongkorn University and an LL.M. degree in commercial law from the University of Cambridge, UK. http://www.weerawongcp.com/people-show.php?id=128.

Weerawong, Chinnavat & Partners Ltd. is one of Thailand’s largest independent law firms, offering a full range of legal services to Thai and international clients. Formerly the Bangkok office of White & Case LLP, which commenced business in Thailand in 1993, Weerawong C&P became an independent Thai law firm in 2009, combining international standards of excellence with local knowledge and expertise. Consistently recognised in the top tiers of The Legal 500, Chambers & Partners, IFLR1000, Asialaw Profiles and ASIAN-MENA Counsel as a leading firm in Thailand, Weerawong C&P received the distinction of National Firm of the Year in 2014, 2015 and 2017 at the International Financial Law Review Asia Awards and in 2016–2018 at the Asian Legal Business Awards. The firm has been recognised for ‘going beyond’ in achieving results for clients by implementing innovative strategies.

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United Kingdom Alan D. Meneghetti

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

the UK. It also has concurrent powers with the Competition and 1 General Markets Authority (“CMA”) to enforce competition law in relation to air traffic services and airport operation services. 1.1 Please list and briefly describe the principal Legislation legislation and regulatory bodies which apply to and/ As with its EU neighbours, legislation is a mix of local law, or regulate aviation in your jurisdiction. international treaties and EU Regulations and directives. Some of the principal pieces of domestic UK legislation are: Regulatory Bodies ■ Civil Aviation Act 1982 (as amended). There are a number of bodies which have the authority to regulate, ■ Civil Aviation Authority Regulations 1991 – Statutory administer and control civil aviation. The UK bodies are chiefly: Instrument No 1672 1991. the Secretary of State for Transport; and the Civil Aviation Authority ■ Operation of Air Services in the Community Regulations (“CAA”). The European Aviation Safety Agency (“EASA”) has 2009 – Statutory Instrument No 41 2009. authority in respect of aviation safety regulation within European Union (“EU”) Member States pursuant to Regulations having direct ■ Air Carrier Liability (No 2) Regulations 2004 – Statutory Instrument No 1974 2004. application (see Regulation 216/2008). ■ Community Air Carrier Liability Order 2004 – Statutory The Secretary of State for Transport Instrument No 1418 2004. The Department for Transport (in exercising the authority of ■ Civil Aviation (Denied Boarding, Compensation and the Secretary of State for Transport) is the governmental body Assistance) Regulations 2005 – Statutory Instrument No 975 responsible for civil aviation. The Secretary of State has a general 2005. responsibility for organising, carrying out and encouraging measures ■ Civil Aviation (Insurance) Regulations 2005 – Statutory for the development of civil aviation and the related aviation Instrument No 1089 2005. industry, for the promotion of its safety and efficiency, for research ■ Civil Aviation Act 2006. into questions relating to air navigation, and for the safeguarding of ■ Civil Aviation (Provision of Information to Passengers) the health of persons on board aircraft. Regulations 2006 – Statutory Instrument No 3303 2006. The Secretary of State has statutory powers relating to aviation security ■ Civil Aviation (Access to Air Travel for Disabled Persons and (see, for example, the Aviation and Maritime Security Act 1990). Persons of Reduced Mobility) Regulations 2007 – Statutory Furthermore, the Secretary of State has responsibility for advising Instrument No 1895 2007. on, and where appropriate, implementing Orders of Council (made ■ Civil Aviation (Allocation of Scarce Capacity) Regulations by the Crown) to effect international obligations and standards in 2007 – Statutory Instrument No 3556 2007. UK domestic legislation. Lastly, Her Majesty’s (“HM”) Government, from time to time, The Civil Aviation Authority (“CAA”) appoints commissions to investigate certain aspects of the aviation The CAA is an independent body responsible for economic, safety industry, the most recent and highly publicised being the Airports and consumer protection regulation, and airspace policy. In addition, Commission into the expansion of London’s airport capacity, which the CAA advises the UK Government on aviation issues, represents was chaired by Sir Howard Davies and issued its final report in July consumer interests, conducts economic and scientific research and 2015. produces statistical data. The CAA acts in the regulation of aviation There has been much talk of the impact that Brexit will have and without detailed supervision by the Government. Under current what legislation will continue to apply in the UK once the UK has legislation, policy formation in route and air transport licensing left the EU. Directives which have been implemented into UK is the responsibility of the CAA, although the Secretary of State domestic legislation on the date of Brexit (at the time of writing, retains specified powers both of direction and of guidance. The 29 March 2019) will continue to apply (until repealed), as by being CAA exercises certain licensing and other powers under European implemented locally they form part of the UK’s domestic legislation, Regulations, notably in connection with operational safety and as will Regulations which have already taken direct effect as of the airworthiness. In certain respects, the CAA acts for EASA in date of Brexit. As at the time of writing, little has been agreed by the UK and EU in terms of the future of aviation law.

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organisations and personnel); 2015/445 (); and 859/2009 1.2 What are the steps which air carriers need to take in (“EU-OPS” – operating safety requirements and standards). The order to obtain an operating licence? CAA is responsible for administering air safety on a day-to-day basis, in its own capacity and for and on behalf of EASA. The CAA is the competent licensing authority in the UK in almost all matters relating to the granting of operating licences. There are two types of operating licence: Type A; and Type B. Type B 1.4 Is air safety regulated separately for commercial, cargo and private carriers? operating licences are for operators of aircraft with 19 or fewer seats; Type A operating licences are for operators of aircraft with 20 or more seats. A Type B operating licence may also be granted to The CAA regulates all aspects of the aviation industry. Whilst the operators of larger aircraft with a limited scope of activity. regulator is the same in all three cases, there are different Regulations and standards which have to be adhered to. In order for the licence to be granted, the CAA must be satisfied that the applicant fulfils the conditions set out in the European United Kingdom Regulation 1008/2008, including that: 1.5 Are air charters regulated separately for commercial, cargo and private carriers? ■ its principal place of business is located in the Member State whose competent licensing authority is to grant the operating licence; for an operator having its principal place of business The CAA regulates all aviation activity (apart from military). in the UK, the CAA is the competent authority; ■ it holds a valid air operator certificate issued by a national 1.6 As regards international air carriers operating in your authority of the same Member State; jurisdiction, are there any particular limitations to be ■ it has one or more aircraft at its disposal through ownership aware of, in particular when compared with ‘domestic’ or a dry lease agreement; or local operators? By way of example only, restrictions and taxes which apply to international but ■ its main occupation is to operate air services in isolation or not domestic carriers. combined with any other commercial operational of aircraft or the repair and maintenance of aircraft; The UK is a party to the Chicago Convention 1944, which provides ■ its company structure allows the competent licensing authority to implement the relevant provisions of the Regulation; for availability, so far as practicable, of aerodromes in its territory (Article 28) and equality of conditions for use of aerodromes for ■ Member States and/or nationals of Member States own more international and domestic aircraft (Article 15). Article 15 of the than 50% of the undertaking and effectively control it directly or indirectly through one or more intermediate undertakings, Convention further provides for equality of charges for use of except as provided for in an agreement with a third country to aerodromes. which the European Community is a party; Under the Air Navigation Order 2009, an aircraft registered in a ■ it meets the financial conditions specified in Article 5 of the state other than the UK must not take on board or discharge any Regulation; passengers or cargo in the UK for valuable consideration without ■ it complies with the insurance requirements specified in an operating permit granted by the Secretary of State. Such permit Article 11 of the Regulation and in European Regulation will only be granted if the necessary traffic rights exist (under 785/2004; and bilateral international agreement or otherwise), and is also subject ■ it complies with the provisions on good repute as specified in to satisfying the Department for Transport of compliance by the Article 7 of the Regulation. operator with administrative requirements relating to the carrier’s It is worth noting that the uncertainties around Brexit have led aircraft and its insurance arrangements. certain airlines headquartered in the UK to apply for operating licences elsewhere in the EU. These are precautionary measures 1.7 Are airports state or privately owned? to enable them to continue flights to EU countries in the event that there is no specific deal securing their operating licences post- They are privately owned. For example, London Heathrow is owned Brexit. Similarly, Ryanair, with headquarters in the Republic of by Heathrow Airport Holdings Limited; Aberdeen, Glasgow and Ireland, has applied to obtain an operating certificate from the UK Southampton airports are owned by AGS Airports; and Manchester CAA to continue their domestic flights in the UK. Airport is owned by Manchester Airports Group plc. They are licensed and regulated by the CAA. 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who 1.8 Do the airports impose requirements on carriers administers air safety? flying to and from the airports in your jurisdiction?

UK legislation is contained in the Civil Aviation Act 1982 and the Conditions of use are imposed, as well as charges. Users of airports Air Navigation Order 2009 (as amended). Another important source are subject to airport charges, which are regulated by the CAA under of law is European legislation, which has direct application in the the Civil Aviation Act 2012 and Airport Charges Regulation 2011. UK concerning safety aspects of aircraft, operators, maintenance “Airport charges” means (a) charges levied on operators of aircraft and design organisations, and personnel in commercial transport. in connection with the landing, parking or taking-off of aircraft at See, for example, the European Regulations: 216/2008 (as amended; the airport (but excluding charges for air navigation services and “Basic Regulation”); 7/2013 (rules for airworthiness of aircraft and certain penalties in connection with aircraft noise and vibration products and certification of design and production organisations); caused by aircraft), and (b) charges levied on aircraft passengers in 1321/2014 (continuing airworthiness and approval of involved connection with their arrival at, or departure from, the airport by air.

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third runway at Heathrow to expand the UK’s airport capacity. A 1.9 What legislative and/or regulatory regime applies to public consultation on the effects of the expansion of Heathrow air accidents? For example, are there any particular followed that decision. In June 2018, Parliament approved the plans rules, regulations, systems and procedures in place for the third runway at Heathrow. Construction is anticipated to begin which need to be adhered to? in 2021, with the runway completed in 2025. The airport’s overall expansion is expected to be operational in 2028. The UK is a party to the Chicago Convention 1944. Article 26 and Annex 13 to that convention make provisions for the investigation In October 2018, London Gatwick, the UK’s second-busiest airport, of air accidents. The UK implements the relevant requirements by published proposals to move its runway to use it for short- way of the legislation discussed below. haul flights by the mid-2020s. In its draft master plan, Gatwick said the standby runway would have to be moved 12 metres to the north The Air Accidents Investigations Branch (“AAIB”) is responsible away from the main runway at a cost of about £500m to comply with for the investigation of civil aircraft accidents and serious incidents international safety Regulations but predicted that using the second

United Kingdom in the UK. The AAIB is an independent part of the Department for runway could raise the airport’s capacity from 281,000 flights in Transport. 2017–18 to 375,000–390,000 by 2032–33. Passenger numbers The principal legislation relating to investigation of air accidents would increase from 45.7m to 68m–70m over the same period if includes: the runway project went ahead. The standby runway would not be ■ European Regulation No 376/2014 on the investigation and lengthened so it could not be used for long-haul flights, according prevention of accidents and incidents in civil aviation. to the plans. Any plans are subject to public consultation and the ■ UK Civil Aviation (Investigation of Air Accidents and airport would have to apply for a development consent order. Incidents) Regulations 1996. ■ UK Civil Aviation (Investigation of Military Air Accidents at Civil Aerodromes) Regulations 2005. 2 Aircraft Trading, Finance and Leasing The AAIB has the power to require the detention and preservation of evidence, and has powers of enquiry. Assistance of the local 2.1 Does registration of ownership in the aircraft register police is routinely available to AAIB investigators to secure an constitute proof of ownership? accident site. The AAIB reports to the CAA and other civil aviation authorities having responsibility for oversight of any aspect of the The United Kingdom Register of Civil Aircraft, maintained by the accident. Reports of civil air accidents are published. United Kingdom CAA, is not a register of legal ownership, and therefore registration of ownership does not constitute proof of ownership of a particular aircraft. However, it often provides non- 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving conclusive prima facie evidence. air operators and/or airports? To register aircraft on the United Kingdom Register of Civil Aircraft, a Form CA1 (see www.caa.co.uk) is submitted either by the owner In June 2014, the Court of Appeal held that a technical problem is or by the so-called “charterer by demise” (by virtue of a relevant not considered to be an extraordinary circumstance under Regulation loan, lease, hire or hire purchase) eligible to register in accordance EU 261/2004 and accordingly cannot be used as a basis for an with the Air Navigation Order 2009 [see Endnote 1]. airline to escape from its obligation to compensate passengers for As part of the application procedure, the CAA may request additional long delays, cancellations, rerouting and/or denied boarding (Jet2. information in order to process an application for registration (for com v Huzar [2014] EWCA Civ 791). In a similar vein, in October example, a certified copy of a bill of sale evidencing the ownership 2017 the Court of Appeal rejected Emirates’ arguments and held that of the aircraft to be registered). non-EU airlines are liable under Regulation EU 261/2004 where a Further guidance on the requirements for registration of flight departing from the UK is delayed by at least three hours at the aircraft on the United Kingdom Register of Civil Aircraft is final destination, as a result of a missed connection outside Europe available at www.caa.co.uk. (Gahan/Buckley v Emirates [2017] EWCA Civ 1530). This case reaffirms the CAA’s decision to take enforcement actions against airlines in relation to passenger compensation. 2.2 Is there a register of aircraft mortgages and charges? At a “macro” European level, in May 2018 the European Broadly speaking, what are the rules around the operation of this register? Commission (the “EC”) dismissed a complaint, brought against Lufthansa’s 2015 introduction of a €16 surcharge on seats booked The CAA maintains the United Kingdom Aircraft Mortgage Register through the global distribution suppliers, such as Travelport, (pursuant to the Mortgaging of Aircraft Order 1972). There are no Travelsky, Sabre and Amadeus, which alleged breach of Council restrictions as to who can be registered as a mortgagee, and any Regulation (EC) 2299/89 on a code of conduct for computerised mortgage charging a UK-registered aircraft by way of security may reservation systems (the “Code”). The EC based their decision on be registered (and indeed, from a mortgagee’s perspective, should the fact that the Code “no longer reflects market reality and that it be, so as to confirm the security priority referred to in the section may be revised in the future”. In response to this, the European headed “Priority” below). Leases and other charges not constituting Technology & Travel Services Association filed a formal complaint in rem rights in a ‘G’-registered aircraft (such as mortgages) cannot with the European Ombudsman against the EC in July 2018. The be registered, and there is no separate register maintained by the outcome will continue to be of interest as a number of other airlines CAA for the registration of ownership rights in engines or parts. have announced similar introductions to incentivise the use of their own, or new distribution capability, booking systems. Mortgage Registration A long-running commission of enquiry, chaired by Sir Howard Davies, Applicants for registration of a mortgage must complete and provide gave its recommendation in July 2015 that a third runway be built at to the CAA a Form CA1577 (see www.caa.co.uk), together with London Heathrow. In October 2016, HM Government approved a a complete copy of the related aircraft mortgage deed (provided it

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has been certified as a true copy by the applicant). The CAA will Priority Notices then confirm, in writing, to the applicant once an aircraft mortgage A potential mortgagee of a registered aircraft can “pre-register” a registration application is successful. mortgage with the CAA by entering a priority notice, utilising CAA The registration fees for an aircraft mortgage by the CAA vary according Form CA1330 (obtained from www.caa.co.uk). The priority notice to the maximum take-off weight (“MTOW”) of the subject aircraft. remains valid for 14 working days from and including the date of They are currently as follows (and are subject to revision annually): entry, and during this period either the relevant aircraft mortgage must be registered or a further priority notice entered. The relevant Maximum Take-off Weight CAA Charge aircraft mortgage, once registered with the CAA, will then take its 5700 kg and under £180 priority from the date of registration of the original priority notice. 5701 kg to 15000 kg £356 The registration fees for such priority notices vary according to the 15001 kg to 50000 kg £593 maximum take-off weight of the subject aircraft, and are currently 50001+ kg £1,062 as follows (subject to revision annually): United Kingdom For aircraft mortgages which attach to a number of aircraft, the CAA Maximum Take-off Weight CAA Charge registration fee is levied on the heaviest aircraft by MTOW, plus 15,000 kg and under £53 £175 for each additional aircraft attached. Over 15,000 kg £106 Priority The relevant registration fee is applied by the CAA on a “per An aircraft mortgage registered on the United Kingdom Aircraft aircraft” basis. Mortgage Register will take priority over all other non-registered or subsequently registered mortgages. It constitutes notice of the Mortgage Searches relevant mortgage being given to all relevant third parties, and all A search of the United Kingdom Aircraft Mortgage Register persons are thereby deemed to have express notice of all of the for entries registered against relevant aircraft can be made by details appearing in the United Kingdom Aircraft Mortgage Register. submitting a CAA Form CA350 (obtained from www.caa.co.uk) to If the relevant mortgagor is a company registered in England and the CAA. Search fees are currently £29 per aircraft and are revised Wales, in order to obtain all the protections conventionally afforded on an annual basis. Certified copies of the entries on the Mortgage to a mortgagee, it will be necessary to also register the relevant Register are available at £29 per aircraft. mortgage at Companies House pursuant to the provisions of the Companies Act 2006 as it will become void against an appointed 2.3 Are there any particular regulatory requirements insolvency agent of the mortgagor (whether an administrator, a which a lessor or a financier needs to be aware of as liquidator or a secured creditor). regards aircraft operation? It should be noted, however, that this priority position of an aircraft mortgage is nevertheless subject to certain other in rem rights As regards the lessor of an aircraft registered with the CAA, (“liens”) of third parties to retain or detain the relevant aircraft until theoretically it is permitted to take enforcement action to repossess a claim for payment (e.g. in respect of maintenance or repair of the the aircraft following a default by the lessee concerned on the aircraft or in respect of an unpaid purchase price for the aircraft) relevant lease terms, without enforcing through the courts, i.e. has been satisfied. These liens are created both by statute and under as a “self-help” remedy. To that end, lease terms and conditions common law, and they are also capable of creation by contract conventionally contain an indemnification of the owner/lessor of between parties. In addition, certain specific rights are created a relevant aircraft against losses and/or claims it incurs as a result by statute for relevant regulatory authorities to detain the aircraft of a repossession action. Similarly, the mortgagee of an aircraft (e.g. the CAA for unpaid airport and air navigation charges, the registered with the CAA may take peaceful possession of an aircraft UK Environment Agency for unpaid penalties under the European following a similar default and it will then, in addition, have the Emissions Trading Scheme, and HM Revenue & Customs in respect power to sell the relevant aircraft if such power is properly and of unpaid taxes). In certain circumstances, these rights of detention expressly described in the relevant mortgage agreement. will also include a power of sale of the relevant aircraft, or attach to Nevertheless, in practice it is generally advisable for the lessor or the the rest of the operating fleet of which the aircraft is a part despite mortgagee of a relevant aircraft registered with the CAA to pursue different ownership. an application for repossession of the aircraft in court, particularly The limited case law in English law, which applies as precedent to if there is any question as to whether a default has actually occurred the matter of the priority of aircraft liens and statutory detention and/or the relevant mortgagor or lessee of the aircraft concerned rights, suggests strongly that an aircraft lien or statutory detention resists or is likely to resist repossession. A court order obtained in right will take priority over a registered aircraft mortgage. this way reduces any risk of liability of the lessor or the mortgagee (as the case may be) of the relevant aircraft to third-party claims Liens are not registrable. However, in dealing with the concerns for compensation for losses due to a repossession (in the case of of mortgagees, it is possible to seek to manage the risks of aircraft in scheduled operation in particular, such losses can be detention and sale of a registered aircraft by way of contractual substantial), assists with ensuring the cooperation of the CAA with obligations of owners and operators limiting the creation of liens to their issuing of necessary permissions for the continued flight of the “permitted liens”. These obligations are generally complemented aircraft affected, and is also presentable to any prospective third- by contractual monitoring rights, established in the relevant loan or party purchaser of the aircraft as proof of the right of the mortgagee, lease agreements, which include requirements to provide “statement or indeed the owner, to sell the aircraft with good title, free of any of account” letters, authorising information regarding relevant trailing interests of the relevant mortgagor or lessee (subject to any payments giving rise to liens, to be provided directly to the mortgagee other third-party rights over the relevant aircraft). by the relevant regulatory authority. This is generally effective in providing an early warning of any potential detention or retention In addition, and by way of further potential protections, if it can of a relevant aircraft, and in ensuring the timely termination of the be demonstrated to the court that a risk exists or that the relevant relevant operating agreement before liens are enforced. aircraft is treated in a way which frustrates the rights of a mortgagee or lessor (for example, removal by an operator of the aircraft

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from the jurisdiction or by a clear and material degradation of the This is broadly the position also in relation to VAT applicable to the condition of the aircraft in the circumstances), it is possible to apply importation of aircraft into the United Kingdom, except where the to the court, on an expedited basis, for an interim injunction ordering aircraft has been imported previously into a Member State of the detention of the aircraft by the mortgagor/lessee until judgment EU and is classified to be in “free circulation” for customs purposes. regarding repossession of the aircraft has been given by the court. In relation to b), there are no documentary taxes (e.g. stamp duty) This type of application may be made without notice to the operator of applicable to the buying and selling (i.e. trading) of aircraft in the relevant aircraft if the mortgagee or the lessor (as the case may be) England and Wales). can demonstrate the urgency of the matter to the court in accordance with the applicable Civil Procedure Rules. In these circumstances, the mortgagee or the lessor (as the case may be) will be required to 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)? provide a cross-indemnity for any third-party claims arising from a sudden detention of the aircraft (not, however, in favour of the relevant

United Kingdom mortgagor, lessee or operator of the relevant aircraft, on the basis that Chicago Convention 1944 it is assumed that an appropriate indemnity from such party has already The United Kingdom was a signatory to the Chicago Convention in been given in respect of, among other things, losses arising from the 1944 and it was ratified on 1 March 1947 prior to its effective date repossession of the relevant aircraft following a default). of 4 April 1947. It should nevertheless be noted that a right to repossess the relevant Geneva Convention 1948 aircraft would always be subject to any liens and other statutory The United Kingdom was a signatory to the Geneva Convention in detention or retention rights of third parties (as described more fully 1948, but has not ratified it. in “Priority” under question 2.2 above). Montreal Convention 1999 The Montreal Convention has legal effect in the United Kingdom 2.4 As a matter of local law, is there any concept of title through the Carriage by Air Acts (Implementation of the Montreal annexation, whereby ownership or security interests Convention 1999) Order 2002/263. The limits of liability for in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft air carriers pursuant to the Montreal Convention have been owned by another party? If so, what are the conditions subsequently amended by way of the Carriage by Air (Revision of to such title annexation and can owners and financiers Limits of Liability under the Montreal Convention) Order 2009. of engines take pre-emptive steps to mitigate the risks? Cape Town Convention (“CTC”) The CTC entered into force in the United Kingdom and thereby English law as a rule recognises the concept of accession, which is became effective as United Kingdom national law on 1 November similar to the nature of an annexation of title, for example by the 2015 following its ratification on 27 July 2015, as implemented owner of an aircraft to which an engine owned by another party is by the International Interests in Aircraft Equipment (Cape Town affixed. Nevertheless, limited case law on the subject is exclusively Convention) Regulations 2015 and several declarations. related to real estate (that is, immovable assets) and there is perceived to be little or no risk as a matter of English law to loss of or prejudice to title when aircraft engines are installed on a different airframe. 2.7 How are the Conventions applied in your jurisdiction? Nevertheless, it is common market practice (also in order to manage certain risks arising due to conflicts of law and legal systems as they The Chicago Convention is integrated into English law and apply to these most mobile assets) for engine owners and financiers applicable in the jurisdiction as a matter of international law. Any to require entry into a contractual “recognition of rights” agreement dispute as to its implementation by the United Kingdom would be governed by English law between the relevant parties as a condition heard through the International Court of Justice. As a practical to installing an engine on a different airframe. In addition, while matter, the principles of the Chicago Convention are implemented aircraft engines are not capable of being registered (and thereby at the national level in the United Kingdom by the CAA. providing constructive notice of ownership to third parties) in the As detailed above, the Montreal Convention became effective in the United Kingdom, ratification of the Cape Town Convention affords United Kingdom pursuant to the Carriage by Air Acts (Implementation the opportunity for engine owners and financiers to register an of the Montreal Convention 1999) Order 2009 and it can be applied in “international interest” in the asset with the International Registry the UK courts, without particular limitation, on that basis. of Mobile Assets. The CTC is effective in the United Kingdom but will not be applied retrospectively, i.e. any rights and interests existing prior to 2.5 What (if any) are the tax implications in your ratification of the CTC will retain their priority without the need for jurisdiction for aircraft trading as regards a) value- registration. This avoids additional administrative hurdles resulting added tax (VAT) and/or goods and services tax (GST), from the ratification of the CTC, but at the same time means that it and b) documentary taxes such as stamp duty; and is not possible to register such pre-existing interests. (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of It is worth noting that, although it does not change any relevant aircraft and/or particular aircraft types or operations? provisions of English law as regards the creation of in rem security interests generally, that law will not apply to determine whether an In relation to a), the supply, charter or hire of “qualifying aircraft” are international interest under the CTC is validly created. This will zero rated for VAT purposes. The definition of “qualifying aircraft” depend entirely on the CTC and its requirements in the case of an was narrowed in January 2011 to bring the United Kingdom more in aircraft, debtor location or aircraft registration in a “CTC country” line with the rest of Europe. Since then, a qualifying aircraft must (and compliance with the formalities set out in Article 7 of the be: i) used by an airline operating for reward chiefly on international CTC), and an aircraft mortgagee may be able to rely on the rights routes; or ii) used by a State institution and of a weight of not less and remedies available under the CTC for such international interest than 8,000 kg and neither designed nor adapted for use for recreation in the relevant aircraft. or pleasure.

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It is also worth noting that by adopting the Alternative A insolvency There is no domestic legislation prohibiting the detention of regime (with a 60-day waiting period for the asset to be returned to commercial transport aircraft. the creditor), the UK has furthermore decided to grant additional protection to financiers and lessors in a debtor insolvency scenario. 3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire 2.8 Does your jurisdiction make use of any taxation possession of the aircraft or enforce any of its rights benefits which enhance aircraft trading and leasing under the lease/finance agreement? (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties There is no relevant statutory regime of “self-help” rights (subject or similar, or favourable tax treatment on the disposal to the limited exceptions mentioned below). English law allows of aircraft? the exercise of extant rights to repossess chattels, including aircraft, without the need for a court order. A person seeking to exercise The uncertainty created by the ongoing discussions regarding the rights on this basis can only do so peaceably and lawfully. There United Kingdom nature and the timing of the exit of the United Kingdom from the are no collateral rights of enforcement as a matter of law, without EU (the so-called “Brexit”) will necessarily impact on any longer- a court order. Accordingly, the exercise of such rights on a self- term planning and reliance on current taxation rules and Regulations. help basis usually requires the person in possession or control of Nevertheless, for the time being the United Kingdom is signatory the aircraft to accede to that exercise. The rights must be extant to a number of Double Tax Treaties with other nations, the effect of (under the finance instruments or lease) and clearly demonstrable which varies but which typically reduces the rate of withholding taxes to third parties. The more usual course of action will be to obtain payable in various jurisdictions of tax residency on outbound operating a court order. lease and finance lease rentals, as well as loan repayment interest, The Bills of Sale Acts 1878 and 1882 allow seizure in the event of connected with the financing of aircraft assets. As regard favourable certain events of default (specified in the Acts) relating to a security bill tax treatment on the disposal of aircraft, no particular tax rules or of sale. Those acts do not apply to a registered mortgage of an aircraft. Regulations apply at present, although the effects of such taxation can be optimised by thoughtful tax planning strategies. 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For 3 Litigation and Dispute Resolution example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases are brought? 3.1 What rights of detention are available in relation to aircraft and unpaid debts? Civil disputes concerning personal injury or property damage may be pursued in the Queen’s Division of the High Court or An unpaid seller in possession of the aircraft may retain possession in the County Court in accordance with the criteria summarised of the aircraft until payment is received (Sale of Goods Act 1979). below. “Commercial claims” (see below) should be pursued in The Civil Aviation Act 1982 provides for a salvage lien on an aircraft the Commercial Court of the Queen’s Bench Division of the High where “any services are rendered in assisting, or in saving life from, Court, or in the County Court. or in saving the cargo or apparel of, an aircraft in or over the sea Civil proceedings for damages or a specified sum may not be started or any tidal water, or on or over the shores or any tidal waters”, in the High Court unless the value of the claim exceeds £25,000; if according to the national and international regulatory framework of not, proceedings should be started in the County Court. the law of maritime salvage. Civil proceedings which include a claim for damages in respect of In common law, under specific conditions, a possessory lien arises personal injuries must not be started in the High Court unless the in favour of a person who has expended labour and skills on the value of the claim is £50,000 or more. improvement of a chattel. The requirement for “improvement” is Subject to the above, pursuit of a claim in the High Court is now uncertain under English law. Liens in favour of maintenance appropriate where: organisations are widely considered to arise in common law; however, in the majority of cases the right of lien is expressed ■ there is a degree of complexity of the facts, legal issues, remedies or procedures involved; and/or contractually and there is no requirement for “improvement”. ■ the outcome of the claim is of importance to the public in Under the Civil Aviation Act 1982, the person managing or owning general. an aerodrome may detain an aircraft where its operator has not paid the applicable airport charges in respect of that aircraft, or of any other A case may be started in the Commercial Court only if it fulfils the aircraft, which that operator operates. Customs and excise authorities characteristics of a “commercial claim”; namely any claim arising may detain an aircraft to enforce their charges against an operator. out of the transaction of trade and commerce, including any claim relating to a business document or contract, the export or import of The Transport Act 2000 provides that an aircraft may be detained and goods or the carriage of goods by land, sea, air or pipeline. sold where its operator has not paid charges relating to air navigation services provided by the CAA, the Secretary of State or Eurocontrol. Although there is no rigid financial limit, a claim for less than £200,000 is likely to be transferred out of the Commercial Court Of less frequent application, a creditor may obtain a freezing unless it involves a point of special commercial interest. The injunction, restraining an aircraft pending judgment and execution majority of cases arising out of the finance or lease of aircraft will be of the judgment debt. The creditor will have to demonstrate, inter heard by the Commercial Court. The majority of cases concerning alia, that there is a real risk of “dissipation” of the debtors’ assets death, serious injury or serious property damage claims arising other than in the debtor’s usual course of business, and that the value out of air accidents will be heard by a Court of the Queen’s Bench of the debt is commensurate with that of the aircraft. The remedy Division of the High Court. is equitable and discretionary; a court will exercise considerable caution before granting it. Civil and criminal cases will be heard in separate courts.

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to pursue. The category and level of court to which an appeal is 3.4 What service requirements apply for the service of to be made depends on the level of the court making the decision court proceedings, and do these differ for domestic which is being appealed. There is no automatic stay of execution of airlines/parties and non-domestic airlines/parties? a judgment or order while appeal is pursued. A route of appeal lies from the Court of Appeal to the Supreme Pursuant to Part 6 (Service of Documents) of the Civil Procedure Court. Again, permission to appeal is required. Rules, where the claim form is being served in the “jurisdiction” (defined as England and Wales and any part of the territorial waters From an Arbitral Tribunal of the United Kingdom adjoining England and Wales), a claim may As a general rule, an arbitrator has the same powers as any court, and be served by a number of methods including (without limitation) by an arbitral tribunal’s decision is binding. There is no right of appeal personal service, first class post, or by service on the defendant’s to the courts on a question of fact. There are narrow exceptions to , fax or other means of electronic communication. this general rule.

United Kingdom The court will serve the claim form (subject to certain exceptions, A party may challenge an arbitral award for lack of jurisdiction for example, where the claimant has notified the court that the (section 67 of the Arbitration Act 1996). It is also possible to claimant wishes to serve it). challenge the arbitrator’s award on the basis of a serious irregularity In the event that the defendant is established out of the jurisdiction, (section 67 of the Arbitration Act 1996). The definition of a “serious the court may permit a claim form to be served on the defendant’s irregularity” includes exceeding the arbitrator’s powers, failure to agent provided that an agent for service of process has been comply with the general duties imposed on the arbitrator or failure appointed and the agent’s authority has not been terminated. to deal with all the issues. It may be necessary for the claimant to obtain the court’s permission, A party may appeal to the High Court on a question of law arising in certain circumstances, e.g., where no agent for service of process out of the arbitral award. The court will only intervene if the is appointed, to serve a claim form on a defendant outside the arbitrator’s decision is obviously wrong or “the question is one of jurisdiction. The claimant must file at court a notice with the claim general public importance and the decision of the tribunal is at least form containing a statement of the grounds on which it is entitled to open to serious doubt”. serve the claim form out of the jurisdiction. 4 Commercial and Regulatory 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis? 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? Remedies vary depending on the nature of the dispute. In general terms, there are both (for historical reasons) legal and “equitable” UK competition law reproduces in virtually identical form EU remedies and the following may be available: competition law, sections 2 and 9 of the UK Competition Act 1998 ■ On an interim basis: (“CA 1998”) setting out provisions similar to the prohibition of anticompetitive agreements and the exemption criteria (Articles ■ an injunction order to prevent the other party from doing something until final judgment is reached; and 101(1) and 101(3) of the Treaty on the Functioning of the European Union (“TFEU”)). A joint venture between airline competitors ■ damages. would, therefore, have to satisfy the four exemption criteria of ■ On a final basis: section 9 CA 1998 and/or Article 101(3) TFEU. In summary: ■ damages; (a) the agreement should generate efficiency gains for the parties ■ injunctions to prevent the other side from doing something or promote economic progress (e.g. costs savings through joint or requiring the other party to do something; operations or improved services); ■ possession orders to take control of an aircraft and other (b) consumers should receive a fair share of those benefits (e.g. aviation assets; and including the passing on of savings through lower prices); ■ orders for the sale of an aircraft. (c) the agreement should not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives. Restrictions should be proportionate; and 3.6 Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in (d) the agreement should not eliminate effective competition. This what circumstances do these rights arise? is a market power test, requiring that there should be effective competition outside of the joint venture. From a Court Decision The EC and the European National Competition authorities (hereinafter referred to as “EU regulators”) have not yet blocked A party requires permission to appeal from a County Court or High airline alliances, which are usually considered to produce Court decision. substantial efficiencies and consumer benefits, but have, often A request for permission to appeal can (and if appeal is to be sought, following lengthy investigations and negotiations with the parties, should) be made to the lower court at the hearing at which the required commitments from the parties, to be satisfied that the decision to be appealed is made. Thereafter, permission may be alliance qualifies for exemption, in particular that competition is not sought directly from the appeal court. eliminated. Permission to appeal will only be given where the court considers In relation to highly integrated airline alliances, the so-called “metal that the appeal would have a real prospect of success or there is some neutral alliances”, the EC closed an investigation on 14 July 2010 other compelling reason why the appeal should be heard. In most into the British Airways, American Airlines and Iberia (members instances, the trial judge will be considered best placed to judge the of the alliance) highly integrated transatlantic alliance, facts of the case. An appeal from factual findings is usually difficult covering all routes between North America and Europe (see case No

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39596 BA/AA/IB). This alliance involved revenue-sharing and joint management of schedules, pricing and capacity. The EC closed 4.2 How do the competition authorities in your its investigation after the parties offered extensive commitments jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? to make landing and take-off slots available at London Heathrow, which were considered essential to facilitate the entry or expansion of competitors on routes between London and New York, Boston, The UK competition authorities will follow an analysis similar to Dallas and Miami (London-New York: 21 slots weekly (three daily); that of the Court of Justice of the European Union (“CJEU”) and the London-Boston: 14 slots weekly (two daily); London-Miami: seven EC. These have defined the relevant market in decisions regarding slots weekly (one daily); London-Dallas: seven slots weekly (one the aviation sectors as follows: daily)). The parties also offered to conclude with competitors fare Origin and Destination (“O&D”) City Pairs combinability and special pro-rate agreements, as well as to provide This evaluation considers a demand-side perspective, whereby access to the parties’ frequent-flyer programmes. customers consider all possible alternatives of travelling from a In May 2013, the EC cleared a revenue-sharing joint venture city of origin to a city of destination, i.e. an O&D (which United Kingdom focusing on transatlantic passenger routes (in particular, Frankfurt- generally are considered unsubstitutable by a different city pair). New York), accepting binding commitments from Premium and Non-Premium Passengers members Air Canada, United and Lufthansa (COMP/39595 The different services appeal to different passenger groups with Continental/United/Lufthansa/Air Canada). varying travel needs and price sensitivities. First and Business Similarly, in May 2015, the EC decided to make binding Class ticket passengers are less price-sensitive than Economy ticket commitments offered by Air France/KLM, Alitalia and Delta – all users. The EC considers that Business and First Class tickets on one members of the SkyTeam – to address concerns over hand, and Economy on the other, are two different product markets. their transatlantic joint ventures with respect to capacity, schedules, Non-Stop and One-Stop Flights pricing and revenue management and sharing of profit and losses, which has the object and effect of restricting competition on three EU regulators consider that the degree of competitive constraint routes, namely: (i) Amsterdam-New York; (ii) Rome-New York; and imposed by one-stop services varies according to the route and (iii) Paris-New York (COMP/39964 AF-KL/DL/AZ). assesses the precise impact of competing one-stop flights on the parties’ joint venture on a route-by-route basis. In relation to codeshare agreements, neither national nor European competition laws provide specific rules; the legal test applied being Airport Substitution based on the exemption criteria of Article 101(3) TFEU and/or Where more than one airport in a city at one end of the route offers the corresponding provisions of the competition laws of the EU passenger air transport services, this must be assessed for market Member States. definition purposes. The market definition for airports is based on The current EU case law is limited. In the SAS/Maersk Air case, a catchment area of airports considered substitutable by passengers. in which the parties notified a to the EC for The relevant market may vary according to the type of passengers: clearance, with an underlying cartel agreement in the form of a broad premium and non-premium passengers; or time-sensitive and non- market-sharing agreement between the parties, the EC concluded time-sensitive passengers. that this agreement was a serious infringement of competition and fined the parties a total of €52.5m, which was confirmed bythe 4.3 Does your jurisdiction have a notification system EU Court of First Instance (see COMP/37.444 – SAS/Maersk Air whereby parties to an agreement can obtain and COMP/37.386 – SUN Air/SAS and Maersk Air, 18 July 2001 regulatory clearance/anti-trust immunity from (2001/716 EG) confirmed by CFI decision T-241/01, 18 July 2005). regulatory agencies? At the national level, codeshare cases were investigated by the Italian National Competition Authority (see the Alitalia/Volare case No. The notification system was abolished by Regulation 1/2003, and the Alitalia/Meridiana case). In the Alitalia/Volare case, the which entered into force on 1 May 2004, and since then it has no Italian Competition Authority considered the codeshare agreement longer been possible to notify agreements to the CMA (or indeed the restrictive but the decision was reversed by the court (both first EC) for clearance. Parties now also need to ensure that their agreement instance and second instance), and in the Alitalia/Minerva case, the satisfies the exemption criteria of section 9 CA 1998 and/or Article Authority considered the codeshare agreement not to be restrictive. 101(3) TFEU, on which section 9 is closely based. In addition, on 27 October 2016 the Commission closed an investigation it had opened in February 11 on free-flow parallel 4.4 How does your jurisdiction approach mergers, hub-to-hub codeshare arrangements between Lufthansa and Turkish acquisition mergers and full-function joint ventures? Airlines, finding that Lufthansa and Turkish Airlines did not have full marketing rights to each other’s seat inventory; that they applied The legislation applicable to UK merger control is the Enterprise differing pricing strategies; and that the codeshare accounted for Act 2002 (the “Act”). Mergers (including, acquisitions and full- only a marginal share of the parties’ sales on the relevant routes. In function joint ventures) are not subject to a system of mandatory February 2011 the EC also opened an investigation on the codeshare notification in the UK. However, where a merger falls outside the arrangement between Brussels Airlines and TAP Air Portugal which turnover thresholds of the EU Merger Control Regulation 139/2004, is still ongoing. but falls within the definition of “relevant merger situation” within With regard to non-overlapping block space and interlining the Act (see below), the CMA will have jurisdiction to investigate agreements, these are viewed by EU regulators as pro-competitive it within four months of completion or the date it was made public, and have been accepted subject to commitments by the EC in whichever is later (discussed below). several merger clearance decisions pursuant to Regulation 139/2004 EU Merger Control (please see: Air France/KLM, case COMP/M. 3280, paragraph 158 A merger will have an EU dimension and will have to be notified to (j); Lufthansa/SNAirholdings, Case COMP/M. 5335, paragraph the EC if either: 441; and Lufthansa/Swiss, Case COMP/M. 3770, paragraph 196). ■ the combined aggregate worldwide turnover of all the

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companies concerned is more than €5 billion (this threshold is intended to exclude mergers between small and medium- 4.5 Please provide details of the procedure, including sized companies); and time frames for clearance and any costs of notifications. ■ the aggregate Community-wide turnover of each of at least two of the companies concerned is more than €250 million (this threshold is intended to exclude relatively minor UK Merger Control Timing and Fees acquisitions by large companies or acquisitions with only a The CMA has an administrative (non-binding) timetable, to which minor European dimension); or it usually adheres, to take a decision on a notified merger within 40 ■ unless each of the companies concerned achieves more than working days of receiving a complete notification. The waiting time two-thirds of its aggregate Community-wide turnover within for a decision will be greater if the CMA has serious concerns or if one and the same Member State (this threshold – the so-called undertakings by the parties to address competition difficulties have “two-thirds rule” – is intended to exclude cases where the to be explored. effects of the merger are felt primarily in a single Member United Kingdom State, when it is more appropriate for the national competition A fee is payable to the CMA in respect of relevant merger situations. authorities to deal with it) (Article 1(2), Merger Regulation). The fees payable are, since August 2012: Alternatively: ■ £40,000, where the UK turnover is less than £20 million; ■ the combined aggregate worldwide turnover of all undertakings ■ £80,000, where the UK turnover is between £20 million and concerned is more than €2.5 billion (instead of €5 billion); £70 million; ■ the aggregate Community-wide turnover of each of at least ■ £120,000, where the UK turnover is between £70 million and two of the undertakings concerned is more than €100 million £120 million; and (instead of €250 million); ■ £160,000, where the UK turnover is over £120 million. ■ the combined aggregate turnover of all undertakings A merger fee is not payable if the merger involves the acquisition of concerned is more than €100 million in each of at least three an interest that is less than a controlling interest and the CMA has Member States; investigated the acquisition on its own initiative. This exception ■ in each of at least three of these Member States, the aggregate does not apply if the merger parties notified the acquisition by turnover of each of at least two of the undertakings concerned submitting a merger notice. is more than €25 million; and Furthermore, a person or corporate body acquiring an interest is ■ unless each of the companies concerned achieves more exempt from paying a merger fee if, in its most recent financial year than two-thirds of its aggregate Community-wide turnover within one and the same Member State (Article 1(3), Merger before the time the fee would become payable, it meets the criteria Regulation). for small or medium-sized enterprises, as defined by reference to certain provisions in the Companies Act 2006. For financial years The relevant legislation applicable to EU merger control is Council beginning on or after 1 January 2016 and, if the directors of the Regulation (EC) No 139/2004 of 20 January 2004 on the control of acquirer so decided, financial years beginning on or after 1 January concentrations between undertakings (OJ L 24, 29 January 2004). 2015, the acquirer qualifies as small or medium-sized if it, or the UK Merger Control group of which it is a member (as defined in section 474 of the “Relevant Merger Situation” Companies Act 2006), has satisfied certain criteria laid down by the A relevant merger situation under the UK merger rules arises where: CMA (which is more fully detailed in the relevant section of the government website: www.gov.uk). ■ two or more enterprises “cease to be distinct” – in essence, the transfer from one party to another of an “enterprise”, If the CMA believes that a merger has resulted or may be expected which is broadly defined to include business activities of to result in a substantial lessening of competition, and satisfactory any kind; and either: as a result of the merger, the combined undertakings cannot be agreed with the parties, the CMA will enterprises will supply or acquire 25% or more of any goods evaluate the competitive effects of the merger and may, where it or services in the UK or a substantial part of the UK; or an believes the merger has or may result in a substantial lessening existing share of supply of 25% or more will be enlarged of competition in the UK market, refer the merger for an in-depth (section 23, Enterprise Act 2002) (it should be noted that the “Phase 2 investigation”. The CMA has a wide range of powers, “share of supply” test is not a market share test but, rather, focuses on the share of supply of the most narrow reasonable including to prevent the merger proceeding or divestment if the description of goods or services); or proceeding has already taken place. ■ where the value of the turnover in the UK of the enterprise being taken over exceeds £70 million. 4.6 Are there any sector-specific rules which govern the Obligation to Notify aviation sector in relation to financial support for air operators and airports, including (without limitation) With the exception of special cases of mergers involving newspapers, state aid? broadcasters or water companies, there is no obligation to notify proposed or completed mergers. However, it is possible, and will At UK level, no. At EU level, yes. The specific rules on state aid in many cases be advisable, to notify the CMA, since if a merger for the aviation sector are set out in the Guidelines on State Aid may result in a “substantial lessening of competition” in the UK to Airports and Airlines (Communication from the EC, 2014/C market, failure to obtain prior clearance risks a reference to a more 99/03). The Guidelines cover the presence of state aid within the in-depth investigation and analysis by the CMA (known as a “Phase meaning of Article 107 (1) of TFEU, investment aid, public service 2 investigation”), with the possible consequences described below, compensation for airlines and airports and so forth. which may include a requirement that the purchaser divests. Public Funding of Airports In order to assess whether an undertaking has benefited from an economic advantage, the Guidelines set out that the Market Economy Operator (“MEO”) test will be applied. The test will

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be based on available information and foreseeable developments govern the collection and use of personal data in the UK. The at the time at which the public funding was granted. When an GDPR came into force in each Member State on 25 May 2018. As airport benefits from public funding, the EC will assess whether a Regulation, it has direct effect in each EU Member State as well such funding constitutes aid by considering whether, in similar as the Member States of the European Economic Area (“EEA”). circumstances, a private-sector funder would have granted the same Among the changes to data protection legislation implemented funding. Should such funding have been regarded as being granted via the GDPR, some key points include: i) requiring freely given, in circumstances which correspond to “normal” market conditions, specific, informed and unambiguous consent from a data subject then it is not regarded as state aid. which must be as easy to withdraw as it is to give; ii) the provision of Start-up Aid for Airlines clear and unambiguous information regarding what the data is to be used for, how long it is to be used for and the requirement to set out The Guidelines acknowledge that state aid granted to airlines for the exactly what the data subject’s rights are in relation to the personal launching of a new route with the aim of increasing the connectivity data they provide; iii) maximum fines for breach of the GDPR are the of a region will be considered compatible with the internal market higher of 4% of annual global turnover or €20 million; iv) requiring United Kingdom pursuant to Article 107(3)(c) of TFEU, if the cumulative conditions organisations who engage in “regular and systematic monitoring” of in the Guidelines are satisfied. The conditions that will be considered data subjects “on a large scale” to appoint a data protection officer (in relation to start-ups) as contributing to the achievement of an (also known as a “DPO”); and v) the requirement for those processing objective of common interest are: (i) if the airline increases the personal data to be accountable and provide adequate technical and mobility of EU citizens and connectivity as well as the connectivity organisational measures to protect any personal data held. of the regions by opening new routes; or (ii) if the airline facilitates the development of remote regions. The DPA 2018 repealed the UK Data Protection Act 1998 (the “DPA 1998”). Broadly, the DPA 2018 applies to the processing The Guidelines also acknowledge that airlines are not always (such as obtaining, recording, holding, using, disclosing or erasing) prepared to run the risk of opening new routes from unknown and of personal data. The obligations under the DPA 2018 are on the untested airports, and may not have appropriate incentives to do so. “data controller”, who is the person that determines how personal Consequently, start-up aid will only be considered compatible for information can be processed. A “data processor” is a person who routes linking an airport with less than three million passengers per processes data on behalf of the data controller. The data controller annum to another EU airport. Additionally, start-up aid for routes remains legally responsible for the processing of personal data by linking an airport with more than three million passengers per the data processor. The DPA 2018 further sets out derogations and annum and less than five million passengers per annum and which exemptions to the GDPR that will apply in the UK. are not located in remote areas are only likely to be considered compatible with the internal market in duly substantiated (and The DPA 2018’s jurisdictional scope includes persons who: indeed exceptional) cases. Linking an airport with more than (a) are incorporated in the UK; five million passengers per annum not located in remote regions, (b) have an office, branch or agency in the UK; or however, cannot be considered compatible with the internal market. (c) have a regular practice in the UK. Data controllers must ensure that data is processed in accordance 4.7 Are state subsidies available in respect of particular with six data protection principles in the DPA 2018; namely that routes? What criteria apply to obtaining these personal data is: subsidies? (a) fairly and lawfully processed; (b) obtained only for specified, explicit and legitimate purposes; Yes. There are specific EU state aid rules as regards public service compensation granted to undertakings entrusted with the operation (c) adequate, relevant and not excessive for the purposes; of services of general economic interest (“SGEI”), which also cover (d) accurate and up to date; the aviation sector. These rules are set out in EC Decision of 28 (e) not kept for longer than is necessary; and November 2005 on the application of Article 86(2) of the EC Treaty (f) protected by ensuring that appropriate technical and to state aid in the form of public service compensation granted to organisational measures are taken against the unauthorised or certain undertakings entrusted with the operation of services of unlawful processing of the personal data, as well as against general economic interest (OJ No L312/67, 29 November 2005). The accidental loss or destruction of, or damage to, personal data. EC’s decision covers compensation for SGEI generally, but contains Whilst there is no longer a principle for individuals’ rights in the the following provisions specifically relating to air transport: DPA 2018, this is dealt with separately in Chapter III of the GDPR ■ public service compensation for air links to islands on which and states that personal data must be processed in accordance with average annual traffic during the two financial years preceding the rights of data subjects. Similarly, the principle for international that in which the SGEI was assigned does not exceed 300,000 transfers of personal data previously contained in the DPA 1998 is passengers, will be considered compatible with the common now dealt with separately in Chapter V of the GDPR. market and not requiring notification; and Furthermore, there is a new accountability principle in the GDPR ■ the same rule applies to public service compensation for which specifically requires you to take responsibility for complying airports, if average annual traffic during the two financial years preceding that in which the SGEI was assigned does with the principles and to have appropriate processes and records in not exceed 1 million passengers. place to demonstrate that you comply. Data subjects, such as individual passengers, now have further rights under the GDPR, including the right to: 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, (a) access a copy of the information comprising their personal data; and what rights do passengers have in respect of (b) object to processing that is likely to cause them damage or their data which is held by airlines and airports? distress; (c) prevent processing for direct marketing; The General Data Protection Regulation (Regulation 2016/679) (d) object to decisions being taken by automated means; (the “GDPR”) and the UK Data Protection Act 2018 (“DPA 2018”)

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(e) have inaccurate personal data rectified, blocked, released or destroyed; 4.10 What are the mechanisms available for the protection (f) have personal data deleted where continued processing is of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? unnecessary (the “right to be forgotten”); (g) request that certain data, which is processed by automated The UK has an Intellectual Property Office (“IPO”). Trademarks, means, is transferred to a different controller; and patents and designs are registrable with the IPO. (h) claim compensation for damage caused by a breach of the DPA 2018. Copyright protection applies to original works upon creation of the work, without the need for registration (copyright is not registrable There is no minimum period for which controllers must hold in the UK). The UK has a relatively low threshold of originality personal information; rather, they must securely delete personal data for a work to be considered an original work which is protected when that personal data is no longer necessary for the purposes for by copyright. Databases may be protected by copyright and/or which it was collected. On 2 December 2015, a provisional deal United Kingdom database rights. was reached by the European Parliament and Council on an EU Directive regulating the use of Passenger Name Record (“PNR”) A patent may be filed online or in hard copy. A patent application data for the prevention, detection, investigation and prosecution of should include a full description (including drawings) of the terrorist offences and serious crime, and was endorsed by the Civil invention, the claims defining the invention, an abstract summarising Liberties, Justice and Home Affairs Committee on 10 December the invention’s technical features and the relevant IPO forms. 2015. The Directive was approved by Parliament as a whole on 14 Some intellectual property disputes may be heard initially by the April and by the Council of the EU on 21 April 2016. IPO. The Intellectual Property Enterprise Court (“IPEC”) is a The PNR Directive obliges airlines to hand EU countries their specialist court that deals with lower-value or lower-complexity passengers’ data in order to help the authorities fight terrorism intellectual property disputes. There is a £500,000 cap on the and serious crime. It requires more systematic collection, use and amount of damages that can be claimed (although this can be waived retention of PNR data on air passengers, and therefore has an impact if agreed by the parties). There is a small claims track within the on the rights to privacy and data protection. IPEC which is appropriate if the claim has a value of £10,000 or less. More complex or valuable cases will be heard in the Chancery The Passenger Name Record Data and Miscellaneous Amendments Division of the High Court. Regulations 2018, which came into force on 25 May 2018, implemented the PNR Directive in the UK. It is also worth noting that EU countries have bilateral PNR 4.11 Is there any legislation governing the denial of agreements with third countries in the wake of terrorist attacks boarding rights and/or cancelled flights? across the EU and in the USA. Each of the agreements sets out the use of PNR data collected by airlines for law enforcement purposes. European Regulation 261/2004 (“Regulation 261”) provides rules concerning compensation for denied boarding and/or cancelled or delayed flights. Airlines must ensure that a clearly legible and visible 4.9 In the event of a data loss by a carrier, what notice containing prescribed wording is displayed to passengers at obligations are there on the airline which has lost the check-in, and must provide passengers affected by denied boarding data and are there any applicable sanctions? with a notice setting out the rules for compensation. Proposals to amend Regulation 261 have been under consideration for several The GDPR has enhanced notification provisions around data losses years but remain to be finalised. In recognition of the need for more and breaches, as well as allowing the relevant data protection immediate action, in June 2016 the EC published Interpretative regulators the authority to levy significantly increased fines for non- Guidelines on the Regulation, to clarify the understanding of compliance with the provisions of the Regulation. passenger rights in this area. Under the GDPR there is now a mandatory obligation for an airline Under the Civil Aviation (Denied Boarding, Compensation and to notify the Information Commissioner’s Office (“ICO” – the Assistance) Regulations 2005, the CAA is responsible for enforcement regulatory body in charge of the DPA) of a data breach under Article of the operators’ compliance with these rules; the Air Transport Users 33. The data controller must notify the relevant authority without Council is the body to receive complaints. It is an offence, subject to a undue delay and, where feasible, not later than 72 hours after having defence of due diligence, for an operating air carrier to fail to comply become aware of it. with the obligations imposed under the above. Where an individual has suffered material or non-material damage due to a data controller’s breach of the GDPR, that individual is entitled to claim compensation from the data controller or processor. 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? The ICO has the power to fine data controllers up to £20 million or 4% of annual worldwide turnover (whichever is higher) for breaches Regulation 261 establishes common rules on compensation and of the GDPR. The data controller may appeal the imposition of a assistance to be given to passengers in the event of cancellation fine to the Information Rights Tribunal. or long delay. Pursuant to the UK domestic legislation – the The DPA 2018 creates several criminal offences, including (amongst Civil Aviation (Denied Boarding, Compensation and Assistance) others) unlawfully obtaining personal data, selling personal data Regulations 2005 – the CAA is empowered to pursue enforcement obtained unlawfully, altering personal data to prevent disclosure to proceedings against an airline for non-compliance with the European the data subject, failing to comply with an enforcement notice and rules. If proved, an airline will be liable to a fine not exceeding making a false statement in response to an information notice. £5,000 for each offence. The ICO’s other coercive powers include issuing information notices requiring organisations to provide it with information and issuing binding undertakings to organisations with which they must comply.

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all companies. Foreign-domiciled companies may operate in the 4.13 Are the airport authorities governed by particular UK without registering a UK company or branch. UK-registered legislation? If so, what obligations, broadly speaking, companies are not required to have a local shareholder or director; are imposed on the airport authorities? they just need to have a registered address in the UK.

The Civil Aviation Act 1982 and the Air Navigation Order 2009 stipulate that where an aerodrome is open for public use, the 4.17 Is vertical integration permitted between air operators aerodrome must be available to all, on equal terms, whether they are and airports (and, if so, under what conditions)? foreign or domestic carriers. There are numerous other obligations imposed upon an airport operator by law of application not limited There is no prohibition of vertical integration between air operators to aviation; for example, concerning employment, health and safety and airports. In such a case, however, competition rules particularly and disability discrimination. prohibiting abuse of a dominant position (section 18 CA 1998 and/ or Article 102 TFEU) will prohibit any discriminatory charges for The Civil Aviation Act 2012 has introduced a new system of United Kingdom access to airport infrastructure, or denial of access where this affects economic regulation of airport operators. Certain airports will trade and is not objectively justified. require a licence to levy airport charges, and the CAA can impose such conditions on that licence as it deems necessary to promote competition (e.g. capping the percentage by which charges at a 4.18 Are there any nationality requirements for entities particular airport may be increased, by a certain percentage or by applying for an Air Operator’s Certificate in your reference to a particular index (such as the Retail Price Index)). jurisdiction or operators of aircraft generally into and out of your jurisdiction? The Transport Act 2000 requires airport operators to keep records of aircraft movements in order to facilitate the assessment and At this time, EU Regulation No. 1008/2008 applies which sets out calculation of charges. The Civil Aviation (Chargeable Air Services) at Article 4 (Conditions for granting an operating licence) that an (Records) Regulations 2001 govern the format and content of the undertaking shall be granted an operating licence by the competent aircraft movement log, which must be kept at any airport pursuant licensing authority of a Member State provided that “(if) Member to section 88 of the Civil Aviation Act 1982. Pursuant to the Air States and/or nationals of Member States own more than 50% of the Navigation Order 2009, the aerodrome licence-holder must ensure undertaking and effectively control it, whether directly or indirectly that the messages and signals between an aircraft and the air traffic through one or more intermediate undertakings, except as provided control unit at the aerodrome are recorded, complete and preserved. for in an agreement with a third country to which the community is The airport operator is responsible for ensuring that the landing a party”. ground and runway remain clear of unmarked and unlit obstructions pursuant to the Air Navigation (Consolidation) Order 1923. There is also a statutory duty for an airport operator to take care, as in 5 In Future all reasonable circumstances, to see that a visitor shall be safe in using the premises for the purposes for which he is invited, or permitted, by 5.1 In your opinion, which pending legislative or the operator, to be there. Failure to install, maintain and use the proper regulatory changes (if any), or potential developments equipment to enable aircraft to take off and land safely will attract affecting the aviation industry more generally in liability, and there may be liability to passengers of aircraft which your jurisdiction, are likely to feature or be worthy of crash if there is a failure to have or to use adequate rescue equipment. attention in the next two years or so? Airport operators have also been held liable where there was a known hazard and no effective system to discover and disperse It is clear that developments in the data protection space involving birds, leading to bird strikes. the collection, retention, processing and use of personal – specifically, PNR data – will continue to feature as a major area of concern and focus for airlines and airports in the future, let alone 4.14 To what extent does general consumer protection the next two years. With the implementation of the GDPR, the DPA legislation apply to the relationship between the 2018 and the PNR Directive (and the national variations) operators airport operator and the passenger? need to continue to review and monitor their mechanisms, processes and procedures in place to ensure compliance with new legislative The Consumer Protection Act 1987 and the Consumer Rights Act requirements around the collection and provision of data and the 2015 apply to aviation-related matters, providing a cause of action secure handling, retention and use of it. to a passenger against a manufacturer. The Enterprise Act 2002 is also applicable to aviation: it gives the CMA powers of enforcement The ICO issued the first UK enforcement notice under the GDPR in in relation to consumer legislation. July 2018 on a Canadian data company. The number of enforcement notices and penalties issued by the ICO under the GDPR is expected to rise and it is likely that the ICO will investigate the data breach at 4.15 What global distribution suppliers (GDSs) operate in British Airways in August 2018 that resulted in the account numbers your jurisdiction? and personal information from around 380,000 customers being stolen. The Package Travel Directive (2015/2302/EU), which entered into All the major GDSs operate in the UK, i.e. Travelport, Amadeus, force on 31 December 2015, became effective on 1 July 2018. This Sabre, etc. has an impact on carriers, as it has a scope which extends beyond the traditional holiday package booked through a tour operator and 4.16 Are there any ownership requirements pertaining to covers many other forms of combined travel (for example, fly-drive GDSs operating in your jurisdiction? holidays and flight-hotel bookings). These forms of combined travel are protected as a package under the Directive, in particular No, there are no ownership requirements specific to GDSs operating where the travel services are booked at the same time and as part in the UK, beyond the general UK company law applicable to

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of the same booking process or where they are offered for an (d) it would not be in the public interest for the aircraft to be, inclusive price. The Package Travel and Linked Travel Arrangements or to continue to be, registered in the United Kingdom. Regulations 2018 implemented the Package Travel Directive in the Pursuant to Part 1 Article 5(1), only the following persons UK on 1 July 2018. are qualified to hold a legal or beneficial interest by way of Consumer rights legislation will continue to strengthen in the UK ownership in an aircraft registered in the United Kingdom or a share in such an aircraft: as a result of the Consumer Rights Act 2015 and the ever-present bolstering of Regulation 261/2004, primarily by the CJEU’s (a) the Crown in right of HM Government in the United interpretation of the Regulation, as now clarified to an extent by the Kingdom and the Crown in right of the Scottish Administration; 2016 Interpretative Guidelines, but also in relation to a revision to the Regulation (which remains to be agreed). In addition, as much (b) Commonwealth citizens; of the aviation law in the UK stems from the EU, it will be important (c) nationals of any EEA state; to keep a close eye on the development of plans for Brexit and any (d) British protected persons; United Kingdom agreed transition period. The “withdrawal” date of 29 March 2019 (e) bodies incorporated in some part of the Commonwealth is fast approaching; however, as at the time of writing, the UK and and having their principal place of business in any part of the EU have still not agreed the vast majority of the terms of the the Commonwealth; UK’s withdrawal. There is, therefore, still uncertainty around what (f) undertakings formed in accordance with the law of an Brexit will mean for the future of aviation law, including important EEA state which have their registered office, central areas such as the ownership shareholding of airlines, rights to land administration or principal place of business within the in and fly over different countries in the EU, and generally what EEA; or legislation will continue to apply in the UK. (g) firms carrying on business in Scotland; in this sub- paragraph “firm” has the same meaning as in the Partnership Act 1890 (c39). Endnote Under Part 1 Article 5(4) of the Air Navigation Order 2009, if an aircraft is chartered by demise to a person qualified under paragraph 1. Under Part 1 Article 4(3) of the Air Navigation Order 2009, an aircraft must not be registered or continue to be registered (1), the CAA may, whether or not an unqualified person is entitled in the United Kingdom if it appears to the CAA that: as owner to a legal or beneficial interest in the aircraft, register the aircraft in the United Kingdom in the name of the charterer by demise (a) the aircraft is registered outside the United Kingdom and that such registration does not cease by operation of law if it is satisfied that the aircraft may otherwise be properly registered. when the aircraft is registered in the United Kingdom; There is also a discretion for the CAA to register an aircraft which is owned by a person not qualified under Part 1 Article 5(1) where the (b) an unqualified person holds any legal or beneficial interest by way of ownership in the aircraft or any share in the owner resides or has a place of business in the United Kingdom, but aircraft; such aircraft must not be used for commercial air transport, public transport or aerial work (Part 1 Articles 5(2) and (3)). (c) the aircraft could more suitably be registered in some other part of the Commonwealth; or

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

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

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

Katten is a full-service, international, business-oriented law firm providing sophisticated, high-value legal services across the world, with more than 650 lawyers located across the USA, Middle East, Asia and the UK/EU in 14 offices. Our international experience and focus means we are well-placed to help you succeed where you currently operate and also to gain ground and traction in new markets. With over 650 lawyers, our reach is truly international and our long-standing track record demonstrates our commitment to client goals and project delivery. The firm’s core areas of practice are corporate, financial services, aviation, insolvency and restructuring, litigation, real estate (including construction), environmental, commercial finance, intellectual property, structured finance and securitisation, and trusts and estates. Katten represents public and private companies in numerous industries, including a third of the Fortune 100, as well as numerous government and not-for-profit organisations and individuals. * * * K&L Gates LLP is a fully integrated global law firm with lawyers located across five continents. Our broad global platform allows us to guide clients through the legal challenges inherent in the ever-changing international landscape. The deep latticework of relationships across our offices and practices enables our clients to respond to diverse legal issues and risks, through the services of one law firm with a single point of communication. K&L Gates LLP represents leading global corporations in every major industry, capital market participants, and ambitious middle-market and emerging growth companies. Our lawyers also serve public sector entities, educational institutions, philanthropic organisations and individuals. We are leaders in legal issues related to industries critical to the economies of both the developed and developing worlds – technology, manufacturing, financial services, health care and energy, among many others.

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USA Diane Westwood Wilson

LeClairRyan PLLC Rebecca Tingey

carriers must hold a valid permit issued by the DOT pursuant to 49 1 General USC § 41301 or a valid exemption. The DOT’s final decision to grant or deny the application of a foreign carrier is subject to review 1.1 Please list and briefly describe the principal by the President of the United States. legislation and regulatory bodies which apply to and/ Applications are published for public comment. Carriers may or regulate aviation in your jurisdiction. seek an exemption permitting them to begin operations prior to the DOT’s decision. ■ US Department of Transportation (“DOT”), a federal Cabinet department of the US government. Safety authority ■ Federal Aviation Authority (“FAA”), a national agency with US carriers are required to hold an Air Carrier Certificate and power to regulate all aspects of US civil aviation, including Operations Specifications (“OpSpecs”) (14 CFR Parts 121 and 135). commercial space transportation. Foreign carriers are required to hold only OpSpecs (14 CFR Part ■ National Transportation Safety Board (“NTSB”), an 129). The FAA evaluates whether the carrier meets certain safety independent US government agency responsible for regulations and standards. investigating civil aviation accidents. There are five phases in the certification process for US carriers: (1) ■ US Department of Homeland Security’s (“DHS”) pre-application; (2) formal application; (3) document compliance; Transportation Security Administration (“TSA”) and Customs (4) demonstration and inspection; and (5) certification. and Border Protection (“CBP”). TSA is responsible for airport Responsibility for issuance of foreign air carrier OpSpecs has been security and works in conjunction with CBP, the largest federal law enforcement agency of DHS, to screen airline delegated to four international FAA field offices located in Dallas/ passengers and employees at airports. Ft. Worth, Los Angeles, Miami, and New York. ■ Title 14 of the Code of Federal Regulations (“CFR”), “Aeronautics and Space”, issued by the FAA. 1.3 What are the principal pieces of legislation in ■ Title 49 of the CFR, “Transportation”, issued by the DHS and your jurisdiction which govern air safety, and who the DOT. administers air safety? ■ Title 49 of the United States Code (“USC”), “Transportation”, enacted by the US Congress. The FAA, established by the Federal Aviation Act of 1958, codified under 49 USC Subtitle VII, administers air safety and has four business areas: 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? ■ Airports – responsible for optimising the safety, capacity, and condition of the national airport system (14 CFR Part 139). ■ Air Traffic Organization – responsible for air traffic safety Air carriers must obtain two separate authorisations: (1) economic (14 CFR Parts 71 and 77). authority issued by the DOT; and (2) safety authority issued by the FAA. ■ Aviation Safety – responsible for ensuring the certification, approval and airworthiness of aircraft, as well as certification of Economic authority all pilots, mechanics, and other air safety-related professionals Pursuant to 49 USC § 41101, economic authorisation must either be (14 CFR Parts 21, 25, 33, 61, 91, 121, 125, and 135). in the form of a “certificate of public convenience and necessity” or in ■ Office of Commercial Space Transportation – responsible for the form of an exemption, such as those applicable to air taxis or air protecting the public, property, and interests of the US during commuters. All carriers must file an application on the public docket launch or reentry of commercial spacecraft. at: http://www.regulations.gov. US air carrier applications are analysed for: (1) US citizenship (49 1.4 Is air safety regulated separately for commercial, USC § 40102(a)(15)); (2) managerial competence; (3) financial cargo and private carriers? fitness; and (4) legal compliance. Foreign air carrier applications are analysed for: (1) foreign citizenship; Yes and no. Aviation regulations are generally dictated by aircraft (2) operational and financial fitness; and (3) whether the carrier is size, as measured by the number of passenger seats and payload covered by a bilateral agreement (14 CFR Parts 211 and 302). Foreign capacity, and whether the operation involves common carriage of

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passengers and/or cargo. 14 CFR Part 121 applies to operators management systems. The FAA Passenger Facility Charge (“PFC”) involved in scheduled common carriage, such as airlines and cargo Program caps at $4.50 the passenger fee that can be collected at carriers; 14 CFR Part 125 applies to operators of larger aircraft major airports (commercial airports controlled by public entities). not involved in common carriage; and 14 CFR Part 135 applies PFCs are capped at $4.50 per flight segment with a maximum of two to commuter or on-demand operations of air carriers, commercial PFCs charged on a one-way trip or four PFCs on a round trip, for a operators, or operators of large aircraft. These Parts set forth varying maximum of $18 total. operational requirements relating to equipment, maintenance, pilot qualifications and training, and other matters. 14 CFR Part 129 1.9 What legislative and/or regulatory regime applies to applies to foreign air carriers operating in the US. air accidents? For example, are there any particular rules, regulations, systems and procedures in place USA which need to be adhered to? 1.5 Are air charters regulated separately for commercial, cargo and private carriers? The NTSB has primary authority to investigate all civil Regulation of an air charter operator depends upon its size and type. aviation accidents to determine probable cause and issue safety The governing regulations are set forth in 14 CFR Parts 135 and 298 recommendations. Upon request, the NTSB frequently assists (on-demand for both passenger and cargo, with smaller aircraft); foreign governments with accident investigation. For general 212 (large aircraft); and 380 (public charters for both small and aviation accidents, the responsible NTSB field office often delegates large aircraft). It is important that an operator obtain authority and the investigation to the FAA pursuant to Section 304(a)(1) of the operate under, and comply with, the appropriate CFR Part. Independent Safety Board Act of 1974. When there is an indication that an accident may have been the result of criminal conduct, local police authorities, the Federal Bureau of Investigation and/or the 1.6 As regards international air carriers operating in your Department of Justice (“DOJ”) will get involved and may delay jurisdiction, are there any particular limitations to be certain aspects of the NTSB’s accident investigation. aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, After a civil aviation accident, the airline must immediately notify restrictions and taxes which apply to international but the local field office of the NTSB (49 CFR § 830.5) and family not domestic carriers. members of passengers (49 CFR § 1136). The airline must preserve aircraft wreckage, cargo, and data recorders until the NTSB takes Generally, foreign air carriers are treated similarly to US air carriers custody (49 CFR § 830.10(a)). The airline must also retain all through bilateral air transport or service agreements. Under the records, reports, internal documents and memoranda dealing with International Aviation Safety Assessment Program (49 CFR Part the accident, and permit the inspection of pertinent records by the 1546), foreign air carriers must meet additional safety requirements. NTSB (49 CFR § 830.9(a) and 830.10(d)). In deciding whether to grant a foreign air carrier an operating After completing its investigation, the NTSB prepares a public final licence, the FAA considers the existence of an effective aviation report (49 CFR Parts 831 and 45). Pursuant to the Aviation Disaster security agreement between the US and the foreign air carrier Family Assistance Act of 1996 and Foreign Air Carrier Family applicant’s homeland. Support Act of 1997, both US and foreign carriers are required to have in place a Family Assistance Plan, which identifies how the 1.7 Are airports state or privately owned? carrier will address the needs of families and passengers involved in any accident resulting in a major loss of life. Almost all of the major US airports servicing commercial operators are owned by public entities, including local, regional, or state (and 1.10 Have there been any recent cases of note or other bi-state) authorities. For example, Chicago owns Chicago O’Hare notable developments in your jurisdiction involving International Airport and Maryland owns Baltimore-Washington air operators and/or airports? International Thurgood Marshall Airport. Actual operation of the airports is often handled by specially created public entities. For As the number of emotional support animals on airplanes of varied example, the Authority of New York and New Jersey, an types and sizes has continued to rise, in 2018, airlines began interstate compact, operates several airports in New York and New considering stricter regulations. Federal laws require that passengers Jersey. A few US airports have long-term agreements with private with disabilities be permitted to bring service and emotional support firms to design, build, and manage new terminals. In 2018, the City animals in the cabin; however, some passengers have interpreted the of St. Louis, Missouri solicited proposals from private investors to vague laws to permit travel with animals that are not subject to the manage St. Louis Lambert International Airport. If privatised, St. type of training that a traditional emotional support dog undergoes, Louis would be only the second major US airport to be privately including, for example, a squirrel, peacock, hamster and duck. The operated – San Juan’s Luis Muñoz Marín International Airport in DOT has proposed updated rules that would narrow the definition Puerto Rico – and the first in continental US. of “service animal” to dogs, cats, and miniature horses, thereby permitting airlines to bar other animals in the cabin. American, Delta, JetBlue, Alaska, and United have all enacted stricter policies 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? that incorporate many of the DOT’s proposed rules. Airplane seat size also is a hot topic – shrinking as passenger girth Like all commercial enterprises, airports generally seek to maximise expands. The US Congress is considering a bill that would require profitability when allocating leasehold space, assignments, and the DOT to set minimum standards for airplane seat size. The bill times of operation, while working closely with the airlines to support addresses concerns regarding passengers’ ability to safely evacuate shared handling arrangements. The FAA Airport Safety Program a plane in an emergency given the cramped seating as a consequence addresses general aviation airport safety, runway safety, and safety of the airlines’ attempts to maximise revenue by increasing seat

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capacity. Currently, airlines must be able to evacuate passengers within 90 seconds. The DOT plans to study whether the FAA is 2.4 As a matter of local law, is there any concept of title ensuring that the tighter airline seating of today complies with annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or federal evacuation standards. other prejudice when installed ‘on-wing’ on an aircraft Another notable development in 2018 was in relation to the owned by another party? If so, what are the conditions nationwide, multidistrict antitrust litigation brought against to such title annexation and can owners and financiers American, United, Delta, and Southwest, alleging a conspiracy to of engines take pre-emptive steps to mitigate the risks? raise, maintain and/or stabilise air transportation prices (discussed in last year’s US Chapter). Plaintiffs reached preliminary settlements The Cape Town Convention, to which the US is a signatory, USA with Southwest for $15 million and with American for $45 million. provides at Article XIV(3) of the Aircraft Equipment Protocol, that The final settlement approval hearing is set for March 22, 2019. “ownership of or another right or interest in an aircraft engine shall not be affected by its installation on or removal from an aircraft”. 2 Aircraft Trading, Finance and Leasing 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- 2.1 Does registration of ownership in the aircraft register added tax (VAT) and/or goods and services tax (GST), constitute proof of ownership? and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of No. Pursuant to 49 USC § 44103, a Certificate of Registration aircraft and/or particular aircraft types or operations? is “not evidence of ownership of an aircraft in a proceeding in which ownership may be in issue”. Thus, while the FAA Aircraft Aircraft transactions in the US or with US persons can be subjected Registry lists an “owner” of each registered aircraft and evidence to either or both state or federal tax on sale, use, and leasing, which of ownership is required to record such registration with the FAA, treatment can be favourable or otherwise depending on numerous the Certificate of Registration does not, standing alone, constitute variables, such as the jurisdiction of the persons involved in the proof of ownership. The best evidence of ownership for an FAA- transaction, the situs of closing, the intended use of the aircraft registered aircraft is an original bill of sale from the manufacturer/ subsequent to closing, and others. seller to the current owner. Where the aircraft has had more than While there is no VAT in the US, each state has its own tax laws, one previous owner, it is recommended that the current owner and, within a state, there may be county or city tax laws. Most obtain bills of sale for all previous title transfers such that the full states collect sales tax on transactions involving tangible personal chain of title is documented. property. Five states – Alaska, Delaware, Montana, New Hampshire, and Oregon – do not have a state sales tax. Therefore, if delivery of 2.2 Is there a register of aircraft mortgages and charges? the aircraft is made in one of these states, there will be no state sales Broadly speaking, what are the rules around the tax assessment. Other states, such as Massachusetts, New York, operation of this register? Maine, and Rhode Island, exempt aircraft from sales tax, while others like South Carolina cap the sales tax on aircraft sales and The FAA Aircraft Registry is a publicly searchable database where leases at $300. Some states, such as Arizona, Arkansas, California, mortgages and other security interests can be recorded against an Colorado, Florida, Georgia, Illinois, Michigan, and Texas, have a aircraft. The requirements for recordation of mortgages and other “fly-away” exemption, meaning that the transaction will be exempt security interests are set forth in 14 CFR Part 49. All registration from sales tax if it is flown out of the state within a specified period documents must include the manufacturer, model, serial number, of time after the transaction closes. and registration number, and original signatures must be submitted. In addition, with respect to any aircraft transaction in the US The FAA Aircraft Registry also serves as the entry point for with a US entity (sale or lease) the US (federal) tax code should registering ownership and security interests pursuant to the Cape be consulted for the applicable tax implications. For example, Town Convention and related Protocol on Aircraft Equipment. the recent Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the deferment of gains and losses for the like kind exchange of aircraft, 2.3 Are there any particular regulatory requirements effective January 1, 2018, but expands the use of bonus depreciation which a lessor or a financier needs to be aware of as of all qualifying equipment (both used and new) to 100%. regards aircraft operation? The interplay of federal and state laws and applicable treaties can be unique to each transaction. Thus, the tax implications of a particular The FAA and the DOT regulate aircraft operations and a lessor or transaction must be considered by counsel well in advance of closing. financier should require its lessee/operator to maintain compliance with all applicable FAA and DOT regulatory requirements. The lessee/operator will need to meet certain requirements (including 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and licensure depending on the type of operation) regarding to who may Cape Town)? operate the aircraft and the type of operations that can be conducted. The lease agreement should state clearly that the lessee maintains All of the main multilateral aviation treaties – international operational control. Lease agreements that contemplate operations Conventions – have been entered into force in the US: by an uncertificated operator (e.g., Part 91) contain a truth-in-leasing clause which satisfies the requirements set forth in 14 CFR Part 91, ■ Convention on International Civil Aviation (the “Chicago which is then filed with the FAA for truth-in-leasing purposes only. Convention”). ■ Convention on the International Recognition of Rights in Aircraft.

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■ Convention for the Unification of Certain Rules relating to breach of the peace. Upon seizure, the lessor may then retain, sell, the International Carriage by Air (the “Warsaw Convention”). lease, or otherwise dispose of the aircraft and apply the proceeds ■ Convention on Offenses and Certain Other Acts Committed to satisfy the debt. The rights of the lessor may be limited by the on Board Aircraft (the “Tokyo Convention”). applicable lease and/or financing agreements. ■ Montreal Protocol No. 4 to amend the Warsaw Convention as In addition, the Cape Town Convention and its Aircraft Equipment Amended by the 1955 Hague Protocol. Protocol may affect default remedies available in the US, depending ■ Convention for the Unification of Certain Rules for on the type of aircraft, its place of registration, the location of the International Carriage by Air (the “Montreal Convention”). debtor, and whether the transaction documents create an “international ■ Convention on International Interests in Mobile Equipment (the interest”. The US Declaration to Cape Town makes clear that the US “Cape Town Convention”) and Aircraft Equipment Protocol. respects applicable local laws with respect to non-consensual liens. USA

2.7 How are the Conventions applied in your jurisdiction? 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For In the United States both state and federal courts have jurisdiction example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases over issues of treaty interpretation. A court should look to whether are brought? a treaty’s provisions are preemptive of local, i.e., federal regulations and state laws, including . The Montreal Convention In civil cases, an individual or the government may bring a claim has been the subject of enforcement by the US Supreme Court. and the available remedies are generally limited to monetary and/ See EL AL Israel Airlines v. Tseng, 525 U.S. 155 (1999) (a seminal or injunctive relief. Criminal cases, which can only be brought by international aviation case upholding the preemptive effect on local the government, can result in monetary award, injunctive relief, and/ law of treaties of the United States, such as the Montreal Convention). or incarceration. Civil and criminal cases are brought in both state Although the Montreal Convention, and its predecessor the Warsaw and federal courts. State courts have broad jurisdiction and can Convention, are the subject of frequent litigation, there is limited hear almost any civil or criminal case, as long as it is not preempted case law interpreting the Geneva and Cape Town Conventions. by federal law. Which is the correct state court can depend on the amount in controversy, and whether the claims are civil or criminal. 2.8 Does your jurisdiction make use of any taxation Civil claims may only be filed, but are not required to be filed, in benefits which enhance aircraft trading and leasing federal court: (1) when the claim involves a federal question (i.e., (either in-bound or out-bound leasing), for example arises under or implicates a federal treaty, law, or regulation, e.g., access to an extensive network of Double Tax Treaties the Montreal Convention); or (2) if the claim is between citizens or similar, or favourable tax treatment on the disposal of aircraft? of different states and the amount in controversy exceeds $75,000.

The US has an extensive network of income tax treaties for the 3.4 What service requirements apply for the service of minimisation of double taxation, the application of which will court proceedings, and do these differ for domestic depend on the particulars of each transaction. Because there are airlines/parties and non-domestic airlines/parties? numerous restrictions on so-called “treaty-shopping”, sophisticated analysis often is required to obtain taxation benefits. There is no Each state has its own procedural rules that govern service of blueprint to follow to maximise tax benefits. process. In the federal courts, service of process is governed by the Federal Rules of Civil Procedure and may vary depending on the type of defendant. Typically, a summons and complaint must 3 Litigation and Dispute Resolution be personally served on a defendant or an agent of the defendant. However, in this digital age, if a plaintiff cannot with due diligence effectuate personal service, courts are increasingly permitting 3.1 What rights of detention are available in relation to aircraft and unpaid debts? alternative forms of service, such as by email or social media platforms. See, e.g., Elsevier, Inc. v. Siew Yee Chew, 287 F. Supp. 3d 374 (S.D.N.Y. 2018) (service by email); St. Francis Assisi v. Creditors’ rights are governed by state law and vary depending Kuwait Finance House, 2016 WL 5725002 (N.D. Cal. Sept. 30, on the type of debt, priority of any lien, and whether the lien has 2016 (service by Twitter). been perfected, i.e., properly recorded/registered. In general, however, if the aircraft owner or operator has unpaid debts and is not under bankruptcy court protection, a creditor may obtain a court 3.5 What types of remedy are available from the courts judgment enforceable in accordance with the relevant state laws or arbitral tribunals in your jurisdiction, both on i) an and procedures. In addition, if a creditor is able to meet certain interim basis, and ii) a final basis? criteria, it may be able to obtain a pre-judgment restraining order or injunction preventing the debtor from moving the aircraft. Courts and arbitral tribunals both have broad authority to award interim and final relief. A Temporary Restraining Order and Preliminary Injunction, two types of interim relief, are generally 3.2 Is there a regime of self-help available to a lessor limited to situations where the party seeking such relief can or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights demonstrate that it will be irreparably harmed if interim relief is under the lease/finance agreement? not granted. In a court proceeding, a final judgment follows a decision on the merits – by motion or, if necessary, after trial. In The Uniform Commercial Code, which has been adopted in some arbitration, after the issuance of a final award, the successful party form by all 50 states, permits a lessor to repossess leased equipment may bring a court proceeding to confirm the award and convert it or render the equipment unusable, if it can do so without causing a into a judgment. Conversely, the aggrieved party can seek to vacate the award in whole or in part.

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The relevant product market is typically defined by the line of 3.6 Are there any rights of appeal to the courts from the commerce being offered, such as scheduled passenger or cargo decision of a court or arbitral tribunal and, if so, in flights from Point A to Point B, or control or ownership of landing what circumstances do these rights arise? rights or slots. The relevant geographic market is typically defined by where the companies involved compete, often based on routes In state court, the rights of appeal vary from state to state, with or city-pairs. potentially no right of appeal until there is a final judgment. The DOJ and the Federal Trade Commission (“FTC”) are typically Some states permit interlocutory appeals either as of right or by concerned with transactions that significantly raise concentration permission, which can dramatically affect the length and outcome levels in city-pair markets. The DOJ will analyse the effect in all

USA of the proceedings. city-pair markets served by both of the carriers involved in terms of: In federal court, interim appellate review of district court rulings (1) non-stop service; and (2) non-stop and connecting service. The is available only in limited circumstances; for example, pursuant DOJ recognises that non-stop service between cities is important to Federal Rule of Civil Procedure 23(f) (discretionary appeal of because business travellers are less likely to regard connective order granting or denying class action certification), 28 USC § 1292 service as a reasonable alternative. Cities served by more than one (interlocutory decisions), and a writ of mandamus (a request that commercial airport, such as Los Angeles, San Francisco, New York, the circuit court of appeal mandate the district court to award the Chicago, and Washington, D.C., may be considered an airport pair. relief denied). In arbitral proceedings, obtaining interim court review is extremely 4.3 Does your jurisdiction have a notification system difficult, and the Federal Arbitration Act severely curtails judicial whereby parties to an agreement can obtain review of arbitration awards. In the US, there is a strong presumption regulatory clearance/anti-trust immunity from for enforcement of agreements to arbitrate and the courts are very regulatory agencies? deferential to arbitration decisions. It is also noteworthy that New York courts, a venue commonly specified in commercial contracts, Yes. US carriers seeking to merge or acquire another carrier must strongly favours enforcement of arbitration awards. provide notice to the DOJ and FTC pursuant to Section 7a of the Hart-Scott-Rodino Antitrust Improvements Act (“HSR Act”) 4 Commercial and Regulatory (15 USC § 18a). The initial HSR Act filing must contain basic information, which the DOJ will use to determine whether a more extensive review is appropriate. 4.1 How does your jurisdiction approach and regulate As described in question 4.1, parties seeking to form a cooperative joint ventures between airline competitors? agreement, or joint venture within the meaning of 49 USC § 41720, or to obtain an exemption from antitrust laws for a proposed alliance, The DOT primarily regulates joint ventures that result in the sharing must submit an application for the DOT for clearance (49 USC §§ of services and/or revenue in the following ways: 41308–41309). ■ Corporate Service Agreements, Code-Sharing: Joint ventures between major air carriers are regulated by the DOT under 49 USC § 41720. The DOT does not approve or disapprove 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? the agreement; rather, it reviews the agreement to ensure that it is not anticompetitive and would not harm the public. The DOT can take action under 49 USC § 41712, the statute Depending on the size of the parties involved and the value of the prohibiting unfair or deceptive practices and unfair methods proposed merger or joint venture agreement, parties seeking to of competition. merge or acquire another carrier must notify the DOJ and FTC prior ■ Global Airline Alliances: Pursuant to 49 USC § 41308– to closing. See question 4.3. By agreement with the FTC, the DOJ 41309, major US and foreign air carriers may request a grant reviews mergers, acquisitions, and joint ventures under the HSR Act of immunity from US antitrust laws to operate alliances. to determine whether the transaction will or may lessen competition In evaluating applications, the DOT employs a two-step and to determine whether the transaction should be approved, analysis. First, the DOT determines whether a proposed modified, or rejected. The DOT may submit its findings to the DOJ alliance “substantially reduces or eliminates competition”. If for review and use in the decision-making process. it does, then the DOT must disapprove the application unless the DOT finds that the alliance “is necessary to meet a serious Additionally, if a US air carrier is formed as a result of the merger, transportation need or to achieve important public benefits” acquisition, or full-function joint venture, the owner must be a citizen and there is not a less anticompetitive alternative. An alliance of the US as defined under 49 USC § 40102,i.e ., the entity must: (1) that has received immunity is required to comply with the be organised under the laws of the US or a state; (2) have a corporate operating constraints and reporting requirements specified in president that is a US citizen; (3) have two-thirds of its board of a final DOT order. directors and other managing officers comprised of US citizens; (4) be under the actual control of US citizens; and (5) be 75% (or 4.2 How do the competition authorities in your greater) owned (with a voting equity interest) by US citizens. The jurisdiction determine the ‘relevant market’ for the first three criteria require that the day-to-day operations be vested in purposes of mergers and acquisitions? US citizens. The fourth and fifth criteria require an analysis of the actual ownership structure of the company. The DOT determines The “relevant market” is determined by an analysis of the relevant “actual control” on a case-by-case basis, and requires an analysis product (goods and services) and geographic markets to assess of both contractual agreements and the corporate structure. With whether the desired merger or acquisition will or may substantially respect to the corporate structure, the DOT has approved foreign lessen competition, and whether consumers in the relevant market ownership of up to 49.99% of the total equity in an air carrier, as can find a suitable alternative in a reasonable time at similar cost long as non-US citizens hold no more than 24.99% of the voting and quality. interest. Further, there can be no indicia of foreign control, or

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even the ability of a non-US citizen to exert control or influence the DOT considers: (1) service reliability; (2) contractual and on the day-to-day management decisions of the air carrier, e.g., marketing arrangements with a larger carrier at the hub; (3) interline interlocking operational and management relationships or other arrangements with a larger carrier at the hub; and (4) community contractual arrangements vesting control in non-US citizens. views (49 USC §§ 41731–41732). The Alternative Essential Air Service Program designates funds 4.5 Please provide details of the procedure, including directly to the municipality or airport authority instead of to the time frames for clearance and any costs of carrier, which allows the community to recruit air service that would notifications. not otherwise meet EAS guidelines. The Small Community Air Service Development program is a grant USA The HSR Act requires notification to the FTC and DOJ and the program to provide financial assistance to small communities that submission of a filing fee (ranging between US$45,000 to US$280,000 address air service and airfare issues (49 USC § 41743). To be based on the size of the transaction) and detailed information about each eligible, the airport serving the community cannot be larger than a party’s business, including the rationale and plans for the transaction. small hub airport and the community must demonstrate that it has The agencies will determine whether additional information is insufficient air carrier service, or unreasonably high airfares. The needed or whether they want to challenge the transaction or allow the DOT may provide assistance to an air carrier to subsidise service transaction to close (16 CFR Parts 801, 802, and 802). to and from an underserved airport for a period of up to three years, Parties seeking approval of a joint venture within the meaning of 49 or it may provide assistance to an underserved airport. Grant sizes USC § 41720, or a cooperative agreement, and/or antitrust immunity have ranged from $20,000 to nearly $1.6 million. for a proposed alliance, must submit an application to the DOT. The DOT shall grant approval and/or request for an exemption where: 4.8 What are the main regulatory instruments governing (1) it is not in violation of the laws of 49 USC § 413; (2) it is not the acquisition, retention and use of passenger data, adverse to the public interest; and (3) it does not substantially reduce and what rights do passengers have in respect of or eliminate competition, unless it is necessary to meet a serious their data which is held by airlines and airports? transportation need or to achieve important public benefits. The DOT must provide notice to the Attorney General and the Pursuant to the Intelligence Reform and Terrorism Prevention Act Secretary of State and an opportunity to comment, and a hearing if of 2004 (49 USC § 114) and the TSA’s Secure Flight Program (49 required. The DOT must make a final decision within six months CFR Parts 1540 and 1560), for purposes of security screening, airlines of receipt if there is no hearing, or 12 months if there is a hearing. that operate flights to and from the US must collect passenger name records (“PNR data”), which includes the passenger’s full name, date of birth, and gender. Records of passengers who are not potential or 4.6 Are there any sector-specific rules which govern the confirmed matches on the No Fly List are deleted within seven days aviation sector in relation to financial support for air operators and airports, including (without limitation) of travel. Under the Privacy Act of 1974, passengers may request a state aid? copy of or make to their PNR data. In addition, air carriers typically have their own privacy policy and are subject to state privacy The US government does not provide direct financial support to US laws. EU citizens are covered by the EU-US PNR Agreement. airlines, with the exception of the programs set forth in question 4.7 The DOT protects the privacy of consumers under 49 USC § 41712, below. Under the Airline Deregulation Act, the government may not which prohibits unfair or deceptive trade practices. The DOT has enforce a law, regulation, or other provision related to a price, route, determined that an airline or ticket agent may violate an airline or service of an air carrier providing transportation. passenger’s privacy by: (1) violating the terms of the airline’s The federal and state governments do, however, provide financial privacy policy; (2) gathering or disclosing private information in support to airports, sourced primarily through the Airport a way that violates public policy, is immoral, or causes substantial Improvement Program (“AIP”), which provides funding through consumer injury not offset by countervailing benefits; (3) violating FAA grants, for airport capital improvements related to enhancing a rule issued by the DOT identifying specific privacy practices to be airport safety, capacity, security, and environmental concerns unfair or deceptive; or (4) violating the Children’s Online Privacy through grants from the FAA. Projects related to airport operations Protection Act (“COPPA”) or FTC rules implementing COPPA. and revenue-generating improvements are generally not eligible for Individuals may file privacy-related complaints with the DOT’s funding. Airports that accept federal funding, such as through the Aviation Consumer Protection website. AIP, accept obligations as part of the grant assurances to operate Airports generally do not collect data that identifies a passenger’s and maintain the airport in a safe and serviceable condition, not personal information, although their facilities may be utilised by grant exclusive rights, mitigate hazards to airspace, and use airport the government for that purpose. Airports, however, have begun to revenue properly. Operators must also comply with security track passenger traffic for purposes of maximising their concession requirements imposed by the TSA and CBP. revenue. For example, purchasing habits may form the basis for sending targeted coupons to passengers’ smartphones.

4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these 4.9 In the event of a data loss by a carrier, what subsidies? obligations are there on the airline which has lost the data and are there any applicable sanctions? The Essential Air Service (“EAS”) Program permits the US government to subsidise air carriers to serve small, rural There is no US federal law specifically regulating the loss of private communities to maintain a minimal level of scheduled air service consumer data or a data breach in the aviation industry. As set forth to those communities. Generally, the DOT will subsidise between in question 4.8, under the DOT’s unfair and deceptive practice two round trips per day with a 30-to 50-seat aircraft between an statute, a passenger may file a privacy-related complaint, and an EAS community and a major hub airport. In selecting a carrier, airline could be fined up to $27,500 per violation.

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Air carriers are governed by their own privacy policies and state DOT regulations require carriers to notify passengers of known privacy laws. State privacy laws often require, among other delays, cancellations, and diversions (14 CFR 259.8). DOT things, reasonable security procedures, data disposal procedures, regulations also provide that US and foreign air carriers cannot and notification of a security breach. States also typically allow permit an aircraft to remain on the tarmac for more than three for private rights of action by individuals, and enforcement actions hours for domestic flights and four hours for international flights, by state Attorneys General, for civil penalties, damages, and/or with exceptions for certain safety, security, and air traffic control injunctive relief, in the event of a data loss or breach. concerns (14 CFR 259.4). Carriers have been fined substantial EU citizens may seek recourse through the EU-US PNR Agreement. amounts for failure to comply with the tarmac delay rule, pursuant to 49 USC §§ 42301, 41712, and 46301. In 2018, the US Congress introduced a bill entitled, “Aircraft USA Avionics Systems Cybersecurity Act”, to require the FAA to address cybersecurity concerns for aircraft avionics systems, including 4.13 Are the airport authorities governed by particular software components. legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities?

4.10 What are the mechanisms available for the protection The FAA, pursuant to 14 CFR Part 139 and 49 USC § 44706, issues of intellectual property (e.g. trademarks) and other Airport Operating Certificates to airports that serve scheduled assets and data of a proprietary nature? passenger-carrying operations using aircraft originally designed with more than nine passenger seats, or an unscheduled passenger- While federal law does not require federal registration of trademarks, carrying operation using an aircraft originally designed with more registration does enhance an airline’s rights because it provides than 30 passenger seats. To satisfy the Part 139 standards, an airport a legal presumption of the exclusive right to use the trademark must maintain an FAA-approved Airport Certification Manual, throughout the US or in connection with the goods and services which ensures that safety and maintenance requirements are met. identified with the registration. The Lanham Act establishes a procedure for federal registration of trademarks with the US Patent In the event of an excessive tarmac delay, federal law requires and Trademark Office (15 USC § 1501, et seq.). Copyrights are airport authorities to provide for the deplanement of passengers, to registered with the US Copyright Office. the extent practicable (49 USC § 42301).

4.11 Is there any legislation governing the denial of 4.14 To what extent does general consumer protection boarding rights and/or cancelled flights? legislation apply to the relationship between the airport operator and the passenger? Under 14 CFR Part 250, the DOT permits airlines to oversell tickets for a flight; however, Part 250 mandates compensation and other Airports must be accessible to passengers with disabilities through protections for passengers who hold “confirmed reserved space” compliance with the applicable sections of the Americans with on a flight, have complied with the carrier’s contract of carriage, Disabilities Act of 1990 (49 USC §§ 12101–12213), Section 405 of have met the carrier’s requirements regarding check-in time and the Rehabilitation Act of 1973 (29 USC § 794), and the Air Carrier appearance at the gate, and have been involuntarily denied boarding Access Act of 1986 (40 USC § 41705, 14 CFR Part 382). because the flight was oversold. Before denying boarding to In addition, when airport owners and operators accept federal grants, passengers, an airline must solicit volunteers to relinquish their seats such as through the AIP, the Federal Aid to Airports Program, or in exchange for compensation. If there are not enough volunteers, the Airport Development Air Program, they agree to operate their a carrier may deny boarding against a passenger’s will, provided facilities in a safe and efficient manner and to comply with certain that the carrier pays the passenger immediately with Denied Board conditions and assurances. These assurances include that the airport Compensation, which varies depending upon the planned arrival will be available for public use on fair and reasonable terms without time of the substitute transportation, if available, and whether the unjust discrimination. flight is domestic or international. The carrier must notify the DOT of all passengers involuntarily denied boarding, on a quarterly 4.15 What global distribution suppliers (GDSs) operate in basis. The DOT may seek enforcement action against air carriers your jurisdiction? that improperly deny passengers boarding under Part 20 as well as 49 USC § 41712. Amadeus, Sabre and Travelport are the GDSs that operate in the For domestic flights, airlines are not required to compensate USA. passengers whose flights are cancelled. For international flights, passengers may be entitled to reimbursement under Article 19 of the 4.16 Are there any ownership requirements pertaining to Montreal Convention for expenses incurred from a cancelled flight GDSs operating in your jurisdiction? by filing a claim with the airline. No. However, the DOT can monitor the actions of GDSs under its 4.12 What powers do the relevant authorities have in unfair and deceptive practice statute, 49 USC § 41712. relation to the late arrival and departure of flights?

4.17 Is vertical integration permitted between air operators The DOT can bring an enforcement action with civil penalties and airports (and, if so, under what conditions)? against an air carrier for unrealistic scheduling of flights, including by deeming a chronically delayed flight to be an unfair and deceptive There are patterns of vertical integration in the US, especially with practice in violation of 49 USC § 41712. A chronically delayed multiple major operators contracting with smaller operators at flight is defined as any domestic flight operated at least 10 times a regional airports. Generally, however, operators enter into lease month which arrives more than 30 minutes late (including cancelled agreements with airports and there is federal oversight because of flights) more than 50% of the time.

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competition concerns given that airports are natural monopolies. three thresholds: (i) has annual gross revenues in excess of $25 “Local” competition in the New York area (with JFK, Newark, and million; (ii) alone or in combination annually collects personal LaGuardia airports being in competition with each other and JFK’s information of more than 50,000 California consumers; or (iii) multiple terminals being operated individually by multiple different derives more than 50% of its annual revenue from selling consumers carriers and non-carriers) can be viewed as an exception. personal information. “Personal information” broadly includes any information that 4.18 Are there any nationality requirements for entities “identifies, relates to, describes, is capable of being associated with, applying for an Air Operator’s Certificate in your or could reasonably be linked, directly or indirectly, with a particular jurisdiction or operators of aircraft generally into and consumer or household”. out of your jurisdiction? USA The CCPA creates a series of consumer data management rights: the Right to Know; the Right of Erasure; the Right to Opt Out; the Right Yes. Under the FAA’s enabling statute, a US air carrier must be to Equal Service; and the Right to Access. Of particular relevance to deemed a US citizen by the DOT in order to receive the appropriate the aviation industry, under the Right of Erasure, subject to certain operating authority from the DOT and the FAA. The “citizen” restrictions, a consumer can demand that a covered business delete qualifications are set forth above in question 4.4. the consumer’s personal information from any business servers or from databases controlled by any service providers of the business 5 In Future with access to personal information. The California Attorney General has primary enforcement authority under the CCPA, and is given authority to identify violations and – 5.1 In your opinion, which pending legislative or after a 30-day cure period – seek administrative penalties of up to regulatory changes (if any), or potential developments $7,500 per violation. Individual consumers can also bring claims affecting the aviation industry more generally in under the CCPA, but only for cases arising out of the “unauthorized your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? access and exfiltration, theft, or disclosure of a consumers’ nonencrypted or nonredacted personal information” if the business failed “to implement and maintain reasonable security procedures California recently enacted a sweeping privacy law, which echoes and practices appropriate to the nature of the information to protect key provisions of the EU General Data Protection Regulation information”. Claims brought by private plaintiffs are capped at (“GDPR”). The California Consumer Privacy Act ( “CCPA”) either $750 per violation, or actual damages (whichever is greater). applies to “businesses”, which includes any for-profit business The CCPA is scheduled to go into effect on January 1, 2020. operating in California that collects consumer personal information (as defined below), and that, or jointly with others, meets one of

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

Tel: +1 212 430 8049 Tel: +1 212 634 5043 Email: [email protected] Fax: +1 212 634 5088 URL: www.leclairryan.com Email: [email protected] URL: www.leclairryan.com USA

Ms. Wilson has a broad litigation and ICC and AAA arbitration practice, Ms. Tingey focuses her practice on complex commercial litigation representing clients internationally and throughout the United States, and arbitration and represents domestic and international clients from with particular expertise in the aerospace, aviation, and airline industries. various industries, including aviation and airline, insurance, finance, Ms. Wilson has been personally handling complex disputes and working and manufacturing. She counsels and defends airlines, airport with counsel around the world for over 30 years. From Brazil to London operators and developers, and component part manufacturers in state to Bangkok, Ms. Wilson has handled major and minor claims and and federal courts. Ms. Tingey’s commercial litigation experience multijurisdictional litigation. Ms. Wilson has represented clients in state includes representing corporate entities and individuals in matters and federal, trial and appellate, courts throughout the US. Among other involving business torts and breach of contract, employment disputes, significant matters, Ms. Wilson represented EL AL in the landmark United and shareholder disputes. Ms. Tingey also has experience litigating States Supreme Court multilateral treaty case, EL AL Israel Airlines v. securities fraud and consumer fraud class actions. Ms. Tingey was Tseng. The transcript and audio of Ms. Wilson’s argument before the recognised as a “Rising Star” by New York Metro Super Lawyers in Supreme Court is available at: https://www.oyez.org/cases/1998/97-475. 2014, 2015, 2016, and 2017. A graduate of Brooklyn Law School (J.D.), cum laude, and Cornell University (A.B.), Ms. Tingey is admitted Ms. Wilson provides strategic counselling and representation to a wide in New York. variety of airlines, airports and manufacturers in the aerospace, aviation, and other industries in state and federal courts, as well as assisting them in long-term strategic business decisions. Ms. Wilson, Co-Chair with Mark Dombroff of the Firm’s Aviation Practice Group, thanks the attorneys at LeClairRyan who work with the aviation sector group for their contributions to the myriad of issues covered by this Chapter, from tax and corporate to airline and airport issues. The team ethos of LeClairRyan is truly unique.

LeClairRyan has one of the largest aviation sector focused groups in the US, and provides business counsel and client representation in all facets of litigation and corporate law to a full spectrum of clients worldwide. We represent domestic and international commercial airlines, aviation product manufacturers, aviation service providers, airport developers, owners and operators of private aircraft entities, lessors, financiers and insurers. Our team has unparalleled experience representing aviation clients in litigation throughout the US – ranging from NTSB investigations; regulatory, administrative and enforcement matters before the FAA, DOT, TSA, state justice and other federal and state bodies; airport and aircraft security, employment issues, and the regulation of unmanned aircraft systems (UAS). LeClairRyan also offers clients the talents of attorneys in practice areas such as intellectual property, products liability, labour and employment, finance and tax, corporate services, general counsel and secondments, commercial transactions, and real estate.

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