THE ROLE OF ARBITRATION IN THE AVIATION INDUSTRY

This article is written by Aashi Jain of 2^nd Year of Dharmashastra National Law University, Jabalpur, an intern under Legal Vidhiya

ABSTRACT

A multitude of industries have emerged as a result of the rise in trade and commerce throughout the world. The idea of civil aviation and related features is one of these concepts. It follows that disputes may inevitably result from the existence of such a significant sector. Domestic as well as international legal stability are negatively impacted by these disputes, which are mainly legal in nature. The participants in this industry, however, choose arbitration and other comparable forms of alternative conflict resolution to the drawn-out legal process.

Arbitration has emerged as a crucial instrument for settling these conflicts because it offers a more rapid, confidential, and flexible resolution than traditional litigation. This abstract looks at the various ways that arbitration is used in the aviation sector and highlights the advantages of doing so to resolve a variety of disputes, from commercial and contractual disputes to creative issues regarding new aircraft technologies and environmental regulations.

Keywords-

Arbitration, Aviation, flexibility, litigation, time effective, confidential.

INTRODUCTION TO CIVIL AVIATION ARBITRATION

“Civil Aviation Arbitration” is a dispute resolution process exclusive to the aviation sector. This kind of arbitration is typically used to resolve conflicts involving airlines, airports, and other aviation-related businesses. Conventional litigation tactics are rarely thought to be as effective and efficient as civil aviation arbitration when it comes to resolving disputes. Civil aviation arbitration is necessary to keep the global aviation business operating smoothly. This form of dispute resolution not only guarantees speedy and efficient resolution of problems, but it also helps avoid service disruptions. Moreover, you might be able to avoid the enormous expenses involved in traditional litigation strategies by employing civil aviation arbitration.

It is crucial to keep in mind that there are more factors to take into account when analyzing a legal dispute arising from an aircraft design, including the pilot’s misuse of the aircraft, the early presentation of risk in the aircraft design, and other similar problems. Merely proving that the accident or injuries were most likely caused by the aircraft’s design is insufficient. It is important to remember that these are subjective in nature and that there are a variety of criteria to be taken into account when resolving conflicts in the civil aviation industry.

We recognize that maintaining the innovative structure and materials used to enhance aircraft performance becomes crucial when the subject of maintenance comes up in court—that is, if the parts or structure are continuously breaking down. Otherwise, the aircraft won’t be operating profitably and won’t cause losses. This includes the process of various maintenance plans, repairs, and inspections. The company that purchases the airplane and the one that makes the parts for it no longer have to be the same. This implies that if an airplane or any of its components breaks down, arguments will unavoidably arise[1].

WHAT IS ARBITRATION

There are many different ways to resolve problems through Alternative Dispute Resolution, including negotiation, mediation, conciliation, and arbitration. Such a procedure offers disputing parties an additional way to settle their disagreement outside of the legal system. These days, disputing parties would rather use alternative dispute resolution procedures than drawn-out court cases to settle their differences. Over the past few decades, arbitration has emerged as the most often used form of alternative dispute resolution. because of the many advantages of arbitration proceedings have led to their increasing popularity.

In the arbitration procedure, disputing parties consent to having a third party to mediate their disagreement. This third party could be one person, several people, or an organization. Because institutional arbitration can handle conflicts involving both national and international trade more easily than courts, disputing parties typically prefer to refer their issues to it. The use of institutional arbitration to settle business disputes is growing, while court intervention is decreasing.[2]

Instead of using the state’s coercive power to settle a dispute or series of disputes, arbitration is a useful method for reaching a final and enforceable agreement between the parties. Arbitration is a straightforward, informal, and mostly private process for resolving disputes. The most crucial feature of arbitration is its procedural flexibility. For two main reasons—neutrality and enforcement—arbitration has gained global acceptance as the primary means of settling international disputes. Regarding “neutrality,” international arbitration allows the parties to select a “neutral” venue and “neutral” panel for the settlement of their disagreements. When it comes to “enforcement,” the losing party in an international arbitration faces a decision that is enforceable everywhere in the world.[3]

Before the Arbitration Act was passed, the arbitration law was made up of the Arbitration Act of 1940, the Arbitration (Protocol and Convention) Act of 1937, and the Foreign Awards (Recognition and Enforcement) Act of 1961. The Arbitration Act was created with the goal of “consolidating and amending the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards,” in addition to outlining the legal limits governing conciliation and related matters. In the process, the Arbitration Act repealed the 1940 Act, the 1937 Arbitration (Protocol and Convention) Act, and the 1961 Foreign Awards (Recognition and Enforcement) Act.[4]

Additionally, it brought corporate arbitration, both domestically and internationally, in accordance with the Geneva Convention, the New York Convention, and the Model Law. [5]

Part I of the Arbitration Act covers arbitrations conducted in India, both domestically and internationally. Part II of the Act addresses the requirements of the Geneva and New York Conventions regarding the enforcement of foreign arbitral awards. The third section of the Act deals with conciliation. Part IV of the Act contains additional provisions.[6]

INTERNATIONAL PERSPECTIVE 

Arbitrations that in some way across national boundaries are referred to as “international arbitrations.” Nonetheless, parties are not need to be of different nations due to the transnational character of arbitration. There must be a connection between international treaties and conventions and national law for international arbitration to work well. Put another way, the reason why international arbitration works so well as a conflict resolution tool is because it is based on a complex web of state laws and international treaties.

Even in the aviation industry, arbitration is becoming a more and more common means of resolving disputes. The aviation industry has had a notable surge in activity and development recently, which has raised the likelihood of legal disputes, particularly given the enormous business interests involved. The current discussion will center on disputes pertaining to corporate aviation and interstate travel. In the international civil aviation sector, disagreements are generally attributed to six basic reasons: restrictions on airline promotion, sales, and cash remittances ; (a) the deregulation of air travel; (b) restricted entry to travel agents and computer reservation systems; unfair ground handling levies and restrictions; (d) bias in capacity, frequency, and other operational limitations; (e) differential fees for air traffic control (ATC) and air traffic navigation (ATN). The previously described causes of conflicts in the international civil aviation sector can be broadly divided into two categories: non-commercial and commercial disputes. The Chicago Convention governs commercial disputes, while non-commercial

Arbitration is becoming one of the most widely used methods of resolving disputes in the aviation industry. Many international legal treaties, both bilateral and multilateral, contain the pertinent provisions in this regard. Various arguments have been made for the application of arbitration in this field, citing the various benefits that come with the above-discussed arbitration process. The broad range of aviation disputes brought on by the industry’s multinational nature is a significant feature that is pertinent in the current setting.

Two primary factors have contributed to arbitration’s unique status in resolving legal disputes pertaining to international civil aviation: first, it is commonly employed as a standard dispute resolution mechanism in bilateral agreements; and second, it has yielded favorable results in actual cases, like the Belgium-Ireland Arbitration (1981). Furthermore, a growing number of commercial agreements entered into between firms operating in the aviation industry and between states and multinational corporations also use arbitration as a means of resolving conflicts.[7]

CHALLENGES FACED BY THE CIVIL AVIATION SECTOR

Arbitration in civil aviation has difficulties from the political, business, and economic spheres in addition to the legal one. Given this, it is essential to comprehend the function that civil aviation arbitration serves in international trade. There has been a noticeable increase in the number of disputes that have occurred in the civil aviation sector in tandem with the growth of global trade and commerce. These disputes cover a broad spectrum of subjects, from aircraft leasing and funding to operational issues including security and safety. Fundamentally, leasing is the process by which a nation’s individual, business, or government takes temporary control of an asset or commodity without actually owning it.

Leasing may be one of the most prevalent market challenges since there are financial obstacles dividing various Indian airlines from foreign airplane leasing firms. In the event of a financial dispute with an Indian airline, international aircraft leasing companies will be able to take back and transfer the aircraft under the Ministry of Civil Aviation’s proposed Protection and Enforcement of Interests in Aircrafts Objects Bill, 2022. The Bill will be passed and any relevant flaws will be investigated, even though it is not yet an Act. Numerous airlines have declared bankruptcy as a result of the COVID-19 pandemic, the crisis between Russia and Ukraine, and other negative effects on the world economy. This has led to several contractual conflicts between airlines and their creditors.  As a result, civil aviation arbitration plays a critical role in settling these conflicts by giving the parties a venue to work out their disagreements without going to court. Furthermore, civil aviation arbitration is a crucial instrument for fostering stability and expansion in the sector. To preserve its long-term viability, the civil aviation sector must overcome a number of difficulties.[8]

These challenges are as follows:

Exorbitant costs: If the case is complicated and requires expert witness testimony, civil aviation arbitration costs could be quite high. If the arbitrators demand exorbitant fees, parties may be discouraged from initiating arbitration proceedings. The 1996 Act’s Fourth Schedule lays out the arbitration fees according to the amount at stake.

The absence of consistency in arbitral rules: There are now no standardized rules governing arbitration in civil aviation. This could lead to a great deal of confusion and prolong the procedures. This is due to the fact that the CNS/ATM and SAOA agreements only take the 1996 Act into account, although mentioning discussion and arbitration as methods of dispute resolution. The issue with this is that, contrary to past precedent, the 1996 Act does not distinguish between conflicts in the civil aviation industry and other industries.

The need for specialized expertise: To address many of the issues that are often dealt in civil aviation arbitration, a significant amount of specialized knowledge is needed. Because the arbitrators could not have access to this information, it could be a barrier for the parties seeking justice. Furthermore, the arbitral decision may not make sense if the arbitral tribunal chosen for the assignment is not qualified to make decisions on issues concerning the civil aviation industry.

The necessity of specialized knowledge : Many of the common difficulties in civil aviation arbitration need a high level of specialized knowledge. The fact that the arbitrators could not have access to this material could be a challenge for the parties seeking justice. Moreover, the arbitral decision may be illogical if the arbitral tribunal assigned to the case is not qualified to make decisions on issues concerning the civil aviation industry.

CONCLUSION

A customized, effective, and efficient substitute for conventional litigation, arbitration is the cornerstone of conflict resolution in the aviation sector. Its capacity to manage the particular intricacies of the industry, such as global rules, cross-border transactions, technology innovations, and environmental issues, renders it important. Arbitration not only settles disagreements amicably but also promotes creativity, collaboration, and stability in a fast-paced sector by offering a private, expert-driven process. In order to ensure that disputes are handled fairly, precisely, and in a way that promotes the expansion and sustainability of the aviation sector, arbitration’s role will surely rise as the sector develops.

REFERENCES

1. Analysis of the Civil Aviation Arbitration Sector: A Dynamic State of Affairs of What Was, What Is, and What Can Be,https://ijpiel.com/index.php/2022/09/07/analysis-of-the-civil-aviation-arbitration-sector-a-dynamic-state-of-affairs-of-what-was-what-is-and-what-can-be/.
2. Navigating the Skies: Arbitration in Resolving Disputes in the Indian Aviation Industry, https://viamediationcentre.org/readnews/MTgw/DURATION-OF-ARBITRAL-PROCEEDINGS.
3. India Moves One Step Further Towards “Arbitration-friendly” Jurisdiction,
4. https://elibrary.law.psu.edu/arbitrationlawreview/vol11/iss1/10/
5. Jaskaran Singh Narula, Roadmap to Legality and Enforceability of Unstamped Arbitration
6. Agreementshttps://www.barandbench.com/law-firms/view-point/roadmap-to-legality-and-enforceability-of-unstamped-arbitration-agreements.
7. Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899 https://www.scconline.com/blog/post/2023/12/23/justice-sanjay-kishan-kaul-retiring-the-gavel-with-honour-and-legacy/.
8. “International Aviation Arbitration: A Critical Analysis of Emerging Trends”https://www.scconline.com/blog/post/2023/09/01/international-aviation-arbitration-a-critical-analysis-of-emerging-trends/
9. “Arbitration In The Airline Industry: System Boards Of Adjustment”, https://naarb.org/wp-content/uploads/2018/09/2010-225.pdf
10. “The Role of Arbitration in International Civil Aviation Disputes”,
11. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2705459

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[1]  Yazad Udwadia & Abeer Tiwari, Analysis of the Civil Aviation Arbitration Sector: A Dynamic State of Affairs of What Was, What Is, and What Can Be, IJPIEL ( Sep 7, 2022),  https://ijpiel.com/index.php/2022/09/07/analysis-of-the-civil-aviation-arbitration-sector-a-dynamic-state-of-affairs-of-what-was-what-is-and-what-can-be/.

[2] Institutional Arbitration Minimizes the Interference Powers of the Judiciary, 3.1 JCLJ 1843 (2022).

[3] Trupti Shetty, Navigating the Skies: Arbitration in Resolving Disputes in the Indian Aviation Industry, https://viamediationcentre.org/readnews/MTgw/DURATION-OF-ARBITRAL-PROCEEDINGS.

[4] Zinye shen, India Moves One Step Further Towards “Arbitration-friendly” Jurisdiction, PENNSTATE LAW, https://elibrary.law.psu.edu/arbitrationlawreview/vol11/iss1/10/

[5] Jaskaran Singh Narula, Roadmap to Legality and Enforceability of Unstamped Arbitration Agreements, BAR AND BENCH, https://www.barandbench.com/law-firms/view-point/roadmap-to-legality-and-enforceability-of-unstamped-arbitration-agreements.

[6] Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899, In re, 2023 SCC Online SC 1666, https://www.scconline.com/blog/post/2023/12/23/justice-sanjay-kishan-kaul-retiring-the-gavel-with-honour-and-legacy/.

[7] International Aviation Arbitration: A Critical Analysis of Emerging Trends, (2023) 6 SCC J-50

[8] Supra 1

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