Professional Documents
Culture Documents
Produced in partnership with Sophie Eyre, Partner, Simon Phippard, of Counsel and Matthew Foote, Senior
Associate of Bird & Bird LLP
Brexit: The UK's departure from the EU on exit day ie Friday 31 January 2020 has implications for practi-
tioners in areas covered by this Practice Note, being applicable law, jurisdiction, service and enforcement.
For guidance, see: Cross border considerations—checklist.
Aviation, by its very nature, is an international industry, involving moving, as opposed to fixed assets, that are
owned pursuant to complex structures, in multiple jurisdictions. Airlines almost invariably operate internation-
ally. Commercial aircraft manufacturers and their supply chains are even more globalised. The scope for dis-
putes is broad and the airline industry is highly regulated. Disputes may involve layers of complexity relating
to contractual, tortious, jurisdictional and regulatory issues and relationships between numerous stakehold-
ers including aircraft operators, owners, lessors, lessees, manufacturers, regulators and airports.
Given the breadth of this category of disputes, this Practice Note focuses on the practical issues which may
need to be considered in starting a claim and does not address specific substantive issues relating to any
particular dispute.
Given the international context and complex structure of relationships (and therefore disputes) within the avi-
ation industry, there is a considerable degree of similarity in terms of issues to consider, with disputes in oth-
er large-scale multi-national industry sectors, such as that of the energy sector. Accordingly, you may wish to
consider the below content alongside Practice Note: Starting a claim in an energy dispute—a practical guide,
to which specific links are indicated where appropriate below.
Aviation disputes—examples and a hypothetical scenario
The scope of disputes that fall within the category of 'aviation' is broad and can range from a straightforward
dispute between a lessor and a lessee about late payment to more complex disputes relating to defective
products that force an aircraft out of service or unsatisfactory equipment performance.
Examples of typical aviation disputes include:
• redelivery disputes, where damages are sought for the late redelivery and/or for the failure to
deliver the aircraft in the required redelivery conditions. Alternatively, the lessee contends that
the redelivery conditions are satisfied but the lessor refuses to accept the aircraft. The lessees
may wish to force the lessor to take the aircraft back
• intellectual property disputes. For example, a dispute between an airline and a seat manufac-
turer alleging patent infringement
• operational disputes. For example, a dispute between an airline and a national aviation regula-
tor in relation to the implementation of flight plans
• insolvency matters. A dispute between an airport, creditors of an insolvent airline and lessors in
respect of various outstanding monies
• charges payable or the extent of services provided under long term aftermarket support
agreements or the ability of either party to withdraw from such agreements, either in whole or in
part
• interim relief from national courts. Obtaining an emergency interim injunction to repossesses an
aircraft when an aircraft arrives in the jurisdiction where the injunction was obtained
• obtaining repossession orders and attachment of assets and receivables against different les-
sees in a number of different jurisdictions
• regulatory claims. For example, compensation claims under EU consumer protection regula-
tions or similar regimes elsewhere, or over the right of an insolvent airline to be allocated land-
ing slots for future seasons
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The hypothetical example below illustrates some of the complexities of a typical aviation dispute:
A Ltd, a Singaporean airline, entered into an agreement with B GmbH, a German registered aircraft manu-
facturer, to deliver ten aircraft fitted with engines supplied by D LLC, a US company registered in Delaware.
A Ltd has arranged a variety of financing mechanisms so that it will not directly purchase all of the aircraft.
One is subject to a lease with C SpA, an Italian registered company.
To date, A Ltd has taken delivery of two aircraft and, according to the contract with B GmbH, it will take de-
livery of the further eight aircraft at various intervals over the next 18 months.
The first two aircraft were delivered approximately five months late. The next aircraft is due to be delivered in
January and B GmbH has reassured A Ltd that this delivery will be on time as will the deliveries of all addi-
tional aircraft.
The first aircraft delivered had engine problems and was grounded for four months. A support letter (SL) was
entered into between A Ltd and D LLC to provide assistance to resolve the issues suffered by that aircraft.
The second aircraft delivered had different issues with its engines to those suffered by the first aircraft but
these new issues resulted in the second aircraft also being grounded. It appears to A Ltd that there is a
known engine issue and therefore A Ltd is concerned about taking delivery of the remaining eight aircraft.
In addition, A Ltd says that the issues with the engines in the two aircraft that have already been delivered
have not been satisfactorily resolved. However, since the agreement with B GmbH was signed, A Ltd has
been having financial difficulties. It has secured financing to pay for the aircraft due to be delivered in Janu-
ary but it is now unsure if it can find the funds needed to buy the remaining seven aircraft it has agreed to
purchase from B GmbH.
Further, the aircraft that is due to be delivered in January is subject to a lease agreement between A Ltd and
C SpA. A Ltd is worried about accepting delivery of this aircraft in light of the known engine issues with the
first two aircraft which have been delivered.
This leads to:
• advice from A Ltd's external lawyers as to which legal procedure to follow in order to resolve
the dispute. The SL is governed by New York law and the lease by English law. The main
agreement is also governed by English law and contains a non-exclusive jurisdiction clause in
favour of the English courts. Further, the lease contains an arbitration clause. The SL and main
agreement with B GmbH also contain provisions for expert determination to resolve any tech-
nical issues prior to the parties taking any disagreement to court
• a potential dispute with B GmbH as to whether A Ltd must still accept delivery of the third air-
craft in light of the fact that A Ltd is now aware that the aircraft has a suspected defective en-
gine. If A Ltd decides not to accept delivery from B GmbH, this may lead to another potential
dispute with C SpA pursuant to the lease agreement with it
• a potential claim by B GmbH against A Ltd for the late, and possibly non-payment, of the re-
maining aircraft it has agreed to buy
The first question will be choice of law, ie what is the governing law of the contract? Different considerations
apply depending on whether dealing with contractual or a non contractual dispute. If the former then check
first as to whether the contract expressly provides for the applicable law.
For further guidance, see Practice Note: Cross border considerations–checklist—Applicable law.
Jurisdiction
With cross-border disputes it will also be necessary to consider the issue of jurisdiction, ie, in which country’s
courts could (and should) the claim be issued. Jurisdiction issues in aviation disputes can be very complex.
In the case of aviation disputes jurisdiction preferences are normally expressly stated in the contractual doc-
umentation by means of an arbitration clause or a jurisdiction clause providing for the courts of a specific ju-
risdiction. Even where there are express clauses, difficulties can arise where the dispute involves a number
of contracts as each may have different and/or conflicting clauses. The question of which clause prevails will
need to be decided at the outset of any dispute and this may incur additional time and costs for the parties
involved if this results in satellite litigation.
Where there is no arbitration or jurisdiction clause in the contractual document or the claim is not based on a
contractual relationship, which court has (or courts have) jurisdiction will be determined by either the relevant
jurisdictional regimes applicable or the national law of the country in which proceedings have been brought, if
there is no specific jurisdictional regime. For further guidance, see: Cross border considerations–checklist—
Jurisdiction.
In some cases, there may potentially be alternative places to issue the claim (usually in non-contract cases
or where the contractual documentation contains conflicting jurisdiction or non-exclusive jurisdiction clauses).
When determining where to commence proceedings, it will be important to consider which courts are best
placed to have jurisdiction to deal with the dispute. For example:
• where a dispute relates to the leasing of a fleet of aircraft, the assets at the centre of the dis-
pute are moveable. Therefore, while the aircraft is physically in a jurisdiction at the time that a
claim form is to be issued, consideration should be given to whether it will still be there when it
is time to enforce the judgment. Put another way, will there be any assets left to enforce the
judgment against in that particular jurisdiction and if not is a judgment from the jurisdiction en-
forceable in other countries to which the assets may relocated by the defendant?
• is the claim based on limited recourse financing, ie a lessor’s only recovery is against the sub-
ject aircraft; or whether it is a general monetary claim against a supplier who may have fixed
assets in a number of jurisdictions. If so, this will be critical to a claimant’s decision of where to
issue proceedings
• what national civil procedure rules apply. This is a consideration as the rules will differ in every
jurisdiction, and can also lead to delays and costs at the time of issue of the claim, during the
course of litigation, and also when it is time to enforce a judgment
Practical tip: as well as advising on the prospects of the English courts founding jurisdiction for the claim,
you may also need to take advice early on from local lawyers in other jurisdictions where jurisdiction could be
founded to understand how their court systems determine jurisdiction. Where there are potentially alternative
places to issue the claim (usually in non-contract cases or where the contractual documentation contains
conflicting jurisdiction or non-exclusive jurisdiction clauses) then be aware that the prospective defendant
may consider an alternative jurisdiction preferable and so the parties may end up in a jurisdiction ‘race’ to
issue proceedings first in their preferred jurisdiction.
For guidance on issues that can arise in the face of apparently competing litigation and arbitration clauses,
see Practice Notes:
See also the decision of Jacobs J in Etihad Airways v Flˆther, as discussed in News Analysis: Court provides
guidance on scope of jurisdiction agreements, including asymmetric clauses (Etihad Airways v Flˆther).
References:
Etihad Airways PJSC v Flˆther [2019] EWHC 3107 (Comm)
Service of proceedings
If any of the parties are based outside the country in which the dispute is to be resolved, you will need to
consider how proceedings will be served once they are commenced.
If the proceedings are in the English courts, you may need to apply for and obtain the court’s permission to
serve proceedings on a party outside the court’s jurisdiction (CPR 6).
It will also be necessary to consider how service is to be effected. For example, does the contract specify
required methods of service or will other methods have to be used (such as the Regulation (EC) 1393/2007,
Service Regulation or the Hague Service Convention)? If the party in question has instructed lawyers and
they have instructions to accept service of proceedings this may facilitate the process.
For guidance on the different considerations associated with service out of the jurisdiction, see:
Enforcement
As seen in Practice Note: Successful enforcement—knowing your defendant, it is never too early to consider
enforcement of a court judgment or arbitral award. This is particularly so where the opponent is based
abroad or its major assets are abroad and/or can be moved—how will the judgment or award be enforced to
give it practical teeth?
It may be sensible to identify where the other party’s assets are located before proceedings are commenced.
This is especially important in aviation disputes where assets can be moveable. It is important to note
whether the assets can be tracked and what other assets may be available to enforce against, other than the
most obvious. You should also check what arrangements are in place for the mutual recognition and en-
forcement of judgments or awards in that country and it may also be sensible to obtain advice from a lawyer
in that country on how judgments and awards may be enforced. This will be even more important if the other
party is a government or state owned entity.
In some aviation disputes practical issues relating to enforcement may need to be considered. For example,
in one situation where the owner of an aircraft had not paid a judgment debt, a without notice order was ob-
tained from the court allowing seizure of an aircraft. The aircraft was tracked into the jurisdiction and plans
made to obtain the keys and take actual physical possession of it to repay the debt. This was the only way to
access the asset and enforce the judgment debt.
For guidance on enforcement of judgments and awards, see:
• Introduction to enforcement—overview
• Cross border considerations–checklist—Enforcement
• Cross border enforcement—overview
• AA 1996—recognition and enforcement of arbitral awards in England & Wales—overview
• International arbitration—enforcing international arbitral awards—overview
Evidence
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When dealing with claims involving a cross border element it may be necessary to obtain evidence from
overseas for the purposes of progressing the claim. This may consist of obtaining documents or examining
witnesses. The taking of evidence regime that applies will depend on the country in which evidence is being
sought. Where no regime applies, evidence will need to be obtained under the local laws of that country. For
further guidance, see Practice Note: Starting a claim in an energy dispute—a practical guide—Energy dis-
putes—proving the claim (evidential issues).
• LCIA arbitration—overview
• ICC arbitration—overview
• SIAC arbitration—overview
• Swiss Rules arbitration—overview
• UNCITRAL arbitration—overview
• Practice Note: Comparison of forms of ADR and litigation
• Practice Note: Dispute resolution clauses—initial considerations
• Practice Note: Which form of ADR?
• Practice Note: Starting a claim in an energy dispute—a practical guide—Resolving energy dis-
putes—arbitration or litigation?
it is not clear where a dispute should be determined because of conflicting jurisdiction clauses contained in
the agreements the parties are signatories to.
References:
Airbus SAS v Generali Italia SPA [2019] EWCA Civ 805
The background to the dispute was complex. In 2005 AO, an Italian company entered into an agreement with
Airbus to purchase a significant number of aircraft (the 'Purchase Agreement'). The Purchase Agreement
was subject to English law and ICC arbitration with a seat in Geneva. AO's rights to the purchase were then
assigned onwards and ended up with a company, M. M then sub-leased the aircraft to Alitalia. Airbus, (as
manufacturer of the aircraft), M (as lessee) and Alitalia (as sub-lessee) together with other parties entered
into a Warranties Agreement ('WA') which contained both an English governing law clause and an exclusive
jurisdiction clause confirming that the English courts have exclusive jurisdiction to settle any disputes arising
out of or in connection with the WA or any non-contractual obligations connected with it.
In 2013, one of the aircraft subject to the Purchase Agreement had to make an emergency landing and suf-
fered significant damage. The appellants in the claim are the insurers of Alitalia and they commenced pro-
ceedings against Airbus in Italy in 2017 to recover the amount they had paid to Alitalia under the insurance
policy as a result of the damage suffered to the aircraft. Airbus sought a declaration in the English courts that
the Italian proceedings were contrary to the terms of the English exclusive jurisdiction clause in the WA. Air-
bus were successful in the High Court and the insurers appealed.
Lord Justice Males gave the leading judgment and said that he would consider the bigger picture as he noted
that minute analysis of the terms of the WA produced by both parties was inconclusive regarding the inten-
tion of the parties. He noted that the WA was the only agreement to which all those who were interested in
the warranties were signatories. The terms of the jurisdiction clause were very wide, including not just dis-
putes arising out of the WA but also any non-contractual obligations connected with it. The judge concluded
from this that the natural meaning of the clause was that it was intended to be comprehensive. There was
nothing to indicate in the clause itself that the parties intended to reserve any claim under the WA for settle-
ment by ICC arbitration in Geneva. The parties, all professionally advised, would have been able to draft the
clause to encompass this yet they had not done so. The appellants were also unable to cite any legal author-
ity that permitted incorporation ‘by general words an arbitration clause from one contract into another which
already contained its own dispute resolution clause’. The judge concluded that it was highly likely that if the
parties had intended the arbitration clause in the Purchase Agreement to apply to any of the warranty claims
in the WA, the WA would have said so. The Court of Appeal therefore upheld the declaration granted to Air-
bus.
proper party to primary litigation against the airline. See Practice Note: Multiple tortfeasors—liability issues
and contribution claims.
National Regulators
Although, technical or safety regulation of civil aviation is substantially harmonised through the International
Civil Aviation Organisation (ICAO) system of internationally-agreed Standards and Recommended Practices,
regulators largely operate on a national basis. This can result in local variations in application. Typically ma-
jor manufacturers commit to supply products which meet detailed requirements applied in the United States
or the EU and this may result in disputes over who carries additional costs of meeting an additional local re-
quirement.
Cross-border aircraft leasing may cause particular difficulties. In the ordinary dry lease an aircraft will be op-
erated on the register of the lessee’s state, and so must meet that state’s requirements on equipment fit, op-
erational capability etc. On the other hand, a wet lease may entail operation on one state’s registry on behalf
of an airline registered in another state: such arrangements may require local approval before operations can
start or subsequent scrutiny by the regulator in the state of operation. Disputes may arise over the allocation
in the contracts of risk and responsibility for meeting such standards.
Delivery and redelivery disputes frequently entail disputes over airworthiness and compliance with regulatory
standards and issues over the cost implications of implementing service bulletins or complying with mandato-
ry airworthiness directives. The latter may cause difficulties where they must be implemented at some point
in the future or the contract requires compliance on a ‘terminating action’ basis.
References:
Kuwait Airways Corpn v Iraqi Airways Co [2002] UKHL 19
For guidance on sovereign immunity in the context of arbitration proceedings, see Practice Notes:
• identifying the commercial drivers in the dispute, eg, any time sensitivity issues (which in the
case of aviation disputes, may relate to the cost implications of missed landing slots, stranded
passengers, missed aircraft delivery dates etc)
• related contracts—a dispute in relation to one contract may have a considerable knock-on ef-
fect on related contracts
as considered in disputes in the energy sector which may apply with similarities in the context of aviation re-
lated disputes.
Aviation disputes—stakeholders
As a result of the nature of the aviation industry, there are often many stakeholders who have a direct or indi-
rect interest in how business is conducted and particular assets used.
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This may mean that additional steps will need to be taken before any formal proceedings are commenced or
steps taken in defending a claim to ensure that the action to be taken has their support or, at the least, it
does not come as a surprise to them.
For example, governments and regulators will be concerned about many aspects of the aviation industry
and, depending on the type of dispute and identity of the parties, regulators and governments involved, it
may be prudent to keep them informed of what is happening and the anticipated consequences of any steps
that are to be taken. In some circumstances, there will be a formal requirement to consult or seek approval
from the relevant government ministry or department of state, a state-owned entity or regulatory body. Even
where there is no formal requirement, it may be desirable, subject to confidentiality restrictions, to keep the
government and regulators informed.
For further consideration of relevant stakeholders in international disputes, such as aviation sector disputes,
as considered in the energy sector, see Practice Note: Starting a claim in an energy dispute—a practical
guide—Energy disputes—stakeholders, which includes consideration of: