13TH LEIDEN – SARIN INTERNATIONAL AIR LAW MOOT COURT

COMPETITION, 2022

IN THE MATTER OF NATIONALITY OF AIRLINES

STATE OF ATLANTIS V. STATE OF MIDGARD

MEMORIAL SUBMITTED ON BEHALF OF STATE OF ATLANTIS

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TABLE OF CONTENTS

LIST OF ABBREVIATIONS ..................................................................................................iii

LIST OF SOURCES.................................................................................................................iv

STATEMENT OF RELEVANT FACTS .............................................................................. vii

ISSUES......................................................................................................................................x

SUMMARY OF ARGUMENTS..............................................................................................xi

JURISDICTION OF THE COURT........................................................................................xiii

ARGUMENTS...........................................................................................................................1

1. Midgard did not have the right to suspend Atlantis Airlines’ sales of tickets under

Article 6 of the ASA, and in particular Midgard did not follow the required procedure

for consultation……………………………………………...………………………………..1

1.1. Midgard didn’t have the right to suspend Atlantis Airlines Sales of tickets under Article

6 of the ASA...……………………………………………….………...……………………1

1.2. Midgard did not follow the required procedure for consultation……..……….….……2

1.2.1. Midgard action of suspension cannot be deemed as immediate action………..…2

1.2.2. Midgard did not follow the required procedure for consultation….……....…….3

2. Atlantis Airlines is majority owned and effectively controlled by Atlantis and its

nationals ………...…………………………………………………………………………….5

2.1. Atlantis Airlines is majority owned by Atlantis and its nationals………………………5

2.2. Atlantis Airlines is effectively controlled by Atlantis and its nationals………………...6

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2.3. Atlantis Airlines has its principal place of business in Atlantis……………………...…8

3. Midgard’s actions in suspending Atlantis Airlines’ sales of tickets and revoking the

operating authority of Atlantis Airlines were therefore in violation of the ASA………….9

3.1. The actions of Midgard amount to a material breach of the ASA……………………10

3.2. The actions taken by Midgard are unilateral in nature ……………………………….11

3.3. Conditions for revocation and suspension of authorization are not satisfied ……………12

4. Atlantis’ retaliatory actions against Odin Airways are appropriate, proportionate and

lawful ……………………...…………….…………………………………………………...14

4.1. The retaliatory actions against Odin Airways are lawful and in response to the unlawful

actions of Midgard ...…………………………………....………………………………....14

4.2. The retaliatory actions by the State of Atlantis were appropriate.…………………....14

4.3. The retaliatory actions were proportionate……………...……………………...….….15

SUBMISSIONS .......................................................................................................................17

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LIST OF ABBREVIATIONS

Abbreviations Expansions

Annex Annexure

Art. Article

ASA Air Services Agreement

CAA Civil Aviation Agency

CAAM Civil Aviation Authority of Midgard

ECAC European Civil Aviation Conference

EU European Union

Edn. Edition

ICAO International Civil Aviation Organization

ICJ International Court of Justice

No. Number

p. Page

Para Paragraph

Rep Report/s

UK United Kingdom

UN United Nations

US United States

v. Versus

VCLT Vienna Convention on the Law of Treaties

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LIST OF SOURCES

INTERNATIONAL CONVENTIONS

1. Charter of the United Nations (adopted 26 June 1945, entered into force 24 October 1945)

(UN Charter)

2. Statute of the International Court of Justice (adopted 26 June 1945, entered into force 24

October 1945)

3. Convention on International Civil Aviation (adopted 7 December 1944, entered into force

4 April 1947) 15 UNTS 295 (Chicago Convention)

4. Vienna Convention on the Law of Treaties (adopted 23 May 1969, entered into force 27

January 1980) 1155 UNTS 331 (VCLT)

INTERNATIONAL CASES

1. Advisory Opinion on the Legal Consequences for States of the Continued Presence of

South Africa in Namibia, International Court of Justice (ICJ), 21 June 1971

2. Argentina v. Uruguay [2006] ICJ Rep 113

3. Gabčikovo-Nagymaros Project, Hungary v Slovakia, Judgment, Merits, ICJ GL No 92,

[1997] ICJ Rep 7

4. France v. United States, 74 A.J.I.L. 785 (1980)

NATIONAL CASES

1. Forklift Engineering Australia Pty Ltd v Powerlift (Nissan) Pty Ltd, [2000] VSC 443

2. Hertz Corp. v. Friend, 559 U.S. 77 (2010)

3. Mobileciti Pty Ltd v Vodafone Pty Ltd, [2009] NSWSC 899

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INTERNATIONAL DOCUMENTS

1. WTO Rule of Consultation

2. European Union Council Regulation No. 2407/92

3. International Law Commission (1999 Vol 1)

4. Gerald Fitzmaurice, Second Report, YILC, 1957, vol II

5. ICAO, Fifth Worldwide Air Transport Conference (ATConf/5), 2003

6. ICAO, Policy and Guidance Material on the Economic Regulation of International Air

Transport (Doc 9587) (Fourth Edition – 2017)

7. ILC “Draft articles on Responsibility of States for Internationally Wrongful Acts, with

commentaries”, Yearbook of the International Law Commission, 2001, vol. II, Part Two

OTHER SOURCES

BOOKS

1. Brian F. Havel and Gabriel S. Sanchez, The Principles and Practice of International

Aviation Law, Cambridge University Press, 2014.

2. Abeyratne R, Convention on International Civil Aviation: A Commentary, Springer, 2015.

3. Shawcross CN and Beaumont KM, Air Law, LexisNexis, 2013.

4. Aust A, Handbook of International Law, Cambridge University Press, 2010.

5. Simma, "Reflections on Article 60 of the Vienna Convention on the Law of Treaties and

its Background in General International Law", 1970.

ARTICLES

1. Ron Harnden, Corporations: Corporate Citizenship - Principal Place of Business, 1972.

2. PPC Hannapel, Airline Ownership and Control and Some Related Matters, Air & Space

Law XXXVI/2, 2003.

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3. Michael Carney, Isabelle Dostaler, Airline ownership and control: A corporate governance

perspective, Journal of Air Transport Management, 2006.

4. Deiró, Giselle. Jurisdiction and Conflicts of Laws in Contracts of International Carriage

by Air. Air & Space Law 37, 2012.

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STATEMENT OF RELEVANT FACTS

INTRODUCTION

The present case is related to the issue of nationality of Atlantis Airlines in relation to the

retaliatory actions carried out by the State of Midgard. The State of Midgard had alleged that

Atlantis Airlines does not fulfil the criteria of nationality as required under the Air Services

Agreement.

BACKGROUND

The States of Atlantis and Midgard had entered into an ASA governing air traffic between the

two countries. In accordance with the ASA, Atlantis and Midgard had each designated one

airline to operate services between the two States, Atlantis Airlines for Atlantis and Odin

Airways for Midgard. Both the airlines were fully owned by the government of their respective

countries.

THE SALE

Due to the global pandemic and the ban on overseas leisure travel, Atlantis Airlines ran into

serious financial trouble and approached the neighbouring country of Dorado to sell a

proportion of its shares to the in return for investing the capital needed to prevent the airline’s

collapse. Out of its 100,000 Class A “ordinary” shares and 50,000 Class B shares, the State of

Atlantis sold shares in Atlantis Airlines as follows:

a. 49,000 Class A shares to Golden Air, an airline which was 100% owned by the State

of Dorado;

b. 50,000 Class B shares to Golden Air; and

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c. 21,000 Class A shares to Ms Lemuria, a wealthy individual who was a national of

Atlantis but is resident in Dorado.

The State of Atlantis retained 30,000 Class A shares in Atlantis Airlines.

CONCERNS OF THE STATE OF MIDGARD

The relations between the State of Dorado and the State of Midgard were not good. Due to the

above transaction, Midgard was worried about Dorado’s increased influence in the region, and

that Golden Air would stand to profit from flights between Atlantis and Midgard. The State of

Midgard was also concerned that, with significant investment by Golden Air, Atlantis Airlines

would be able to offer a far superior passenger experience on the route than Odin Airways,

which meant that Odin Airways was likely to lose market share in the longer term once demand

recovered.

THE INVESTIGATION

The Civil Aviation Authority of Midgard (“hereinafter referred to as CAAM”) launched an

investigation into the arrangements at Atlantis Airlines, demanding the State of Atlantis to

provide immediate evidence that Atlantis Airlines continued to comply with the nationality

requirements to be designated under the ASA. Atlantis Airlines sent the relevant transaction

documents to the CAAM. However, the State of Midgard concluded that Atlantis Airlines no

longer meets the nationality requirements under the ASA and demanded that the transaction be

reversed within 10 days. Atlantis did not do so, hence on 1st August 2020, Midgard suspended

Atlantis Airlines’ right to sell tickets from its Middleville office and through its

www.atlantisairlines.mi website, pending the resolution of consultations between Midgard and

Atlantis.

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CONSULTATIONS

On 3 August 2020, the State of Atlantis entered into bilateral consultations with the State of

Midgard over their conflicting interpretations of the ASA. The consultations continued for four

weeks, throughout which time Atlantis Airlines was unable to sell tickets from its Middleville

office or its www.atlantisairlines.mi website. On 31 August 2020, Midgard refused to continue

with the bilateral consultations and revoked Atlantis Airlines’ operational authorization, citing

Article 4(1) of the ASA. In response, on 1 September 2020, Atlantis revoked Odin Airways’

permission to operate to Atlantis, ending all nonstop air services between the two countries.

APPEAL BEFORE THE INTERNATIONAL COURT OF JUSTICE

As the two states could not agree on a common interpretation of the ASA, Atlantis, with the

consent of Midgard, started preparations to bring the dispute before the International Court of

Justice by way of this Application.

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ISSUES

The State of Atlantis will argue the following contentions before the International Court of

Justice -

a. Midgard did not have the right to suspend Atlantis Airlines’ sales of tickets under

Article 6 of the ASA, and in particular, Midgard did not follow the required procedure

for consultation;

b. Midgard did not have the right to revoke Atlantis Airlines’ operational authorization

under Article 4 of the ASA, given that:

i. Atlantis Airlines is majority owned and effectively controlled by Atlantis and

its nationals; and/or

ii. Atlantis Airlines has its principal place of business in Atlantis, and is not

majority-owned or effectively controlled by any third country or its nationals;

c. Midgard’s actions in suspending Atlantis Airlines’ sales of tickets and revoking the

operating authority of Atlantis Airlines were therefore in violation of the ASA;

d. Atlantis’ retaliatory actions against Odin Airways are appropriate, proportionate and

lawful.

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SUMMARY OF ARGUMENTS

1. Midgard did not have the right to suspend Atlantis Airlines’ sales of tickets under

Article 6 of the ASA, and in particular, Midgard did not follow the required

procedure for consultation;

It is humbly submitted that Midgard did not have the right to suspend Atlantis Airlines’ sales

of tickets under Article 6(1)(a) of the ASA as Article 6 itself obligated the contracting parties

to allow the other contracting party to establish offices for the promotion of air transportation and

the sale of tickets. Even under Article 6(2) of the ASA, the parties are allowed to have

commercial arrangements with any third party. Moreover, actions by the State of Midgard can’t

be termed as immediate action as they had asked to reverse the transaction in 10 days. Also,

the State of Midgard suspended Atlantis Airlines’ right to sell tickets even when the

consultation process didn’t start. Thus, it is clear that Midgard did not follow the required

procedure for consultation.

2. Midgard did not have the right to revoke Atlantis Airlines’ operational authorization

under Article 4 of the ASA

It is humbly submitted that Atlantis Airlines is majority-owned by the State of Atlantis which

has the substantial ownership of 51% of the shares in Atlantis Airlines. The State of Atlantis

and Ms. Lemuria own 30,000 and 21,000 Class A shares in Atlantis Airlines respectively. It

means that the airline is being effectively controlled by the State of Atlantis and its nationals.

Moreover, Article 2 of the Co-operation Agreement between Atlantis Airlines and Golden Air

clearly shows that all corporate employees will continue to be based in Undersea City and all

aircraft would continue to be registered under the laws of Atlantis. Thus, Midgard did not have

the right to revoke Atlantis Airlines’ operational authorization under Article 4 of the ASA.

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3. Midgard’s actions in suspending Atlantis Airlines’ sales of tickets and revoking the

operating authority of Atlantis Airlines were therefore in violation of the ASA

The unilateral suspension of sale of tickets and the later revocation of operating authorization

of Atlantis Airlines was in violation of the ASA and amounted to a material breach of the ASA.

Such actions by the State of Midgard defeated the very purpose for which the contract was

entered into leaving Atlantis with practically no rights under the ASA. Moreover, the

conditions required to suspend the authorization were not satisfied by Midgard and the action

was taken even without going through the consultations as required under the ASA.

4. Atlantis’ retaliatory actions against Odin Airways are appropriate, proportionate

and lawful.

The retaliatory actions of the State of Atlantis are completely lawful and justified under the

Vienna Convention which empowers aggrieved parties to a bilateral treaty to terminate or

suspend the treaty in case of a material breach by the other party. Also, actions by the State of

Midgard defeat the very purpose for which the contract was entered thus, the actions of the

State of Midgard were unlawful. The countermeasures by Atlantis were just an appropriate,

proportionate and lawful response to unlawful actions of the State of Midgard.

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JURISDICTION OF THE COURT

This dispute is brought before the court under Article 36, Paragraph 1 of the Statute of the

International Court of Justice. It states that:

“The jurisdiction of the Court comprises all cases which the parties refer to it and all matters

specially provided for in the Charter of the United Nations or in treaties and conventions in

force.”

The State of Atlantis and State of Midgard both accept the jurisdiction of the International

Court of Justice.

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ARGUMENTS

1. MIDGARD DID NOT HAVE THE RIGHT TO SUSPEND ATLANTIS AIRLINES’

SALES OF TICKETS UNDER ARTICLE 6 OF THE ASA, AND IN PARTICULAR

MIDGARD DID NOT FOLLOW THE REQUIRED PROCEDURE FOR

CONSULTATION

1. It is humbly submitted that the State of Midgard had no right under Article 6 of the ASA to

suspend the ticket sales of Atlantis Airlines as the latter has complied with all the obligations

and requirements in good faith and was empowered to enter into any commercial and/or co-

operative agreements with any third party. Moreover, Midgard did not even follow the required

procedure for consultation.

1.1. Midgard didn’t have the right to suspend Atlantis Airlines Sales of tickets under

Article 6 of the ASA

2. The principle of ‘pacta sunt servanda’ which forms the basis of Article 26 of the Vienna

Convention on Law of Treaties,1 mandates that all the treaties are binding upon the parties and shall

be performed in good faith. It must be noted that Article 6(1(a) of the ASA empowers the

designated airlines of the contracting parties to sell and issue any ticket and/or airwaybill, both

its own tickets and/or airwaybills of any other carrier. The act of the State of Midgard to suspend

the sales of tickets amidst the pending consultations2 is violative of the rights allowing the sale

1
Vienna Convention on the Law of Treaties art. 26, opened for signature May 23, 1969, 1155

U.N.T.S. 331.

2
Compromis, para. 15.

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of tickets provided under Article 6 of ASA and therefore, is in violation of Article 26 of the

VCLT.

3. Further, Article 6(2) of the ASA specifically permits “each Designated Airline of one

Contracting Party may enter into commercial and/or co-operative marketing arrangements

including but not limited to blocked-space, code-sharing and leasing arrangements, with any

other Airline including an Airline of a third country”. The State of Atlantis has acted according

to provisions of this clause as the arrangements between Atlantis, Midgard and Ms. Lemuria

were just commercial and co-operative arrangements and still, Midgard chose to first suspend

the ticket sales and later terminate the operational authorization of the Atlantis Airlines acting

in complete contravention to the Article 6 of the ASA.

1.2. Midgard did not follow the required procedure for consultation

1.2.1. Midgard’s action of suspension cannot be deemed as an immediate action

4. The action by the State of Midgard to suspend the ticket sales was also in contravention to

the essential requirement under Article 4(2) of the ASA which mandates that unless immediate

action is essential to prevent further non-compliance the right to terminate or suspend the

agreement shall be exercised only after consultation with the other contracting party.

5. It is humbly submitted that immediate suspension of sale of tickets Atlantis Airlines was not

essential as pointed by the International Court of Justice in the case of Hungary v. Slovakia3

where it was held that an act which precludes an international obligation can only be allowed

if it is necessary and such grounds are to be permitted only if there are exceptional

3
Hungary v Slovakia, Judgment, Merits, ICJ GL No 92, [1997] ICJ Rep 7.

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circumstances. The International Law Commission in Article 33 of the Draft Article on

International Responsibility of States4 that an “essential interest” shall be:

1. Grave and imminent peril;

2. Only means of safeguarding that interest;

3. Seriously impaired an essential interest of the State towards which the obligation

existed.

6. Atlantis Airlines didn’t involve itself in anything that might have caused any grave or

imminent peril to the interests of the Midgard nor the actions by Midgard was the only means

of safeguarding its interest as provided in Article 15 of the ASA. Midgard should have tried to

resolve the matter through bilateral consultations and in case of failure could have submitted

the matter for a decision at the ICJ as provided in Article 15 of the ASA.5 Further, the Co-

operation Agreement between Atlantis Airlines and Golden Air or the Shareholders Agreement

didn’t hamper the rights of Midgard under the ASA. Hence, any essential interest of Midgard

was not harmed under the ASA. Therefore, immediate action under Section 4(2) of the ASA

was not required and it can be said that Midgard did not follow the required consultation

process.

1.2.2. Midgard did not follow the required procedure for consultation

7. It is a well-settled principle of international law that whenever two parties enter

consultations, the intent shall be to reach a conductive solution. Further, Article 65 of the

4
Draft Article on International Responsibility of States, Art. 33.

5
Air Service Agreement, Atlantis-Midgard, Art. 15.

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Vienna Convention6 calls upon parties to settle disputes in a peaceful manner as indicated in

Article 33 of the UN Charter.7 Hence, it can be said that the actions by the State of Midgard

such as suspending Atlantis Airlines’ right to sell tickets from its Middleville office and

through its website without following the consultation process or any other peaceful means is

against Article 65 of the Vienna Convention as well as Article 33 of the UN Charter.8

8. Also, Article 15(1) of ASA clearly states that if any disagreement arises between the

contracting parties relating to the interpretation or application of this Agreement, the

contracting parties shall in the first place endeavour to settle their dispute by bilateral

consultations. But in the present situation, Midgard did not follow the required procedure of

consultation defeating the very purpose of the ASA which was to conclude an Agreement for

the purpose of establishing air services between the two countries.

9. In the case of Argentina v. Uruguay9, the court has held that the parties can’t make unilateral

decisions when the obligations have been incumbent by the statute itself. Also, the court held

that Uruguay didn’t follow the prior obligation of consultation laid down by the statute thus

has violated the statute. In the present situation, Midgard has taken the unilateral decision of

suspending the sales of tickets without the prior obligation of consultation vested by Article

4(2) and 15(1), and hence, has violated the ASA.

6
Vienna Convention on the Law of Treaties art. 65, opened for signature May 23, 1969, 1155

U.N.T.S. 331.

7
UN Charter, Art. 33.

8
Ibid.

9
Argentina v. Uruguay, [2006] ICJ Rep 113.

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10. Hence, it can be fairly concluded that Midgard didn’t follow the required procedure of

consultation before suspending the sales of tickets of Atlantis and has acted against Article 6

of the ASA.

2. MIDGARD DID NOT HAVE THE RIGHT TO REVOKE ATLANTIS AIRLINES’

OPERATIONAL AUTHORIZATION UNDER ARTICLE 4 OF THE ASA

11. It is humbly submitted that Atlantis Airlines is majority owned and effectively controlled

by Atlantis and its nationals and that its principal place of business is Atlantis. Thus, the State

of Atlantis also has effective control over the Airlines.

2.1. Atlantis Airlines is majority owned by Atlantis and its nationals

12. Atlantis has substantial ownership of Atlantis Airlines as the majority of equity shares of

the airline are owned by the State of Atlantis and its nationals. As per the manual of the ICAO

on Regulation of International Air Transport10, the criterion for the ownership of an airline is a

test of who has the substantial ownership of the airline. In assessing what constitutes

‘substantial ownership’, most states generally focus on the amount of share capital owned by

different parties, considering that more than 50 percent of the ownership in the share capital of

an air carrier constitutes ‘substantial ownership’.11 States having a national law or regulation

that specifies the percentage of equity in a national air carrier that may be held by non-nationals

consider that ownership in excess of the specified limit is “substantial”.12

10
Manual on Regulation of International Air Transport, ICAO Doc. 9626.

11
Aust, Anthony. Handbook of International Law. Cambridge University Press, 2014.

12
Ibid.

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13. In the present case, the share capital of Atlantis Airlines consists of 100,000 Class A shares

out of which the State of Atlantis owns 30,000 Class A equity shares, and Ms Lemuria who is

a national of Atlantis owns 21,000 Class A equity shares13 which makes 51 percent of the total

equity shares. Hence, it can be said that the substantial ownership of Atlantis Airlines lies with

Atlantis and its nationals.

2.2. Atlantis Airlines is effectively controlled by Atlantis and its nationals

14. The European Union Council Regulation explicitly defines “effective control” as -

‘a relationship constituted by rights, contracts or any other means which, either separately or

jointly and having regard to the considerations of fact or law involved, confer the possibility

of directly or indirectly exercising a decisive influence on an undertaking, in particular by

(a) the right to use all or part of the assets of an undertaking;

(b) rights or contracts which confer a decisive influence on the composition, voting or decisions

of the bodies of an undertaking or otherwise confer a decisive influence on the running of the

business of the undertaking.’14

15. The Co-operation Agreement signed between Atlantis Airlines and Golden Air does not

confer in any way the right to use all or part of assets of Atlantis Airlines to Golden Air or the

State of Dorado. In fact, as discussed earlier, the majority of voting shares are owned by the

State of Atlantis and its national Ms. Lemuria. Thus, it doesn’t grant any decisive influence to

the Golden Air or the State of Dorado.

13
Compromis, para 9.

14
European Union Council Regulation No. 2407/92.

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16. Further, Article 1(3) of the Shareholders Agreement between the State of Atlantis, Golden

Air, and Ms. Lemuria binds Golden Air to transfer all its shares to the State of Atlantis in case

the general interests of the State of Atlantis are prejudiced. Also, according to the

aforementioned Shareholders Agreement, out of twelve members in the Board of Directors of

the airline, six need to compulsorily be the nationals of Atlantis and one seat is reserved for

Ms. Lemuria who is also a national of Atlantis.15 Thus, the Nationals of Atlantis have a decisive

influence on the running of the business of the Airlines. of Further, Ms. Lemuria is to be

appointed as the CEO of the airline and would be in charge of the day-to-day actions Atlantis

Airlines16 meaning that the control of day-to-day actions of the airline would also lie with a

national of Atlantis.

17. Also, ‘effective control’ as a term is very ambiguous and has not been defined in the

agreement between the State of Atlantis and the State of Midgard. Hence, each state can have

its own interpretation. ICAO, in order to counter this ambiguity in such agreements called

upon17 its members through a resolution to replace traditional criteria of ‘substantial ownership

and effective control’ with ‘principal place of business and effective regulatory control’. As

contended before, Atlantis Airlines would be effectively regulated and controlled by the

regulations of Atlantis and the principal place of business of Atlantis Airlines is in Atlantis.

Furthermore, according to Article 11 of the Chicago Convention,18 the laws and regulations

15
Compromis, para. 9.

16
Shareholder Agreement, State of Atlantis, Golden Air & Ms. Lemuria, Art. 5.

17
2003 Fifth Worldwide Air Transport Conference (ATConf/5).

18
International Civil Aviation Organization (ICAO), Convention on Civil Aviation ("Chicago

Convention"), Art. 11, (1994) 15 U.N.T.S. 295.

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regarding the admission or departure of the host country apply on the aircraft which means that

it is being effectively controlled by the regulations of that country. Hence, it can be said that

Atlantis Airlines is being effectively controlled by the State of Atlantis.

2.3. Atlantis Airlines has its principal place of business in Atlantis

18. The European Civil Aviation Conference19 suggests that the principal place of business of

a carrier should be where it has a substantial amount of its operations and capital investment in

physical form. It also mentions that the principal place of business can be in a country where it

pays income tax, registers its aircraft and provides employment to a significant number of

nationals in managerial, technical and operational positions20. In the present situation, it can be

seen that under Article 1 of the Co-operation Agreement between Atlantis Airlines and Golden

Air, the former is to remain a “distinct legal entity incorporated under the laws of Atlantis'',

retain its registered office at Undersea City and be subject to the taxation laws of Atlantis.

Moreover, according to Article 2 of the Co-operation Agreement, the operational, managerial

and technical staff of Atlantis Airlines are to be based at Undersea City and the aircraft of

Atlantis Airlines have to continue to be registered at Atlantis. The present situation fulfils all

the tests laid down by the ECAC and therefore, it can be said thatAtlantis is the principal place

of business of Atlantis Airlines.

19. Similar tests are used by countries around the world to determine the principal place of

business of the corporations. For instance, the courts in the USA have devised two basic tests

19
European Civil Aviation Conference, Ownership and control in airlines (Position Paper),

Hermes Air Transport Organization, 2018.

20
Honig JP, The Legal Status of Aircraft: Proefschrift, Springer, 2012.

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in order to determine the principal place of business. The first test is the Nerve centre test which

takes into consideration the decision making and control centre of corporate affairs and is

normally where the executive, administrative and financial offices are found and where the

income tax returns are filed. As discussed earlier, Atlantis Airlines needs to follow the taxation

laws of the State of Atlantis. Further, all key decision-making officials are to be situated in

Undersea City.21 The second test is the place-of-operations test which represents the centre of

industrial activity and is ordinarily the location of most corporate employees and tangible

assets22. As clearly stated in Article 2 of the Co-operation agreement, all corporate employees

are to continue to be based at Undersea City and all aircraft would continue to be registered

under the laws of Atlantis. Hence, by all means, it can be said that the State of Atlantis is the

principal place of business of Atlantis Airlines.

3. MIDGARD’S ACTIONS IN SUSPENDING ATLANTIS AIRLINES’ SALES OF

TICKETS AND REVOKING THE OPERATING AUTHORITY OF ATLANTIS

AIRLINES WERE THEREFORE IN VIOLATION OF THE ASA

20. It is humbly submitted that the State of Midgard has violated the ASA by suspending

Atlantis Airlines’ sales of tickets and revoking its operating authority23. Midgard has also

refused Atlantis; the rights provided under the ASA and has imposed a prohibition on

commercial activities by Atlantis Airlines.24 This violation by Midgard may be termed as a

21
Hertz Cop v. Friend, 559 U.S. 77 (2010).

22
Ibid.

23
Compromis, para. 17.

24
Compromis, para. 15.

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material breach of the ASA as the actions taken by Midgard have been taken unilaterally and

without completing the required consultation process as specified under the ASA.

3.1. The actions of Midgard amount to a material breach of the ASA

21. The concept of ‘material breach’ is drawn from two places: contract law and treaty law, or

the Vienna Convention on the Law of Treaties. In contract law, a material breach is essentially

a ‘serious violation of the terms of a contract. Here the other party has the option of terminating

the contract if one of the parties is in material breach of it.

22. However, under Article 60 of the Vienna Convention, a material breach is defined as a

violation of a provision essential to the accomplishment of the object or purpose of the treaty25.

The material breach of a bilateral treaty allows one party to terminate or suspend the treaty if

the other party is in breach of it.

23. In the case of Forklift Engineering Australia Pty Ltd v Powerlift (Nissan) Pty Ltd26, the

Supreme Court of Victoria in Australia concluded that a "material breach" can be equated with

the expression known to the law of contract of "fundamental breach", being a breach that goes

to the very root of the contract. Moreover, in the case of Mobileciti Pty Ltd v Vodafone Pty

Ltd27, the Court noted that "material" is an ordinary English word without any technical or

special meaning. After examining the dictionary definitions of the word, the court held that the

question of whether a representation is "material" should be assessed from the perspective of

25
Vienna Convention on the Law of Treaties art. 60, opened for signature May 23, 1969, 1155

U.N.T.S. 331.

26
Forklift Engineering Australia Pty Ltd v Powerlift (Nissan) Pty Ltd, [2000] VSC 443..

27
Mobileciti Pty Ltd v Vodafone Pty Ltd, [2009] NSWSC 899.

-MEMORANDUM FOR THE APPLICANT-

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the party with the right to terminate. That is, the misdeeds must be of substantial import or of

consequence to the innocent party. In other words, a breach will only be a "material" breach if

it would substantially adversely affect the interests of the innocent party.

24. The State of Midgard is in breach of the obligations as put forth in Air Services Agreement

and its continued non-compliance would result in serious consequences. By revoking the

operational authorization of Atlantis Airlines, Midgard would be denying the rights granted to

the State of Atlantis under Article 2 of the ASA28 which include the right to fly across its

territory, the right to make stops in its territory and the right to transfer passengers while

operating an agreed service on a specified route.

25. The denial of these rights constitutes a material breach of the ASA as the very purpose for

which the ASA was entered i.e., to contribute to the progress of international aviation and to

establish air services between the states has been defeated by the steps taken by the State of

Midgard.

3.2. The actions taken by Midgard are unilateral in nature

26. The State of Midgard had taken a unilateral decision without any consultation in suspending

Atlantis Airlines’ sales of tickets and revoking the operating authorization of Atlantis Airlines.

The validity of such unilateral decisions has been dealt with in several cases. In the case of

Argentina v. Uruguay29, the court has held that the parties can’t make unilateral decisions when

the obligations have been incumbent by the statute itself. Moreover, in the case of Hungary v.

28 Air Service Agreement, Atlantis-Midgard, Art. 2.

29
Supra, 9.

-MEMORANDUM FOR THE APPLICANT-

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Slovakia30, it was held that an act that precludes an international obligation can only be allowed

if it is necessary and such grounds are to be permitted only if there are exceptional

circumstances.

27. Article 15 of the ASA mentions that if any disagreement arises between the contracting

parties relating to the interpretation or application of this Agreement, the contracting parties

shall in the first place, endeavour to settle their dispute by bilateral consultations and such

consultations shall begin within a period of sixty (60) days from the date of receipt of the

request. Midgard, in complete ignorance of Article 6 (2) of the ASA restricted Atlantis Airlines

to sell tickets from the Middleville office and through its website without any consultations.31

Moreover, after the start of the consultation process, Midgard decided that it was no longer

willing to continue with the bilateral consultations32, and without consulting Atlantis,

suspended the operating authorization of Atlantis Airlines even though the resolution of

consultation between Atlantis and Midgard was pending. This is also against Article 65 of the

VCLT which calls upon parties to settle disputes in a peaceful manner as indicated in Article

33 of the UN Charter.33

3.3 Conditions for revocation and suspension of authorization are not satisfied

30
Supra, 3.

31
Compromis, para 15.

32
Compromis, para 17.

33
Article 33, Appendix III, UN Charter.

-MEMORANDUM FOR THE APPLICANT-

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28. Article 4 of ASA provided the contracting parties with the right of suspension, revocation

or limit the operational authorization if any contracting parties don’t comply with the

requirements provided under this provision.34

29. The ASA gives the right to the contracting parties to suspend the operational authorization

if the other party is not able to prove upon request that the majority ownership and effective

control of such airline are vested in the designating State, the party has its principal place of

business on the territory of the designating state or it is not majority-owned or effectively

controlled by any third country, where such third country has no existing air services

agreements with the contracting party seeking to revoke or suspend the operating

authorization.35

30. Atlantis Airlines is substantially owned and effectively controlled by the State of Atlantis

and its nationals, despite Golden Air being a shareholder of Atlantis Airlines. Also, as

mentioned under the Co-operation Agreement, the operational and technical staff of Atlantis

Airlines will continue to be out of Atlantis and the principal place of Atlantis Airlines will

remain the same. Atlantis Airlines complies with requirements prescribed under Article 4 of

ASA, leaving no reason for Midgard to revoke or suspend the operational authorization of

Atlantis Airlines as granted by the ASA.

31. Moreover, Article 4 also provides that unless immediate action is essential to prevent

further non-compliance with the article,36 the rights established by this article shall be exercised

only after consultation with the other contracting party. But in the present situation, Midgard

34
Air Service Agreement, Atlantis-Midgard, Art. 4.

35
Ibid.

36
Ibid.

-MEMORANDUM FOR THE APPLICANT-

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suspended Atlantis Airlines’ right to sell tickets from its Middleville office and through its

www.atlantisairlines.mi website without any consultations, hence, it constitutes a breach of

Article 4 of the ASA.

4. ATLANTIS’ RETALIATORY ACTIONS AGAINST ODIN AIRWAYS ARE

APPROPRIATE, PROPORTIONATE AND LAWFUL

4.1 The retaliatory actions against Odin Airways are lawful and in response to the

unlawful actions of Midgard

32. Article 60 of the Vienna Convention37 allows the aggrieved parties to a bilateral treaty to

terminate or suspend a treaty in case of a material breach by the other party. Further, Article

18 of the Vienna Convention38 restricts the parties to a treaty from doing any such act which

might defeat the very purpose for which the treaty is entered.

33. The State of Midgard was in material breach of the ASA and the retaliatory actions of

Atlantis are completely lawful and justified under the Vienna Convention. The actions of

Midgard defeat the very purpose for which the agreement was entered. Hence, the counter-

measures by Atlantis were a lawful response to the unlawful actions of Midgard.

4.2 Retaliatory actions by the State of Atlantis were appropriate

37
Vienna Convention on the Law of Treaties art. 60, opened for signature May 23, 1969, 1155

U.N.T.S. 331.

38
Vienna Convention on the Law of Treaties art. 18, opened for signature May 23, 1969, 1155

U.N.T.S. 331.

-MEMORANDUM FOR THE APPLICANT-

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34. The International Court of Justice has pointed out39 that the principle ‘inadimplenti non est

adimplendum’ has been translated by the yearbook of International Law Commission40 as “not

being required to respect an obligation if the other party to the contract did not respect its own”.

The State of Midgard, in complete contravention to the contractual obligations under the ASA,

suspended the right to sell tickets and revoked the operational authorization of Atlantis Airlines

leaving Atlantis with no rights but only obligations under the ASA, which effectively nullified

the contract against the State of Atlantis. It is pointed out by Gerald Fitzmaaurice in YILC41

that reciprocal treaties can be revoked in case of any fundamental breach by the other party. As

the ASA is reciprocal in nature, it can be said that Atlantis is not required to follow its

obligations under the ASA and the retaliatory actions by Atlantis were completely appropriate.

4.3 The retaliatory actions were proportionate

35. B. Simma in "Reflections on Article 60 of the Vienna Convention on the Law of Treaties

and its Background in General International Law"42 points out -

“Only a stringent limitation of the right to respond to a breach with a unilateral abrogation of

the infringed treaty is in accordance with reciprocity as the underlying principle and with the

precept of proportionality governing all responses to international wrongs. Termination is the

most rigorous remedy at the disposal of the injured state but by no means the only one.

39
Advisory Opinion on the Legal Consequences for States of the Continued Presence of South

Africa in Namibia, International Court of Justice (ICJ), 1971.

40
ILC 1999 Vol 1.

41
Gerald Fitzmaurice, Second Report, YILC, 1957, vol II.

42
20 Österreichische Zeitschrift für öffentliches Recht (1970) 5, at p. 29.

-MEMORANDUM FOR THE APPLICANT-

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Therefore, it is not at all exaggerated to say that in order to justify putting an end to the whole

treaty, the breach must itself be of a kind that does practically that”.43

36. As pointed out earlier, the actions of Midgard practically nullified the ASA for Atlantis.

Thus, the retaliatory actions by Atlantis were completely justified.

37. Further, in the Air Services Case between France and the USA 44, Pan American Airlines,

a designated carrier, announced a change of gauge in London. France objected that this change

of gauge was contrary to the agreement between them, which prohibited changes of gauge

within the territory of the two parties but contained no provision on changes of gauge in the

territory of a third state. Further, even after objections and diplomatic exchanges between the

two states, Pan American sought to operate the service, and as retaliation, passengers were not

allowed to disembark in Paris by France. Thereafter, Pan American suspended its flights.

Moreover, the USA started prohibiting flights by French designated carriers to the US west

coast from Paris via Montreal as long as the French ban on Pan American flights continued.

France referred this matter to an arbitral tribunal. The arbitral tribunal decided in favour of the

USA and said that the USA held the right to retaliate and was justified in taking the actions that

it took as it was proportionate.

38. The above-mentioned case is similar to the present case where Midgard has unreasonably

interpreted the ASA and has left Atlantis with practically no rights under the ASA. Thus, the

retaliatory actions by Atlantis were completely proportionate to the actions taken by Midgard.

43
Ibid.

44
France v. United States, 74 A.J.I.L. 785 (1980).

-MEMORANDUM FOR THE APPLICANT-

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SUBMISSIONS

May it please the Court, for the forgoing reasons, to adjudge and declare that:

1. Midgard did not have the right to suspend Atlantis Airlines’ sales of tickets under Article

6 of the ASA, and in particular Midgard did not follow the required procedure for

consultation.

2. Midgard did not have the right to revoke Atlantis Airlines’ operational authorization under

Article 4 of the ASA.

3. Midgard’s actions in suspending Atlantis Airlines’ sales of tickets and revoking the

operating authority of Atlantis Airlines were in violation of the ASA.

4. Atlantis’ retaliatory actions against Odin Airways were appropriate, proportionate and

lawful.

And for this act of kindness the Applicant shall as duty bound ever humbly pray.

All of which is most respectfully submitted.

Place: The Hague, Netherlands Agents for the Applicant

-MEMORANDUM FOR THE APPLICANT-