Airline Industry operations generally involve multiple parties, including sovereign states and corporations, to operate complex, costly, high-risk jobs. In this context, the Aviation sector is exposed to various types of disputes such as international airspace boundary claims, claims over jurisdiction, expert determination, environmental claims, regulatory issues, and trade restrictions.
Airline Industry players are often at risk of increasing disputes involving multiple parties, especially in the midst of the current global Pandemic crisis, which will certainly require quick, efficient resolution of disputes, lower legal fees, minimal pre-hearing discovery, and motions, the neutrality of the forum. While resolving any dispute, is it important to ensure that it does not affect the Airline’s commercial activities or permanently destroy the goodwill or sour relationship and future cooperation between the parties.
In this regard, alternative dispute resolution (ADR) may be one of the most preferred options by the parties than litigation to ensure the smooth running of the aviation business operation. Arbitration is a dispute resolution process agreed upon between the parties in which the dispute is submitted to one or more arbitrators who issue a decision. It is an alternative dispute resolution (ADR) mechanism because it allows parties to resolve their disputes outside State courts, that is, without litigation.
Arbitration is a form of dispute resolution. Arbitration is the determination of judicial disputes conducted privately by an independent third party. An arbitration hearing may involve the use of an individual arbitrator or a court. Arbitrators can be selected from professionals who have expertise in the highly technical and complicated subject matter. Such an aspect is considered very crucial in the Airline Industry. Besides, it also allows the parties to sense that they will be able to resolve the dispute in a fair, neutral, and independent environment.
There are different reasons why parties in a dispute are sometimes reluctant to submit their differences to legal adjudication –the uncertainty of the result being the most evident – preferring instead to engage in bilateral negotiations. On the other hand, in many cases, parties resort to formal arbitration/adjudication because this mechanism provides legal certainty by defining the parties’ respective rights and obligations, and usually, its decision is binding in nature (because the parties themselves have so agreed).
The unstoppable growth of arbitration’s popularity can be easily explained by the fact that arbitration has several advantages over adjudication in the settlement of differences, the most notorious ones being: neutrality; centralized dispute resolution; enforceability of agreements and awards; commercial competence and expertise; finality of decisions; party autonomy and procedural flexibility; cost and speed; confidentiality and privacy of dispute resolution; and arbitration involving states and state entities. Initiatives to promote arbitration are flourishing everywhere in the world and permeate practically every field in international trade. Aviation is no exception.
The main characteristic of arbitration is its consensual nature. Disputes can be resolved by the arbitrator only if both parties have agreed to this. The agreement between the parties usually takes the form of an arbitration clause in the contract, before the dispute. Once a dispute arises, the parties can agree to submit the particular dispute to the arbitration court. There are different types of arbitration depending on the issue in dispute, for example, commercial, construction, investor-State, or investment arbitration (ISDS), etc.
Arbitration proceedings can be categorized as institutional arbitration and ad-hoc arbitration. Most arbitration proceedings are administered by arbitration institutions, including ICC, SCC, ICSID, UNCITRAL (PCA), LCIA, SIAC, HKIAC, DIAC, SELAI, ICDR, OHADA (CCJA), and others. Thanks to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitration Awards, the resulting arbitral award is enforceable in 154 countries, unlike court decisions.
The Asian International Arbitration Centre (AIAC) or formerly known as the Kuala Lumpur Regional Centre for Arbitration (KLRCA) is the main institution that administers and resolves all commercial arbitration disputes in Malaysia. However, it may be argued that, given the technical nature and complexity of disputes that may arise in the Airline Industry, there is a need to set up an independent arbitration center for Aviation under the AIAC to resolve the matters. There may be a need for a special legal framework to enable the establishment of the center by drawing inspiration from other jurisdictions.
One of the most recent milestones in this regard is the creation of a new forum for aviation arbitration. Thanks to the joint efforts by China Air Transport Association (CATA), the International Aviation Transport Association (IATA), and the Shanghai International Arbitration Commission (SHIAC), the first global arbitrary institution for civil aviation, the Shanghai International Aviation Court of Arbitration (SIACA), was inaugurated in 2014.
The SIACA deals with various types of disputes in the aviation industry field, including but not limited to air transportation, aircraft manufacturing, aircraft sales, aircraft financial leasing, aviation insurance, general aviation trusteeship, ground services, and air ticket agents.
On 25 May 2017, the 2017 International Forum on Aviation successfully took place in Shanghai. Nearly 100 local and foreign aviation law experts, scholars, attorneys, and aviation industry participants attended the forum and exchanged views on Aviation Dispute Resolution. Under the theme of ‘Exploring Diversified Approaches for Aviation Dispute Settlement’, the Forum hosted three-panel sessions: (1) Lawsuit Dispute Resolution in Aviation Field; (2) Improvement of International Aviation Arbitration Mechanism; and (3) Alternative Dispute Resolution in Aviation Field.
The current roster of the SIACA Panel of Arbitrators comprises 71 domestic and international aviation and legal experts, amounting to six percent of all SHIAC arbitrators. The experience and specific knowledge of this body of experts in aviation and legal matters are invaluable resources that are now available to the parties in any aviation dispute. It can – and certainly will – be a pivotal contribution to the consolidation of arbitration as the way forward to settle conflicts in international aviation.
Solving all related problems in one process will usually be more efficient and economical, requiring fewer arbitrator payments and other fees. A single hearing also eliminates the possibility of conflicting awards, because different arbitral tribunals may decide differently, even on the basis of a similar pattern of facts. In fact, resolving disputes in one trial allows the arbitral tribunal or single arbitrator to have a better understanding of the underlying facts, which can improve the quality of the final award awarded.
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