February 2015 – Aviation disputes requires a special management
Aviation Disputes Require Special Management
Aviation is synonym to travel, business, aircraft and finance. In other words, the means after litigation which is often at the heart of aviation deals. It is in the industry’s nature for bad situations to crop up from time to time, so it is worth thinking of litigation not as something scary that should be avoided at all costs, but as a tool for doing business. It should be the last resort, but that doesn’t mean it should be the last thought. Because of the complexities of law, it’s impossible to offer generic legal advice. A deal usually implies the applicability of several legal systems. However, there are some practical issues that every company should be aware of.
Pick your fights
Disputes in the aviation sector often end up being handled separately from general transactions, and if formal proceedings are involved, they take place in a different environment, under rules that are completely different from the day-to-day standard. However, they do not exist in a vacuum; they have implications for the financial position, a company, ones broader relationship with the counterparty and sometimes (where precedents might be set) other transactions.
Those implications are more important than the legal merits. Arguments can get terribly absorbing, so it is important for everyone – lawyers included – to focus not on right versus wrong, not on win versus lose, but on a good outcome versus a bad one. Litigation is not a crusade for justice; it is simply there to facilitate the continuation of commerce. One should always keep in mind that business will always continue.
Should one find oneself in a legal quandary, it is important to prioritise. What are your most and least important goals? What are your strongest and weakest legal claims?
While disputes about money can be complicated, those about aircraft are often far more complex. Throwing everything but the kitchen sink into your legal claim can have its attractions; you stand to win more and your ‘opponent’ has less. But it is important to remember that you will have to fight all of those points too. This will not only take time and hefty legal fees, but one also runs the risk by minor points that really don’t matter much.
No case is 100 per cent solid. That simply doesn’t happen. Unknown facts can emerge, arguments are made, witnesses and lawyers can do well or bad, judges and mediators can make mistakes.
Even if you win, your success may only result in a piece of paper and not in financial reward. One should keep in mind what the possible outcomes really are – both favorable and unfavorable. Consider a settlement, which, although it may not offer you the result you feel you deserve, can offer certainty that your matter will be resolved – even if it is on imperfect terms. And with a settled case an enemy in court can become a partner in business.
Stay pragmatic
Accepting a settlement is just one way in which one can be pragmatic, but it is important to keep a realistic view throughout the legal process.
One should reflect honestly on the prospects of legal enforcement and how much time and cost it will involve. One will also consider the implications on future business.
Disputes in this industry often arise because of an airline’s precarious financial position; one may want to consider who else might be enforcing legal action, as others may be able to stay ahead of the pack. For example, those quickest to prosecute the defunct Indian airline, Kingfisher, often did better than those who acted more slowly.
Planning is also crucial. In Italy a careful preparation for possible insolvency proceedings leads to a better position if and when those proceedings commence.
Another way is to research what needs to be done, how, by whom, where and when. Those preparations will take some time, but neglecting them could cost more in the long run.
For example, a successful repossession can be jeopardised if by the time one gets a court order in one country the aircraft is already in another country. Similarly, the aircraft may be grounded but immovable. Or, One may have the aircraft but not the documents, or possession but not deregistration.
Additionally, the prospect of quick proceedings in one jurisdiction might be blocked if the other side, forewarned by poor choreography, steals a march by filing a claim in another, slower court.
Choose your jurisdiction – Forum Shopping
Regarding jurisdictions, it is important to pick your battleground. A court should be good for many things – particularly efficiency, reliability and recovery of costs, but it is sometimes unable to enforce its laws in other parts of the world.
If an aircraft is abroad, one will have to decide whether to proceed at a local court or shift the proceedings to another country with laws that are more favorable. Would one be able to stay at a local court for the duration of the proceedings, or would it be better to attend one closer to where one is based? And depending in which part of the world, one will consider that the courts are not always as independent as they should be.
Do what you can to strengthen one’s position; gain leverage over the other side, or deprive them of leverage over you. Some countries (France and The Netherlands, for example) enable to get monetary security for claims at the start of proceedings (actio iudicatio solvi) where in other countries one would normally have to wait until after the court’s decision.
Some countries make it possible to re-possess aircraft or other assets extremely quickly and without any prior warning; others do not. Some countries such as England and Belgium can be extremely quick in this regard, whereas others such as Italy and France have also proven to be very favorable jurisdictions, recently allowing an aircraft and its documents to be re-possessed within 24 to 48 hours of filing a request at court.
Look beyond the dispute, work out what the other side’s pressure points are, where they’re located and what steps are legitimately open to you in those places; one may be able to protect a claim and bolster a negotiation position.
And one will also consider the applicable law, which is often chosen during the draft of the agreements choosing a legal system, implies one should knowns its judiciary.
Stay in control
Aim to be the party that sets the terms of debate. The importance of a clear, well-articulated case at an early stage is often under-estimated. The other side and its lawyers will without any doubt vigorously deny every word you say, but that doesn’t mean it won’t have an impact on their expectations and their willingness to come to terms.
Focus on your areas of strength; make those the centre of gravity for any eventual decision. Anticipate and pre-empt arguments against you and make their significance peripheral. Where decisions rest with others – such as judges and mediators – strive always to convey a reasonable and measured approach.
Formal proceedings will take time; usually, a frustratingly long time. There will be ups and downs and it is rare for any party, no matter how clear its case is – to win every point along the way. Even the most commercial judge operates in a different atmosphere, and will tend to see things with less urgency and more patience. It is important to keep developments in perspective, and not be thrown by setbacks, nor made over-confident by minor successes. Be prepared, form the outset, to hold your nerve – and to keep holding it.
It is also important to remember that handling any dispute is a team exercise – not just because of the effort involved, but because it needs to bring together a range of different perspectives. It is vital to have ongoing input from many parties, including the commercial decision-makers, people who deal directly with the counterparty (and so have insight into the other side); in-house lawyers; external counsel; and technical experts. On top of that, all those people need to hear from each other, otherwise their input can be uninformed, and their recommendations may be misjudged.
Most disagreements are resolved quickly. Some have lawyers wheeled in, but only a few see the inside of a courtroom. The majority of disputes are resolved through discussion and debate, not least because companies prefer to keep doing business with one another.
The law is only one of many factors, but in any case, thorough practical planning, co-operation and co-ordination, and above all, a clear, hard-headed commercial outlook are the best weapons in any fight. Therefore when one is on the legal battlefield, keep always in mind that & commercial outcome is usually – after negotiations and a good legal drafted agreement – the best solution: it is cheaper and one knows where one stands, and an enemy might become a potential business partner, or client.
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© 2015 A. Flieger – This publication is defined to provide accurate and authoritative information in regard to the subject matter covered. It is transmitted with the understanding that the publisher is not engaged in rendering legal, or any other professional services. If legal advice or other expert assistance is required, professional services should be sought. You can always contact A. Flieger at flieger@fliegerlaw.com.
