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THE AUTHOR:
Patrick Gearon, Partner and Head of Middle East at Charles Russell Speechlys LLP
Katy Ackroyd, Senior Associate at Charles Russell Speechlys LLP
Introduction
Contributing USD 4.1 trillion, or 3.9%, to the total global Gross Domestic Product and supporting 86.6 million jobs worldwide, aviation is an industry involving high-value transactions, complex supply chains, and longstanding and intricate commercial relationships across the globe. Aircraft development programmes and purchases, leasing arrangements, maintenance agreements, and slot allocations are all likely to involve substantial sums of investment and long-term commitments.
When disputes arise – whether over aircraft delivery delays, engine performance warranties, or lease terminations – the financial exposure can be enormous. Effective dispute resolution is therefore critically important in helping parties manage commercial risk, maintain safety and operational continuity, preserve commercial relationships, and avoid prolonged uncertainty that may affect business operations and investor confidence.
In this article, we consider the role of international arbitration in resolving aviation disputes and discuss some of key considerations in arbitrating aviation disputes effectively.
Aviation Disputes – Why Arbitration?
International arbitration has become the preferred forum for the resolution of aviation disputes for a number of reasons; perhaps its most compelling advantage is ease of enforcement.
The cross-border nature of aviation brings with it a significant degree of jurisdictional complexity. With contracting parties located in different countries – for example, an aircraft may be manufactured in one country, owned by a lessor in another, registered in a third, and operated by a carrier headquartered in a fourth – there is often uncertainty as to the appropriate forum, along with risks of parallel proceedings, and practical difficulties in enforcing judgments across borders. In particular, enforcement challenges are heightened where state-owned enterprises or government regulatory authorities are involved, as litigating before the national courts may raise legitimate concerns about impartiality.
The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards has been ratified by more than 170 states and provides a well-established and widely recognised framework for the enforcement of arbitral awards. By contrast, enforcing court judgments can be considerably more difficult and uncertain, particularly in jurisdictions that lack reciprocal enforcement treaties. For an industry in which assets – aircraft, engines, and associated collateral – are located across multiple jurisdictions, this is a significant factor.
International arbitration is widely known for its private and confidential nature: except in certain limited circumstances, arbitral awards and documents disclosed in the course of arbitral proceedings are generally not available in the public domain. The ability to resolve disputes in private and away from public scrutiny is a significant factor in aviation disputes, as the industry is characterised by a relatively small number of major players, such as manufacturers, lessors, airlines, and maintenance, repair, and operations services providers who rely heavily on long-term relationships with one another. Disputes, therefore, must be managed in a way that allows for continued collaboration. Confidential arbitration or mediation is often preferred over public court proceedings to avoid disclosure of commercially sensitive information or damaging publicity.
Aviation disputes frequently involve high levels of technical complexity, such as component design and testing, engine performance specifications, airworthiness standards, software functionality, and certification requirements. Aviation is also one of the most heavily regulated industries globally, and parties and their lawyers are required to navigate a tricky web of domestic legislation, international treaties and conventions, and regulatory standards, all of which demand a significant level of technical and specialist expertise.
Unlike litigation, where parties generally have little control over the identity of judges allocated to hear their disputes, users of international arbitration are often afforded a degree of choice and flexibility in selecting arbitrators with relevant expertise and experience. In fact, some arbitral institutions, such as the Hague Court of Arbitration for Aviation (the “Hague CAA”) and International Centre for Dispute Resolution, the international division of the American Arbitration Association (the “AAA-ICDR”), offer access to experienced experts and professionals to serve as arbitrators and neutrals in aviation and aerospace disputes. Many arbitral institutions also offer expedited procedures or emergency proceedings that not only cater to disputes of exceptional urgency but can also help reduce the duration and cost of arbitral proceedings generally, as compared to conventional litigation.
Key Considerations in Arbitrating Aviation Disputes
The last decade has witnessed the birth of a number of arbitral bodies specialised in aviation disputes, such as the Shanghai International Aviation Court of Arbitration in 2014, the AAA-ICDR in 2016, and the Hague CAA in 2022. However, the decision as to which arbitral institution to choose for aviation disputes and how to craft an effective and workable arbitration clause requires the careful weighing up of several key considerations.
Speed and Duration of Proceedings
Despite its reputation of providing a more expeditious resolution than court litigation, the typical duration of arbitral proceedings can vary considerably depending on the arbitral institution and rules selected.
Some specialised aviation institutions have built speed and expediency into their procedural rules as a default. For example. the Hague CAA operates on the basis that proceedings are expedited by default, requiring arbitral tribunals to render a final award within five months of their constitution. The AAA-ICDR similarly provides for an expedited procedure in cases where the amount in dispute is under USD 500,000 or where the parties agree to an expedited procedure irrespective of claim size, whereby an award must be rendered within 30 calendar days of the close of the hearing or the date established for the receipt of the parties’ final statements and proofs.
In contrast, the major international arbitral institutions generally do not impose expedited timelines as a matter of course, although most do offer expedited procedures where parties so choose. For example, the International Chamber of Commerce (“ICC”) arbitration rules provide for an expedited procedure that applies where the parties have not opted out of them and the claim value does not exceed USD 3 million. Under this procedure, a final award will be rendered within 6 months of the case management conference.
While there is clear commercial value in expediency in the context of aviation, it is important to stress that expedited timelines will not be appropriate in all cases. Some aviation disputes involve significant volumes of disclosure and complex technical data. By way of example, in Dodson International Parts, Inc. v. Williams International Co. the arbitration of antitrust and tort claims arising from the evaluation of two jet engines following an aircraft crash required extensive technical evidence concerning the engines’ condition, manufacturer’s processes, and the availability of engine manuals and repair data. In aviation disputes of this nature, expedited procedures may not afford the parties sufficient opportunity to present their cases fully.
Parties should give careful thought to this when drafting their arbitration agreement and selecting the rules and “seat” of the arbitration. The choice between a specialised aviation institution with built-in expediency and a general institution with optional expedited procedures may be a significant strategic consideration for parties negotiating cross-border aviation contracts.
Confidentiality and Protective Orders
Aviation is a highly competitive industry with proprietary know-how being of paramount importance. Yet disputes arising from the aviation sector will invariably involve the exchange of commercially sensitive information and technical know-how, which may impact the parties’ commercial interests. This is particularly important where a dispute concerns an aircraft component, engine technology, or maintenance methodology, as the parties may be required to disclose detailed technical data and trade secrets in order to advance or defend their respective cases.
Most international arbitral rules recognise the importance of confidentiality and include provisions to that effect. The Hague CAA, for instance, binds all persons involved in the arbitration to secrecy on matters relating to the arbitration (including the existence of the arbitration), except insofar as disclosure is required by law or permitted by the parties’ agreement. The AAA-ICDR also imposes a similar obligation on the parties involved, providing a non-disclosure obligation in relation to the award and matters in connection with arbitration unless required by law or otherwise agreed to by the parties.
Beyond the general duty of confidentiality imposed by institutional rules, parties and tribunals may also have recourse to protective orders to control the use of commercially sensitive material revealed in the course of arbitration. By way of example, both the AAA-ICDR Rules and the ICC Rules contain provisions that permit the tribunal to make orders concerning the protection of trade secrets.
In the aviation context, where the disclosure of technical specifications or supply chain arrangements could confer a significant competitive advantage on a rival, such orders are of considerable practical importance. Parties would also be well advised to consider the inclusion of bespoke confidentiality agreements within the arbitration clause itself (and typically do), or as a standalone agreement ancillary to the contract, to govern the disclosure and handling of sensitive information throughout the arbitral process and to ensure that that confidentiality obligation, and restrictions on the use of proprietary information revealed in the course of arbitration, extend beyond the conclusion of the proceedings.
Interim Orders and Preliminary Injunctions
Aviation disputes are concerned with a moving asset, which gives rise to a distinct set of considerations when it comes to interim relief. Scenarios include circumstances where the parties have a commercial need to continue supply chain activity pending the resolution of the dispute, and conversely, where one party seeks an order to ground an aircraft pending a determination on the merits of a dispute.
Preliminary injunctions and other forms of emergency relief are, in principle, available under most arbitral rules upon application by the parties. Under the AAA-ICDR Rules, the arbitrator possesses a general power (Article 27) to award any interim or conservatory measures upon the request of a party, and Article 7 permits a party to apply for emergency relief before constitution of the arbitral tribunal. These measures are also found in other non-specialised arbitral institutions, and corresponding provisions are found in Article 28 of the ICC Rules and Article 25 of the LCIA Rules.
Notwithstanding the availability of interim relief in arbitration, parties may still elect to seek urgent relief from a national court, either instead of or in addition to applying to the tribunal. There are several reasons for this.
First, courts possess stronger coercive powers than arbitral tribunals. An arbitral interim order may ultimately require court assistance to compel compliance, particularly where the respondent is uncooperative or the asset is located in a jurisdiction where voluntary compliance cannot be assumed.
Second, courts may be able to act more quickly, which is a critical consideration where the arbitral tribunal has not yet been constituted and the urgency of the situation does not permit the delay inherent in appointing an emergency arbitrator.
Third, arbitral tribunals can only exercise jurisdiction over the parties to the arbitration agreement, meaning that where interim relief is required against a third party, such as an airport authority, a maintenance provider, or a regulatory body, recourse to the courts is the only available option.
Parties should also consider including express carve-outs in the arbitration agreement that permit either party to seek preliminary injunctive relief from the courts without such recourse being treated as a waiver of the right to arbitrate. Such carve-outs are common in international arbitration practice and provide parties with the flexibility to seek the most effective form of urgent relief in the circumstances.
Disclosure
The technical complexity of aviation disputes presents particular challenges in relation to the disclosure of evidence. Where disputes involve aircraft design, maintenance records, certification compliance, or alleged manufacturing defects, the volume of potentially relevant documentation is likely to be substantial. A party alleging a defect in an aircraft component, for instance, will typically need access to detailed engineering records, testing data, and maintenance logs at an early stage to make their case. However, such evidence will often be in the exclusive possession of the opposing party or, in some cases, of third parties such as manufacturers or regulatory authorities.
International arbitration operates on a fundamentally different basis from litigation when it comes to disclosure. While arbitral rules generally permit the production of documents, pre-hearing disclosure can be more limited than in many litigation contexts, operating by way of targeted requests instead. This can present challenges for claimant parties in aviation disputes, who may find it more difficult to obtain the evidence necessary to establish their case from the outset. That challenge can be compounded where third-party disclosure is required, as arbitral tribunals lack jurisdiction over non-parties to the arbitration agreement. In such circumstances, parties must often turn to national courts for assistance.
Interim Awards and Early Determinations
A further procedural tool available to parties in aviation arbitrations is the use of interim awards and early determinations in a variety of circumstances, including where a claim is said to have limited prospects of success.
In the context of aviation disputes, these mechanisms are particularly useful where the dispute concerns contractual provisions that can be resolved as a matter of construction without the need for extensive factual enquiry, thereby reducing the overall length and expense of the arbitration.
Conclusion
International arbitration has rightly emerged as the forum of choice for the resolution of aviation disputes. However, as explored above, the arbitration of aviation disputes gives rise to a range of intricate procedural and strategic considerations that require careful attention at every stage, from the drafting of the arbitration agreement and the selection of the arbitral institution and seat, through to the management of disclosure, and the availability of interim relief. The effectiveness of arbitration as a dispute resolution mechanism in the aviation context will ultimately depend not on its theoretical advantages alone, but on the degree of care and foresight with which the parties and their advisers navigate these considerations.
ABOUT THE AUTHOR
Patrick Gearon is Head of Charles Russell Speechlys LLP’s Middle East practice (conducted from offices in Bahrain, Dubai and Qatar). Patrick is also Chair of the Firm’s International Relationships Committee, which co-ordinates the Firm’s international activities. Patrick specialises in all areas of dispute resolution with particular emphasis on commercial, banking, intellectual property and professional negligence disputes. Patrick has conducted litigation and arbitration in Gibraltar, Hong Kong, Italy, France, Ukraine, the USA and in all the GCC states as well as in all the courts within the English jurisdiction.
Katy Ackroyd is a Senior Associate at Charles Russell Speechlys LLP, advising on complex, high-value litigation and arbitration, both domestically and internationally. Katy works on behalf of both individual and corporate clients advising on complex and high value commercial disputes across a broad range of sectors, often involving multiple parties. She has a diverse practice and has experience of advising on disputes involving breaches of contract, breaches of warranty, misrepresentation, civil fraud, professional negligence and Judicial Review, often with international elements.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
