This edition of Jones Day's Airlines and Aviation
Alert focuses on a handful of the many practical issues faced
by aviation businesses, particularly in Asia. As the airlines of
China and other Asian countries expand their operations around the
world, those carriers and the businesses with which they interact
have moved from the conceptual to the practical.
Our first article outlines advantages to choosing "New York
law" to be the governing law in contracts for the sale of
aircraft to Chinese buyers. Most notably, the contract laws of New
York and China both impose obligations of good faith on the
parties. In both jurisdictions, this rule injects an element of
fairness that protects the parties' interests and expectations,
in a way that is not guaranteed under the laws of other
jurisdictions, such as England. Therefore, use of New York law can
help a seller meet the expectations of the Chinese buyer.
The ability of the parties to China aircraft sale contracts to
make their own choice of law is fairly new, made possible by
China's 2009 ratification of the Cape Town Treaty and Protocol,
and it will be increasingly significant as businesses in this area
pursue the opportunities created by China's enormous demand for
We then present an overview of arbitration regimes available in
Asia. Thanks to increased ad hoc and institutional arbitration
activity in Asia, not to mention the welcoming efforts of some
Asian jurisdiction governments, venues like Hong Kong and Singapore
now are attractive locales for international arbitration, taking
their place with the traditional venues in the U.S. and Western
Europe. This article compares the arbitration rules of the major
arbitration institutions in Asia—CIETAC, HKIAC, SIAC, and
UNCITRAL—and makes recommendations on what elements to
include in your arbitration agreement.
A third article looks ahead to Chinese airlines entering into
alliances with air carriers of other countries, which of course
would present the kinds of antitrust risk concerns that motivate
other jurisdictions to authorize grants of antitrust immunity.
Chinese law does not offer any explicit antitrust immunity.
However, avenues may be available under existing law to reduce
antitrust risk. Chinese law requires that some joint ventures be
reported to its Ministry of Commerce, whose clearance may imply
government approval of the conduct for which the joint venture was
established. Similarly, the other Chinese antitrust agencies may
review and choose to allow business activities after the parties
commit to certain conduct going forward. Completing these
procedures may give airlines some comfort they can proceed with
lessened risk of Chinese antitrust challenge to coordination within
international alliances such as oneworld, SkyTeam, or Star.
Finally, we report on U.S. litigation that will affect both U.S.
and non-U.S. aviation businesses and advise on how aircraft lease
financiers may avoid the risks created by recent decisions that
denied insurance coverage under hull and liability policies where
the operator intentionally caused the loss. The Highland
Capital case presented the disturbing story of an operator
that stripped parts from aircraft insured by the financier and
leasing company, which had protected themselves with a standard
policy endorsement that named them as additional insureds. The
insurers resisted coverage, arguing that the state of mind of the
wrongdoing operator should be imputed to the financiers. The
district court and Second Circuit accepted this argument, and also
ignored the endorsement's statement that coverage could not be
invalidated by the independent actions of any other party. This
article offers ways to avoid this troublesome and mistaken
interpretation of this standard policy endorsement.
We hope you enjoy our Alert. We are very privileged to represent
airlines and industry clients in a variety of interesting and
challenging matters, and we believe the aviation industry is
unique. It is indispensable to economic growth and it ensures the
quality of modern life. We welcome your comments.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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