26 September 2001

Administrative High Court Decision Ratified The Jurisdiction Of The Colombian Air Authority To Fix Travel Agencies´ Commissions

Colombia Corporate/Commercial Law
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Last June 20, 2001 the Colombian Senate approved in second debate law project 209 of 2001 whereby the percentage charged by travel agencies to international airlines is increased to a minimum of 10%. The project would become a law if approved in two additional debates in the Colombian Chamber of Representatives.

This commission of a 10% was originally established by the Colombian Air Authority through Resolution 2743 of 1988. Resolution 820 of 2000 subsequently revoked the latter and established the gradual reduction of such commission in one point each year until 2004.

With respect to this same matter, a claim was filed requesting the annulment of article 4 of Resolution 2743 of 1988 issued by the Colombian Air Authority, which established that the commission for the sale and promotion of international airline's tickets would be of 10%.

The judge of the First Section of the Administrative High Court, Mrs. Olga Inés Navarrete, decided on August 30, 2001 to reject the above-mentioned claim.

This decision was based on the following arguments:

a. Jurisdiction

In spite of the fact that Resolution 2743 of 1988 was revoked by Resolution 820 of 2000, the Court has jurisdiction to decide on the grounds of the latter. This, since the Administrative High Court has sustained in past legal decisions that a revoked norm may continue to produce legal effects with regard to legal situations consolidated during its term and the legality of the norm is assumed until an express judicial decision providing otherwise is issued.

b. Admissibility of the Claim

Third parties intervening in the proceedings claimed that the nullity action was not the appropriate action to be filed In their opinion, only the nullity and re-establishment of the right action could be applied because of the existence of a particular interest of one airline (i.e. American Airlines, Inc.)

Notwithstanding the above, the Court considered that the above-mentioned Article 4 is of a general character because it affects evenly all airlines and travel agencies and not only those that have decided to ignore the provisions therein contained . In consequence, the nullity action was the appropriate one.

c. Jurisdiction of the Colombian Air Authority to issue Article 4 of Resolution 2743 of 1988.

i.) The control exercised by the Colombian Air Authority is not exclusive in relation to transport companies. Travel agents and intermediaries working in the aeronautical sector, are subject to its surveillance and control and, therefore, all their activities may be subject to Government regulations (Article 1868 of the Code of Commerce).

ii.) In the Colombian Constitution of 1886 and, more recently, in the Constitution of 1991, freedom of enterprise has been guaranteed but within the limits of common welfare (Article 32, C. 1886 and Articles 333 and 334, C. 1991). In other words, the State reserves the power of intervening in the general direction of the Colombian economy, whenever the general welfare is threatened.

Since transportation is considered to be a public service, the Court concluded that the State is best qualified to intervene in order to guarantee the rendering of service and protection of the general interest.

iii.) The Administrative Department of the Civil Aeronautics, today Special Administrative Unit of Civil Aeronautics (i.e. the Colombian Air Authority), was and still is the maximum authority in aeronautical matters. This means that it has the capacity to develop all policies to exercise the activity and even to fix and regulate all matters related to tariffs of air transportation.

By virtue of the CLAC (Latin American Civil Air Commission) statute approved by Law 622 of 2000 and Resolution A6-7 of the same entity, it is established that the commissions paid to travel agencies and, in general, to intermediaries, are an integral part of tariffs. Consequently, the member States of CLAC shall review and fix the levels of the mentioned commissions.

Therefore, Article 4 of Resolution 2743 of 1988, does not violate any of the CLAC's regulations because commissions are part of the tariff, and tariffs, in turn, may be regulated by the aeronautic authority.

iv. The plaintiff argued that the Air Authority was exclusively empowered to issue regulations pursuant to those provisions included in the Colombian Commercial Code . Additional regulations and previous Court decisions from the Administrative High Court have been entrusted to clearly determine the contents of such regulations. Consequently, the claimed article is not covered by the aeronautic regulation.

The Court did not agree with the above, reinstating the argument that the Colombian Air Authority is the maximum authority on the subject matter and may regulate international transport tariffs not only pursuant to the powers afforded by law, but also to those granted by the Constitution upon considering transportation as a public service.

By virtue of the above, the Administrative High Court rejected the claims of the plaintiff.

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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