The aviation sector contributes nearly 4% to the global gross domestic product (the "GDP") and supports more than 65 million jobs around the world.1 The aviation sector in India currently contributes USD 72 billion to the GDP, and India is expected to be the third-largest aviation market in the world by the year 2024.2
However, this year, the aviation sector has faced an unprecedented crisis globally, with all the major countries, including India, restricting air travel and grounding all scheduled domestic and international air services in order to contain the spread of COVID-19. While the scheduled domestic operations in India resumed from 25th May 2020, scheduled international operations are yet to resume. This tumultuous phase has witnessed a significant number of unique developments which has enabled the aviation industry to progress even in times of constraint. Primary amongst them is the execution of air transport bubble arrangements between countries, and the Supreme Court's ruling on the refund of passenger money for flights booked by the passengers during the lockdown.
Additionally, during the year, the legislative space saw (i) the amendment to the foreign direct investment policy for aiding the disinvestment of Air India; (ii) the passing of the Aircraft (Amendment) Act, 2020; (iii) the amendment to civil aviation requirements for setting out the procedure for the recording of Irrevocable Deregistration and Export Request Authorisation ("IDERA"); and (iv) the allowance for the use of Wi-Fi on board aircrafts, etc.
This newsletter highlights key legal developments in the Indian aviation space from March 2020 to December 2020.
- KEY HIGHLIGHTS
2.1 Air Transport Bubbles
As a result of the COVID-19 pandemic, new travel arrangements known as 'air transport bubbles' have been introduced and conceived to reopen international travel to and from India with respect to commercial passenger services in a restricted manner. Air transport bubbles are temporary reciprocal arrangements between countries which have progressively restarted commercial international travel until regular scheduled international flights can commence operations.
Air transport bubbles have different nomenclature around the world and are synonymous with 'air bridges', 'air bubbles', 'transport bubbles', and 'travel corridors'. Regardless of the terminology, globally, these arrangements permit a certain number of mutually agreed scheduled flights to operate between the participating countries. These flights operate on a specially approved and published schedule. However, there can be a significant variance in the rules around air transport bubbles, depending on the respective countries and their negotiated agreements. These arrangements have assisted in supplementing repatriation flights, and allow individuals to visit their stranded family members in other countries.
As of November 2020, India has entered into bilateral air transport bubble agreements with 20 countries, including Afghanistan, Bahrain, Bangladesh, Bhutan, Canada, France, Germany, Iraq, Japan, Kenya, the Maldives, the Netherlands, Nigeria, Oman, Qatar, Rwanda, Tanzania, Ukraine, the United Arab Emirates, the United Kingdom and the United States of America3. Indian citizens/passport holders, Overseas Citizens of India (OCI) cardholders, and foreign citizens with eligible Indian visas can travel under the respective air transport bubbles arrangements in force in India.
2.2 Amendment to the Aircraft Act, 1934
The Aircraft Act, 1934 (the "Act") is the principal legislation in India governing the manufacture, possession, use, operation, sale, import and export of aircraft, and the licensing of aerodromes. The Aircraft (Amendment) Act, 20204 (the "Amendment") was passed by the Lok Sabha on 17th March 2020 and by the Rajya Sabha on 15th September 2020, and received presidential assent on 19th September 2020, thereby, according it a status of enforceable law.5
The Amendment aims to give proper recognition to 3 existing regulatory bodies, i.e., the Directorate General of Civil Aviation (the "DGCA"), the Bureau of Civil Aviation Security (the "BCAS") and the Aircraft Accidents Investigation Bureau (the "AAIB"), which operate under the Ministry of Civil Aviation as statutory authorities under the Act, to enhance the quantum of penalties, thereby, empowering officers to levy greater fines for violations of the Act and to also include certain areas of air navigation services for rule-making purposes. Per the Amendment, the DGCA will be responsible for safety and regulatory functions, the BCAS will carry out regulatory oversight functions related to civil aviation security, and the AAIB will carry out investigations associated with aircraft and related incidents.6 The Central Government can issue directions to these organizations in their respective spheres of working (as detailed under the Act) if it considers it necessary to do so in public interest,7 and may review any order passed by the Director General of the DGCA or the BCAS, and issue directions to them to rescind or modify their orders.8
Offences under the Act now carry an increased financial penalty of up to INR 10 million (approximately USD 135,000) in addition to the prescribed imprisonment. Further, the Central Government can impose penalties not exceeding INR 10 million (approximately USD 135,000) for offences for which no specific punishment has been prescribed under the Act.9 The Central Government is also permitted to cancel the license, certificate or approval issued to any person under the Act, if such person contravenes any provision of the Act.
The Amendment provides for the compounding of certain offences, either before or after the institution of any prosecution of offences by the Director General of the DGCA, the BCAS or the AAIB, subject to the supervision of the Central Government.10 The Central Government may appoint a designated officer, not below the rank of Deputy Secretary, to adjudicate and compound penalties under the Act. Courts in India cannot take cognizance of any offence punishable under the Act, except on a complaint by, or with the previous written sanction from, the Director General of the DGCA, the BCAS or the AAIB. Only a court which is equivalent to or higher than that of a Metropolitan Magistrate or Magistrate of First Class can try offences under the Act.
The Amendment enables the Central Government to regulate and formulate rules for all areas of air navigation services and any other related matters.11 Further, the Amendment extends the exemption provided under the Act to any aircraft belonging to the naval, military or air forces or any other armed forces of the country from the purview of the Act, until specified otherwise by the Central Government.
2.3 Changes in Foreign Direct Investment in Aviation
The Department for Promotion of Industry and Internal Trade under the Ministry of Commerce and Industry, through its Foreign Direct Investment Policy (the "FDI policy"),12 regulates foreign investments in India. The FDI policy provides that sector-specific investments are allowed either through (i) the automatic route, requiring no prior approval from the Government of India; or (ii) the approval route, requiring the prior approval of the Government of India.
The existing FDI policy allows investment in the aviation sector under the automatic route and the approval route (in certain specified cases), subject to certain additional conditions. Currently, foreign investment in a scheduled air transport service or a domestic scheduled passenger airline is permitted up to 100% (49% under the automatic route and the remaining under the approval route). To bring more flexibility to, and to attract prospective bidders for, the proposed disinvestment of Air India (currently owned wholly by the Government of India), the FDI policy now allows a non-resident Indian ("NRI"), who is an Indian national, to invest up to 100% through the automatic route in a scheduled air transport service or a domestic scheduled passenger airline. However, foreign investments in Air India through persons other than NRIs (including foreign airlines) cannot exceed 49%, either directly or indirectly. Also, substantial ownership and effective control of Air India shall be vested with Indian nationals.
However, Press Note No. 3 (2020 Series)13 has clarified that (i) an entity of a country sharing a land border with India; or (ii) where the beneficial owner of an investment into India is situated in or is a citizen of a country which shares a land border with India, can invest only under the approval route.
2.4 Recording of IDERA
The DGCA, on 15th June 2020, made certain amendments to the Civil Aviation Requirements, Section 2 – Airworthiness (Series F, Part I, Issue II)14 (the "Amended CAR") on Registration and De-registration of Aircraft by introducing a new paragraph 7A, which provides for a specific procedure for recording an IDERA upon its submission to the DGCA. Paragraph 7A of the Amended CAR requires that, for the purpose of recording an IDERA with the DGCA, the IDERA-holder, his authorized signatory or the certified designee of the authorized signatory shall submit the prescribed application (as provided in Appendix B of the Amended CAR) along with the original IDERA and a notarized copy or two notarized copies thereof.
The said amendment introduces a formal mechanism to record IDERAs with the DGCA. Prior to the Amended CAR, the lessor or its authorised representative, or the lessee (on behalf of the lessor), would submit the IDERA along with a cover letter to the DGCA, and the DGCA would provide a receipt acknowledgment for the same. This acknowledgment would serve as proof of the submission of the IDERA. The formal process of recording the IDERA introduced by the Amended CAR brings India closer to meeting its obligations under the Convention on International Interests in Mobile Equipment on matters specific to Aircraft Equipment (Cape Town Convention).
2.5 Wi-Fi on board Aircraft
In August 2020, the DGCA released draft civil aviation requirements for the use of Wi-Fi on portable electronic devices ("PEDs") by passengers during flights15. These new requirements were announced 6 months after the Ministry of Civil Aviation, through official notification, permitted internet access to passengers through onboard Wi-Fi on 21st February 2020, by bringing into force the Aircraft (Second Amendment) Rules, 2020.16 As per Rule 29B(3) of the Aircraft Rules, 1937 (as amended), 'the Pilot-in-Command may permit the access of Internet services by passengers on board an aircraft in flight, through Wi-Fi on board, when laptop, smartphone, tablet, smartwatch, e-reader or a point of sale device is used in flight mode or airplane mode'.
Under the draft requirements, internet services through Wi-Fi on PEDs shall be provided to passengers only if the device is in flight/airplane mode. Further, internet services will be made available at 3,000 meters or 10,000 feet above departure/arrival airfield elevation. The pilot in command shall be allowed to disable the Wi-Fi and also ask for stowage of the PEDs at his/her discretion during any phase of the flight. The cabin crew shall be instructed to keep a watch on passengers to ensure compliance with the relevant protocols. Each operator that offers in-flight Wi-Fi shall be required to obtain necessary statutory approvals.
2.6 International Financial Services Centre and Aviation
The Central Government had notified the International Financial Services Centres Authority Act (the "IFSC Act")17 on 19th December 2019 to initiate development and regulation of the financial services market in India. On 16th October 2020, the Ministry of Finance, through a notification,18 expanded the definition of 'Financial Product' under the IFSC Act, by including aircraft leases (including operating and financial leases as well as a hybrid of operating and financial leases), helicopters or engines; this opens the door to big opportunities for the aviation sector, including developing a feasible aircraft leasing market in India. The units set up under the IFSC Act will be able to provide services through financial products, which now include aircraft leasing. India has a lot of untapped potential for aircraft leasing which will get a much-needed push through the IFSC Act.
1.Aviation: Benefits Beyond Borders (ABBB), 2018, Air Transport Action Group (ATAG), https://aviationbenefits.org/media/166344/abbb18_full-report_web.pdf.
in India Industry Scenario
5. A detailed analysis of the Amendment is accessible at https://induslaw.com/app/webroot/publications/pdf/alerts-2020/Infolex-NewsAlert-Amendment-to-Aircraft-Act-1934.pdf.
6. Section 5A of the Act.
7. Section 4D of the Act.
8. Section 5A(1B) of the Act.
9. Section 10A of the Act.
10. Section 12A of the Act.
11. Section 5(gd) of the Act.
16.Accessible at http://www.egazette.nic.in/WriteReadData/2020/216483.pdf.
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