On 14 February 2023, after months of extensive input from lawyers working in aviation and arbitration, the Hague Court of Arbitration for Aviation (the "HCAA") published a major update of its arbitration rules incorporating a number of improvements on the HCAA's unique offering for the resolution of contractual disputes arising in various facets of the aviation industry.

We explore the most notable features of this latest iteration of the HCAA arbitration rules (the "HCAA Rules") and discuss what those features can bring to the resolution of aviation-related contractual disputes.

The arbitration advantage

Historically, the vast majority of aviation industry contract disputes that require adjudication have tended to be brought before national courts, with English and American (notably, New York or California) courts leading in the context of cross-border disputes. Most aircraft lease agreements, for instance, contain English or New York jurisdiction clauses to match the governing law typically provided for in such agreements. However, while the judgments of national courts enjoy varying levels of enforceability depending on the jurisdiction in which they are issued, no judgment benefits from the ubiquity of enforcement options enjoyed by arbitration awards. That is due to the New York Convention on the Recognition and Enforcement of Arbitration Awards (1958), to which 172 States are party. An arbitral award made in an arbitration seated in a New York Convention State is enforceable in any other New York Convention State, with limited grounds for challenging enforcement. This is particularly valuable in an inherently international industry in which debtors will often have assets distributed across a wide range of jurisdictions.

An equally valuable feature of international commercial arbitration is that the parties can elect for any and all elements of the arbitration to be confidential as between the parties. This is particularly important where a dispute involves commercially sensitive information or arises out of facts which may impact on the reputation of one or more parties if made public. Article 6 of the HCAA Rules has, since its first iteration, enshrined the principle of confidentiality, but the latest iteration of the Rules has helpfully clarified that the scope of that confidentiality is as broad as is permissible in most jurisdictions, covering all materials created or documents produced in the arbitration, any award(s), and even the fact of the arbitration itself. Given that broad scope of confidentiality, Article 6 has introduced a number of express qualifications that include (i) making applications to a competent court for the purposes of protecting or pursuing a legal right as well as enforcing or challenging an award; (ii) making disclosures required by law or regulation; and (iii) seeking legal, expert or other advice relating to the proceedings.

Arbitration rules with efficiency in mind

The most noteworthy characteristic of the new HCAA Rules is the increased emphasis on efficiency at all stages of the proceedings. Whereas the original rules provided for expedited arbitral proceedings in certain specified circumstances, arbitration under the new HCAA Rules will be expedited by default. This is indeed a highly unique feature of the new HCAA Rules. While "extended arbitration proceedings" are possible by agreement between the parties or by determination of the tribunal on its own motion, if appropriate, Article 40 provides that on the default (i.e., expedited) timetable, the arbitral tribunal shall endeavour to render its final award within five months – but in any event no more than six months – from the date of the case management conference. If that is still not quick enough (for instance, where the rapid determination of a straightforward claim for unpaid rent or fees for MRO services is sought), the tribunal is empowered under Article 39, at the request of any party, to make an "early determination" of any point of fact or law on the basis that it is either manifestly (i) without merit, (ii) outside of the tribunal's jurisdiction, or (iii) inadmissible. This brings the HCAA Rules in line with the summary disposal procedures available in English and New York court proceedings, as well as the most recent iterations of the LCIA rules1 and SIAC rules2.

Beyond expedited proceedings by default and a mechanism for early determination, the HCAA Rules are interspersed with various provisions designed to facilitate efficiency of both time and cost. By way of example: A new Article 10 now enables disputes between parties arising out of more than one contract between them to be dealt with in one arbitration (provided that the disputes are subject to arbitration under the HCAA Rules); and to Article 13, which concerns the number of arbitrators to be appointed to a tribunal, language has been added to provide for a tribunal of one arbitrator (rather than three) in principle where the overall claim value in the arbitration is below EUR 3 million.

The efficiency measures contained in the HCAA Rules extend to the almost complete removal of paper-based communication and in-person hearings. Pursuant to Article 3, the default method of communication in the proceedings is electronic, while under an updated Article 26, the hearing under the default procedure is to take place electronically unless otherwise ordered by the tribunal. 3 These provisions also chime with the stated intention of the HCAA Rules (per Article 59) to limit the environmental impact of the arbitral proceedings.

Interim and conservatory measures

The HCAA Rules have largely retained their framework for the arbitral tribunal to order interim and conservatory measures (Article 35) and for the appointment of an emergency arbitrator where a party requires such measures prior to the constitution of the arbitral tribunal (Article 36). This facility enables a party to obtain relief (such as an order that an aircraft be grounded in the context of a leasing dispute) pending determination of the main dispute in the arbitral proceedings. Importantly, the HCAA Rules make explicit that Article 36 does not prevent a party from seeking such relief from a competent court. Indeed, those regimes can work hand in glove: by way of example, section 42(1) of the Arbitration Act 1996 (which governs arbitrations in England, Wales and Northern Ireland) provides for the courts of those jurisdictions to make an order requiring a party to comply with the measures ordered by an arbitral tribunal.

It should be noted that the HCAA Rules as drafted are not designed to supplant any remedies available under the Cape Town Convention in the context of aircraft leasing or financing, such as court-assisted repossession or self-help by deregistration and export. Where in-rem relief is sought under the Cape Town Convention, it will need to be sought from national courts.

Diversity and environmental impact

The HCAA Rules now enshrine, at Article 59, a statement of intent calling on all parties (including the Netherlands Arbitration Institute, the administrating institution) to be mindful of the benefits of diversity in arbitration and of the environmental impact of the conduct of the arbitral proceedings. This is an important "aide-mémoire" to actors in the aviation space and signals the growing importance of these two issues in international arbitration.

Aviation specialism

The HCAA's (unpublished) list of neutrals consists of experienced arbitrators qualified to serve on a single or three-member arbitral tribunal. The stated goal of the HCAA is to reinforce this list with experts in all areas of the aviation industry. The ability of the HCAA to call on aviation experts not just to provide expert advice to the tribunal (something provided for under Article 30) but also to sit as arbitrators themselves is one of the most promising aspects of this new institution, and something which distinguishes the HCAA from generalist arbitral institutions.

Indeed,the latest iteration of the HCAA Rules represents a mission critical evolution which improves the HCAA's offering to parties in the aviation sector.

With expertise in both aviation and international arbitration, Withers is very well placed to advise and assist clients who already use or are interested in using the HCAA Rules to resolve their commercial disputes.

The authors wish to acknowledge the work and dedication of Paul Jebely, Partner and Global Head of Asset Finance at Withers, who is the Chair of the Board of Directors and founder of The Hague Court of Arbitration for Aviation.

Footnotes

1. Article 22.1(viii) LCIA Arbitration Rules 2020

2. Rule 29.1 SIAC Rules 2016

3. Where the default procedure applies, Article 23(2) enshrines a preference for the case management conference to be conducted electronically, and where the extended procedure applies, Article 26(3) provides that procedural hearings are also to take place electronically unless otherwise ordered. It should be noted, however, that Article 26(3) provides, in extended proceedings, for hearings other than procedural hearings to take place in person unless otherwise ordered.

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.