When bad things happen to good deals

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Of the thousands of aircraft and aviation deals that close every year only a surprisingly small number end in disputes. And few of these disputes end up in court. But when they do it is a nightmare for everyone involved.

While judges are often impressive it is asking a lot for them to understand the nuances involved in an aviation transaction which looks nothing like the oil and gas dispute they ruled on last week. Published rulings also open up disputes for everyone to see.

“When private aviation deals unravel in an acrimonious fashion – as we all know they sometimes do – the court litigation that ensues can be ferocious, unedifying, publicly embarrassing, and astoundingly expensive,” says Paul Jebely, founder and chair of the new Hague Court of Arbitration for Aviation that was launched this week at Farnborough Airshow

The non-profit Hague Court of Arbitration for Aviation (Hague CAA) aims to be a neutral and private forum for specialised arbitration and mediation relying on aviation experts. It aims to provide confidential, final and binding resolution when contractual relationships become acrimonious and offer voluntary mediation for aviation disputes.

It is effectively a private court regulated by National laws. The Netherlands Arbitration Institute which is backing the project was launched in 1949.

“Many in the industry do not understand that an Arbitration award is more enforceable internationally than a New York or English court ruling,” says Jebely. “The way we do it, both arbitration and mediation are also much cheaper and faster than going to court and you get experts who understand the issues. You do not have to spend time explaining how a business jet transaction works to a judge that may be hearing a case involving private aviation for the first time.”

Nearly 70 diverse aviation and arbitration attorneys, aviation executives and technical experts from around the world, including notable lawyers and technical experts in the private aviation industry, have worked together with the Netherlands Arbitration Institute on this launch. The volunteers include lawyers from more than 20 law firms, four law schools and nearly 30 aviation companies.

Agreed access to a combined mediation and/or arbitration forum with resident expertise offers more than just a much cleaner process, according to Ian McDougall, chairman of the Board of Directors, Volatus Aerospace, who is also part to the Hague Court’s legal team. The Hague CAA will deliver this at greater speed, less cost and overall will better support the original contractual objectives that are in question between parties,” he says. “It avoids the large, unproductive distractions and distortions of traditional litigation. Plus, the possibility of an interim mediated result pending final arbitration can facilitate loss mitigation by avoiding unnecessary AOG outcomes.”

Matt Potts, general counsel EMEA at Jetcraft and also part of the Hague CAA, acknowledges in a perfect world, every transaction would be completed smoothly and easily without complications or disagreements. “But as we all know, we do not live in a perfect world,” he tells us. Most transactions will never need the court. “However, if your transaction does end up in a disagreement or requires outside intervention, all parties involved will want a cost-effective, efficient, and binding resolution based on an expert understanding of the issues raised. Terms that are not generally used to describe the legal system.” 

The Hague Court of Arbitration for Aviation will begin accepting requests for arbitration or mediation in August. Jebely is also hopeful that market participants will chose to add arbitration and mediation to new contracts in the near term.

Meanwhile, he concludes: Specialised arbitration – and mediation – and private aviation are a marriage made in law heaven.”

Paul Jebely, founder and chair of the new Hague Court of Arbitration for Aviation told CJI: Specialised arbitration – and mediation – and private aviation are a marriage made in law heaven.”

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