The HCAA (Hague Court of Arbitration for Aviation) is a newly established specialized arbitration center catering specifically to the aviation sector, which was launched at the Farnborough International Air show in July 2022. Earlier this year, we did an overview of our initial views on the HCAA Model Clause and Rules. The HCAA has also recently revised its arbitration rules on 14 February 2023, showing the high level of consultative engagement that the HCAA has with the aviation community.
Like the Court of Arbitration for Sport and the Chambre Arbitrale Maritime de Paris, one of the HCAA’s key advantages is the availability and expertise of aviation arbitrators in their specialist field which is intended to reduce cost and increase efficiency. Drawing references to the construction and maritime industries however, it is worth noting that setting up a specialized arbitration center is not the only method of allowing transacting parties access to specialists. Professional groups of arbitrators such as the London Maritime Arbitrators Association and Society of Construction Arbitrators can also provide a similar advantage to parties to a dispute in an ad hoc forum rather than a fully administered arbitration. In aviation, the American Arbitrations Association has a panel dedicated to Aerospace, Aviation, and National Security.
Another key advantage offered by the HCAA is that it adopts specialist rules adapted to the needs of the aviation industry. While more generalist arbitration centers such as the American Arbitration Association may have rules for specific industries (e.g., construction or accounting), only specialized arbitration centers (including HCAA) are able to provide both the benefit of arbitrator expertise and specialist rules.
While specialization leads to cost efficiency and potentially faster and fairer outcomes, transaction lawyers and in-house counsel should consider that there are drawbacks to over-specialization as well. A blanket use of a specialist arbitration center for all disputes may not always be relevant. For example:
- Disputes where aviation is ancillary to the cause of action. Consider a dispute involving an airline caterer and food safety standards. Whilst this may be a dispute related to the aviation industry, the real expertise required is within food safety and an aviation specialist tribunal may not be best placed to resolve such disputes.
- Disputes involving advanced air mobility. It also remains to be seen whether emerging technologies within the aviation sector, like the drones, EVTOLs, CTOLS and VTOLs etc. within urban air mobility and advanced air mobility fit well within the HCAA rules and within the scope of expertise of the HCAA’s panel of arbitrators. A salutary example of why a more diverse panel (including experts from the tech and logistics industries) might prove welcome additions alongside more traditional aviators;
- HCAA’s expert arbitrators. Many of these emerging technologies involve elements of technology law, data privacy and beyond, that traditional large air carrier aviation experts may not have the requisite expertise. Moreover, different aviation technologies will require experts with nuanced skill sets. An engineer versed in vertical take-off and landing aircrafts may not be well-suited to a dispute where the aircraft’s flight is traditional, approach-based.
Before transaction lawyers can decide the extent to which HCAA is recommended as the dispute resolution forum of choice, the HCAA would have to develop a nuanced approach with an understanding of the breadth and depth of expertise within aviation that they are able to bring. That said, many overarching themes have impacted the aviation sector that aviation experts would be exceedingly helpful in resolving, including leasing disputes, severe supply chain issues and manpower shortages experienced in the entire sector after flight routes gradually resume, assets being subject to sanctions related regulations as a result of the war in Ukraine and beyond. Answering to this concern, the HCAA has plans to evolve from a generically focused aviation institution to one that has a conglomeration of sector focus, which could include sub-sector specialties like leasing and financing, trading, MRO (maintenance, repair and operations), advanced air mobility and more.
As transaction lawyers consider the HCAA and its benefits, we need also to be cognizant of the fact that transaction lawyers and in-house counsel in this sector are not completely free to choose. Many aviation related contracts have been based on industry-standard forms, either proposed by leading manufacturers (in the case of aircraft or engine purchase agreements, maintenance or conversion agreements) or proposed by industry groups such as IATA which produce standard forms and best practice guidance for aircraft leases, innovations and sale and purchase (Note that IATA also has its own recommended arbitration rules).
Apart from industry-standard forms, the aviation sector is also one where deviation from precedent is often seen as an unmanageable level of risk. For example, there is a focus in the commercial aviation sector on commercial aircraft leases containing terms that are bankable (i.e., terms that banks are likely to provide financing for the aircraft on) and tradeable (i.e., terms that allow an aircraft subject to a lease to be sold to a new owner that will also take on the role as lessor). As a result, it could be that the first early-adopters of HCAA may be in segments of the aviation industry, which are less influenced by industry-standard forms or concerns of bankability or trade-ability, potentially in the business jet or advanced air sectors where industry participants are more varied and less tied to precedent.