Walking the grounds of the Singapore Airshow this week, my thoughts turned to litigation—yours would too, if aviation litigation happened to be your craft. The commercial aviation industry coalesced peacefully, of course, but it became clear to me that the undercurrents of legal conflict were present at the show. Although I tried to suppress the litigator in me as I met with our clients and contacts throughout the week, I could not escape the fact that legal conflict is as—if not, much more—likely in commercial aviation as in any international business . Suffice it to say that I spent a lot of time listening and giving some free insights, rather than plane spotting—although I did plenty of that as well. In this article, I summarize my responses to the five questions that I was asked most frequently at the Singapore Airshow this week.
Should we put things in writing?
In a word, yes. Parties can have different perceptions of what was agreed. There may be changes of key personnel along the way. By putting things in writing we create a paper trail, we clarify the communications and eliminate any misunderstandings that may exist between the parties. We tend to put more thought into an email as we are writing it, and before clicking “send”. The email then serves as an accurate record of what was agreed. E-mail is generally preferred over messages sent via Whatsapp. There is a tendency when using Whatsapp to be too informal, and you run the risk of saying something which on reflection may not look great. Messages sent via Whatsapp can also be lost more easily, and may be harder to present as evidence since they can be altered. Meeting notes are a good idea. When good notes are taken then important items are better remembered, and less likely to be open to challenge at a later date. If key contractual points such as time-frames, specifications and payments are set out in writing then they become easier to enforce should a dispute arise at a later date. In terms of language, try using ”soft words and hard arguments“.
Should we arbitrate or litigate?
I believe that conflict is inevitable, but litigation is optional, and an ounce of mediation is worth a pound of arbitration and a ton of litigation. There is an adage which says that you should “arbitrate with a customer”, but “litigate with a competitor”. My experience suggests that there is merit in this approach. By arbitrating at least, the parties should be able to maintain some form of meaningful ongoing commercial relationship with each other. Goodwill can be maintained.
Another benefit is that arbitration is a flexible process, which is often quicker (and hopefully cheaper) than litigation. Importantly, the outcome of arbitration can be kept confidential and so reputational damage to either party can be avoided. Also bear in mind with arbitration that the parties can effectively “choose” their Judge, and select arbitrators who may have first-hand technical expertise of the aviation industry.
The New York Convention arguably makes it easier to enforce (binding) arbitration awards in a foreign country, rather than getting caught up in unfamiliar and ‘messy’ local litigation.
There are of course downsides to arbitration. For instance, an existing contract may compel mandatory arbitration in the event of a dispute. This can easily be forgotten about, and may be buried in the small print of a long-standing commercial agreement. If the arbitration is mandatory and/or binding then going to court may not be an alternative for the affected parties. In most jurisdictions there are limited rights of, or basis for appeal against an arbitrator’s decision. Also bear in mind that there can be limited discovery in an arbitration (subject to what the parties may have agreed), although this can be both a good and a bad thing – good in the sense that it may save money, bad in that the parties may not be able to properly assess the strength of the opponents evidence.
Despite all of this, there are still arguments in favour of litigating. A Plaintiff can exert a high degree of control over (and the pace of) the litigation process. Within reason, a Plaintiff may also choose the jurisdiction in which to bring their claim. This may be tactical. Some jurisdictions around the world (I shall diplomatically refrain from naming them) are challenging and notoriously slow, which can result in drawn-out and very expensive litigation lasting many years. An unwilling Defendant does not want to be sucked into this scenario, and may decide on commercial grounds (if nothing else) to “buy” their way out of the claim in order to dispose of it – regardless of the legal merits.
How should a party prove the claim, or what evidence can it obtain to counter it?
Whether a claim is to be resolved by arbitration or litigation one thing is key – the need for evidence. The aviation sector can involve complicated processes, and some of the technology which used in aircraft and engine manufacturing now is simply astonishing. The use of expert witnesses can be key to winning a case where there are technical issues in dispute. Often suitable experts can be found on expert witness databases. Many experts are well-versed in giving evidence before a court or an arbitrator. My view is that greater control can be exercised over the use of experts in arbitration compared to litigation. There are jurisdictions in Asia for example, where the Presiding Judge may choose the expert witness. These court-appointed experts are not always suitable for the task, and may simply be an academic at the local university in a similar field. It may be “pot-luck” therefore whether the court-appointed expert knows the subject area and can genuinely assist the case.
Can a claim be brought or contested in the home jurisdiction?
This depends on a number of factors. For instance, if a contractual agreement has a valid dispute resolution clause then this may already have been catered for. It may state for example - “In the event of a dispute between X and Y, such dispute is to be resolved by arbitration which is to be seated in London, and English Law will apply”. That is quite straight forward, and leaves little scope for argument by either party. If the contract does not make such provision, then it is up to the parties to reach an agreement on whether, how and where to arbitrate.
In litigation the position is slightly different. There are generally speaking certain rules that apply. Typically, we see litigation being commenced in a Defendant’s home jurisdiction. Alternatively, a party may look to commence proceedings in the jurisdiction where the contract was made. If one of the Air Law Conventions apply (eg a claim for damage caused to cargo during carriage by air) the Plaintiff may consider the point of departure, or the place of arrival. The Plaintiff may also consider the domicile and/or the airline’s principle place of business.
Should lawyers be engaged?
Parties to a dispute will normally have a sense of how discussions are progressing (or not as the case may be). Careful drafting in the first instance is desirable, as this will narrow the scope for disagreement over the interpretation or the wording of a contract. So called “step clauses” drafted into the agreement may help. This would place a requirement on the parties to, for example, endeavor to negotiate in the first instance before entering a “binding” secondary step such as arbitration.
My advice would be to bring in the lawyers at an early stage of a dispute, and before either party becomes too entrenched in their respective corners. It often helps to become slightly detached from the dispute, and to avoid making the dispute in some way personal with your opponent.
There may be strengths (or weaknesses) in your own case that you had not previously considered.
Often there is a “window”, or a “sweet spot” early on in the dispute which may be an ideal time for the parties to sit down and discuss the matter across the table.
It goes without saying that proper legal representation is crucial going into arbitration especially where it is binding, but in particular with litigation. Local or “correspondent” lawyers may be required if litigation has been commenced in a foreign jurisdiction where your usual lawyers may not have an office or local rights of audience.