As part of our ongoing series of interviews with in-house lawyers at international aviation companies, ALN caught up with Ina Anzalna Shamsuddin, head of legal at Malaysia Airlines, to discuss the carrier’s recent restructuring and her role in Malaysia’s accession to the Montreal Convention.
Ina joined the in-house team at a local bank right out of law school and spent time working at the Malaysian Inland Revenue Board before going into private practice as a corporate lawyer. In 2003, she joined Malaysian Airline System Berhad (MAS) as a junior counsel: “I realised that the most satisfying challenge for me would be to work in a corporate sector where I can actually be part of something real and see it through, as opposed to merely giving advice and guidance.”
She got her wish in 2014, when, after stints in the airline’s policy and risk management teams, she was made legal adviser for MAS’s restructuring and eventual rebranding as Malaysia Airlines. After the restructuring completed in 2015, Ina was promoted to head of the airline’s legal department and she has held the role ever since.
What drew you to the aviation industry? What particular challenges face general counsel at airlines?
As an aviation counsel, you are constantly learning new things with each project or assignment because the industry itself is very volatile and heavily regulated. What you advised today may not necessarily be applicable tomorrow, so you need to keep up with the latest developments in the law and be creative in formulating pragmatic solutions that are unique to the airline’s operational environment.
As Malaysia Airlines has an extensive international network, we not only have to look at Malaysian law; counsel must also be well-versed in the laws of the other countries where Malaysia Airlines operates. Therefore, when looking at certain processes or solutions, we have to ensure that they meet the minimum legal requirements of all of the affected jurisdictions.
What role did the legal team play in the difficult years of the airline’s restructuring and rebranding? What did the process look like from the inside?
The old company, MAS, was a public listed company, with majority shareholding indirectly held by the government. To facilitate the restructuring, the company had to be privatised, so the airline had to call for an extraordinary general meeting to do a share buy-back with the minority shareholders. The Malaysian Airline System Berhad (Administration) Act was passed soon after that, but the airline was not involved in the drafting of the legislation, it was all done by the attorney general’s chambers.
The legislation called for the appointment of an administrator over MAS and the establishment of a new legal entity that would become the national airline. The legislation also made it clear that the new airline was not the successor entity of the old one and does not inherit any of its assets and liabilities.
To facilitate the continuous operations of the national airline, the legislation empowers the administrator to transfer certain assets and contracts to the new airline using a vesting order. The restructuring office was then tasked with assessing assets, rights and contracts that are necessary to ensure minimal disruption to the airline operations, with the main assets being the aircraft, and ground-handling and catering contracts. As the legal counsel, I had to work closely with the procurement team to renegotiate better rates from the new suppliers, service providers and financiers.
Some of the other items which were not transferable (such as licences, overflying rights, airport slots, bank accounts, and even employees) had to be acquired by the new airline on its own. The challenge for this was coordinating it all to happen in synchronisation on day one, not just for the Malaysian operations, but also for the other offices worldwide.
What does your department do differently to other aviation legal teams?
Keeping a low operating cost is always key for most airlines. The legal team is constantly being asked to renegotiate contracts with suppliers or equipment manufacturers who are mostly in monopolistic or oligopolistic markets. Often the legal team has to engage in strategic negotiation techniques as we don’t have as much leverage in a renegotiation exercise as we do in a pre-award negotiation. As such, legal counsel must possess strong understanding of these different market conditions, as well as their legal landscape, to be able to present and implement a sound renegotiation strategy.
What mistakes do you try to avoid?
Often when the company faces problems or is starting something new, we turn to external lawyers for advice. However, it would be a mistake for in-house counsel to simply absorb this advice and pass it on to the company; usually our legal team would re-evaluate and analyse these solutions and form our own recommendation that best suits the company, even if it means extra work and more accountability for the team.
For example, signing aircraft financing agreements at the office would attract huge amounts of stamp duty. To mitigate this, the legal team will arrange for the contract execution to be performed outside of the jurisdiction and coordinate for the aircraft delivery to happen when it is flying over international waters.
What issues are currently keeping you busy? Are they specific to Malaysia Airlines, or characteristic of the sector as a whole?
The main issue (which I believe is also faced by other airlines) is dealing with the rise of European claims. Law firms will sue an airline as soon as there is a flight delay or cancellation, purporting to be representing a particular passenger, or a group of passengers. When we mediate, agree on a settlement and want to make payments directly to the passenger, the lawyers disappear. By then, we would have already incurred time, effort and legal costs.
The airline is currently working on expanding its marketing effort in the digital sphere. At the same time, we are converting all our internal standard operating procedures from manual to integrated electronic systems. The legal team is busy with reviewing an increasing number of IT-related and e-commerce contracts and must be mindful of the impact of the EU General Data Protection Regulation.
What is your relationship with the wider management team and the board? How is compliance handled across the company?
In the past, the legal department was always in a fire-fighting role because business units only came to us for help when they had problems. Now, the in-house counsel has a permanent seat on the executive council, which sits every fortnight, and this means that every decision made by the company will have to be examined and analysed from the legal, governance and compliance perspective before being implemented.
We have a very strict compliance policy and a dedicated team that goes around the organisation conducting briefings and awareness programmes on new laws, regulations, policies and procedures. Employees’ attendance at these programmes is tracked closely to ensure that the information reaches everyone.
What development or achievement do you take the most pride in from your tenure at Malaysia Airlines?
That would be when I was handling an assignment which resulted in Malaysia’s accession to the Montreal Convention.
Prior to 2008, air transportation in Malaysia was still governed by the Warsaw Convention. While Malaysia Airlines had lobbied the government to ratify the Montreal Convention – as it provides a better compensation regime to passengers and cargo shippers – when I joined the airline in 2003, there was no particular unit or person who was pursuing this objective exclusively and diligently. I took on this challenge, working with our regulatory affairs team to educate the relevant ministries and government agencies on the need for Malaysia to accede to the treaty. We assisted the ministries to prepare cabinet papers and drafts of the bill and were even requested to brief the ministers and backbenchers at parliamentary sessions. This resulted in the promulgation of the Carriage by Air (Amendment) Act in 2007. However, I felt more of a sense of achievement when the Ministry of Transport nominated me as advisor to the Malaysian delegates attending the 2008 ICAO Diplomatic Conference held in Montreal on this subject.