Advancing Aviation Dispute Resolution: The Strategic Impact of the Hague Court of Arbitration for Aviation

Given the specialized nature of these disputes, both legally and technically, resolving them often requires industry-specific expertise that goes beyond what national courts typically possess. The absence of this specialized knowledge can lead to confusion, unnecessary expenditures, and stress—often played out under public scrutiny. Court judgments also can vary significantly in quality owing to a lack of subject matter knowledge, and, potentially, questionable impartiality. Litigation in national courts therefore can give rise to inefficient dispute processes and result in suboptimal outcomes for clients. This highlights the need for a more specialized approach to resolving aviation-­related disputes.

The Hague Court of Arbitration for Aviation (the Hague CAA) was created to address the gap in the market for a resolution mechanism specialized in handling aviation-related disputes. Established in July 2022, the Hague CAA is an independent dispute resolution center tailored for the aviation industry, administered by the Netherlands Arbitration Institute (NAI), one of the world’s oldest arbitral institutions. The Hague CAA is designed to address the complex challenges faced by the aviation industry, which requires swift, efficient, and effective means to resolve disputes. Commercial parties have responded rapidly to the advent of the Hague CAA, with already over $1 billion in transactions subject to its jurisdiction.

Some within the industry initially raised doubts about the necessity of the Hague CAA, suggesting that existing institutions suffice for resolving aviation-related disputes. However, this view overlooks the critical need for specialized knowledge and tailored dispute resolution mechanisms that only a dedicated institution can provide. The aviation industry, characterized by its technical complexities and international reach, requires more than generic dispute resolution frameworks. It demands a deep understanding of the sector’s specific challenges and dynamics. The Hague CAA fills this essential role, by aiming to ensure that aviation disputes are resolved with unparalleled expertise and industry-focused insight, leading to better outcomes.

The Hague CAA is accessible to all players in the aviation industry. The institution is designed to serve a broad range of participants, from airlines and aircraft manufacturers to leasing companies; financial institutions; airports; maintenance, repair, and overhaul (MRO) stations; ground handling companies; and other service providers. Its purview extends from high-stakes transactions like aircraft sales to more sundry operational aspects.

Unlike other institutions, the Hague CAA’s Arbitration Rules and Mediation Rules are the result of collaboration by senior aviation legal and technical experts, together with seasoned arbitration and mediation professionals. This collaborative approach ensures that the institution is focused on the specific needs of the aviation industry.

There are two main forms of dispute resolution available within the Hague CAA: arbitration and mediation. Under the Arbitration Rules, arbitration is designed to be efficient. As will be elaborated upon below, the rules allow for interim measures, early determinations on points of law or fact, and emergency arbitrations for urgent relief. Regarding mediation, the Hague CAA Model Clauses include an optional provision for mandatory mediation, requiring parties to attempt to resolve their dispute through mediation in accordance with the Mediation Rules before moving to arbitration. This step can help resolve disputes quickly, amicably, and at a fraction of the cost of arbitration or litigation. However, the focus of this article will be on the arbitration side of the Hague CAA.

This article will outline the advantages of arbitration over litigation for aviation disputes, delve into the key features of the Hague CAA Arbitration Rules, discuss the support provided by the institution, examine cost considerations, and explore how arbitration interacts with the Cape Town Convention. It ends with some concluding thoughts.

Advantages of Arbitration versus Litigation for Aviation Disputes

Arbitration differs from litigation in a number of respects and offers distinct advantages to the aviation industry, a sector replete with complex, cross-border transactions. Consequently, arbitration is now widely regarded as the preferred means of resolving international commercial disputes. This is true for several reasons.

First, arbitration offers flexibility and efficiency via a customizable process, enabling parties to agree on aspects like the choice of arbitrators, language, and venue, including the option for virtual hearings. This level of control makes arbitration a useful tool for enhancing the efficiency of the process, focusing on the parties’ priorities, and avoiding the overly formulaic nature of domestic litigation and the accompanying delays and costs.

Second, unlike court proceedings, which are public, arbitration under the Arbitration Rules offers a confidential process. Confidentiality can be crucial in an industry where public perception can be as impactful as operational performance or the outcome of the dispute. Confidentiality enables parties to rely on commercially sensitive documents in their disputes, without their confidential information entering the public domain.

Third, arbitration helps ensure impartial dispute resolution by mitigating the real or perceived “home-court” bias often seen in litigation. It allows for the selection of independent and impartial arbitrators, ensuring a fair approach to dispute resolution. This neutrality is essential in the aviation industry, where disputes frequently span multiple jurisdictions.

Fourth, arbitral awards are final, which accelerates the resolution process. Appellate review is limited, usually confined to issues such as jurisdiction, procedural fairness, discrete issues of law, or public policy. The finality of arbitration contrasts with the lengthy appeals permitted in many national court systems.

Fifth, awards are usually more enforceable than court judgments. Arbitral awards enjoy the protective umbrella of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), as well as favorable arbitration laws in many countries. This provides a pro-enforcement regime characterized by expedited recognition procedures and limited grounds for denying recognition. There is nothing comparable for the enforcement of foreign court judgments. The New York Convention gives arbitral awards the power of global enforceability, an advantage in an industry as globally interconnected as aviation. With 172 contracting states, the New York Convention assures that an award issued in one jurisdiction can be enforced almost anywhere in the world, providing predictability and coherence in a complex, international legal environment.

The Arbitration Rules

The Hague CAA operates under specialized arbitration rules designed to address some of the challenges and dynamics inherent in aviation industry disputes. These rules—crafted through substantial collaboration among a global consortium of senior aviation and arbitration professionals—were developed under the guidance of an arbitral institution with nearly 75 years of expertise. This collective effort, representing well over a thousand years of combined aviation and arbitration experience, resulted in rules that are attuned to the complexities of the sector.

Furthermore, to ensure continuous improvement, the Hague CAA conducts periodic industry consultations. The most recent example is the release of rule enhancements in February 2023, demonstrating the Hague CAA’s agility and commitment to adapt in response to the evolving needs of the aviation sector.

In terms of the arbitration process itself, these rules offer several innovative features such as electronic submissions, virtual hearings, and a default expedited procedure. The expedited procedure is designed to ensure that an arbitral award is issued within six months from the initial case management conference—a timeline significantly faster than international arbitrations under some generalist institutional rules and dramatically quicker than traditional litigation in national courts. For comparison, civil cases in the United States can take over 27 months to conclude, not including potential appeals.

The Arbitration Rules—Arbitrators

The Arbitration Rules offer flexibility for parties to customize the arbitrator appointment procedure while also containing safeguards to ensure timely and efficient proceedings. The selection mechanism is designed to ensure that the interests of parties in the aviation industry are best served. Unlike litigation, where judges may have broad legal knowledge but lack specific industry expertise, arbitration under the Arbitration Rules facilitates the appointment of arbitrators with actual expertise in aviation-related matters.

The method of appointment can vary based on party preferences outlined in the parties’ arbitration agreement or agreed upon subsequently. To prevent deadlock, parties may choose either a sole arbitrator or a three-arbitrator tribunal. If no agreement is reached, the Hague CAA administrator decides on the number of arbitrators, typically favoring a single arbitrator for disputes below €3,000,000. There are three methods of tribunal setup available to disputants under the Arbitration Rules.

First, and as noted above, parties may opt for a three-person tribunal. In this setup, each party selects one arbitrator, and these two arbitrators then jointly select the chair, who must be a lawyer with demonstrated experience sitting as an arbitrator. Unlike traditional court proceedings, this approach grants significant autonomy to the parties in selecting their arbitrators, who can be any natural person of legal capacity without nationality restrictions. This flexibility allows for the appointment of arbitrators with specific expertise in aviation, including individuals deeply familiar with aviation regulations, industry practices, aircraft technology, and related commercial aspects.

Second, parties may opt for a sole arbitrator. The Hague CAA administrator is responsible for directly appointing the arbitrator unless the parties decide otherwise. This expedited process ensures that disputes can advance without delay, with the administrator ensuring the selected arbitrator possesses the requisite legal capacity and specific expertise in the aviation sector.

Third, parties may utilize the List Procedure. This alternative method involves the Hague CAA administrator sending an identical list of at least nine arbitrators for three-person tribunals and at least three names for sole arbitrators to the parties, who can veto arbitrators and rank the remaining ones. The Hague CAA administrator, considering the parties’ preferences and objections, typically selects the highest-ranked individuals to serve as arbitrators. This method ensures that the parties are on equal footing and can significantly accelerate the tribunal-appointment process.

This list features highly experienced arbitrators who are globally recognized. In cases involving multiple arbitrators, the Hague CAA provides a separate, confidential list of qualified aviation industry specialists who may serve as co-arbitrators. These specialists are seasoned veterans in the aviation industry and are also trained in arbitration.

Additionally, the Hague CAA maintains a roster of senior aviation technical experts and convenes a Technical Standing Committee. These initiatives aim to ensure that disputes are resolved both efficiently and fairly, with arbitrators equipped with the specialized knowledge required to make informed decisions that serve the best interests of all parties involved. Importantly, the Hague CAA maintains impartiality with no allegiance to any industry participant or group.

The Arbitration Rules—Proceedings

Arbitration under the Hague CAA is purposefully designed to be efficient. The Arbitration Rules offer numerous advantages over traditional court litigation, enabling the swift and effective resolution of disputes.

Key among these advantages is that proceedings are expedited by default. Arbitrators are expected to render their final award within six months following the first case management conference. This accelerated timeline ensures that parties can resolve their disputes and resume their business activities promptly. However, where parties believe that a case requires more time, they have the flexibility to opt for extended proceedings without strict time constraints. This feature accommodates the complexities unique to each case while promoting the swift resolution of more straightforward disputes.

Parties also can request an early ruling on points that are clearly without merit or beyond the tribunal’s jurisdiction. This procedural innovation narrows the focus to substantive issues, thereby expediting the overall dispute resolution process. Further emphasizing speedy dispute resolution, tribunals are mandated to prevent unwarranted delays and are granted the authority to implement appropriate measures to try to ensure this.

The Arbitration Rules also are equipped to handle complex multiparty disputes, which are prevalent in the interconnected aviation industry. For cases involving three or more parties, the arbitration can proceed with minor adjustments. An issue in such scenarios is the appointment of an arbitrator when multiple parties cannot reach a consensus. The Arbitration Rules address this by enabling the Hague CAA administrator to appoint the entire tribunal, if necessary, thereby maintaining the integrity and progress of the proceedings.

Similarly, the Arbitration Rules facilitate the joinder of additional parties under certain conditions, such as mutual agreement or if the new party is itself already bound by the relevant arbitration agreement. The arbitral tribunal considers various factors in this decision, including jurisdiction, procedural fairness, and the potential impact on the ongoing arbitral process.

Furthermore, multiple arbitration proceedings may be consolidated into a single proceeding under the Arbitration Rules. This is particularly beneficial when different disputes share common issues of fact or law, necessitating a unified approach for resolution. Conditions for consolidation include agreement among all parties, compatibility of arbitration agreements, and interconnected legal relationships.

The decision to consolidate is made by an independent neutral, separate from the arbitration, appointed either by the parties or by the Hague CAA administrator if the parties cannot agree. In making a decision on consolidation, the independent neutral will consider factors such as the efficiency of consolidation, conflicts of interest, procedural fairness, and whether consolidation would jeopardize the validity of the eventual award(s).

Finally, disputes arising from multiple contracts between the parties also can be combined into a single arbitration proceeding through a process outlined in the Arbitration Rules.

The Arbitration Rules—Interim Measures and Emergency Arbitrators

The Arbitration Rules enable parties to request interim measures (also referred to as conservatory or provisional relief) during the arbitration process. This crucial provision explicitly empowers the arbitral tribunal to order such measures as deemed appropriate, subject to the governing laws and any agreements between the parties. This mechanism allows parties to safeguard their interests, whether it concerns asset preservation, evidence protection, or other urgent matters that cannot wait for the final award. The tribunal’s decisions on interim measures are issued in the form of reasoned orders or awards.

Moreover, the Arbitration Rules permit the tribunal to request appropriate security in conjunction with the interim measures. Notably, the arbitration agreement does not restrict any party’s right to seek interim relief from competent judicial authorities, providing an additional avenue for urgent intervention.

In aviation disputes, the need for swift and effective emergency relief may be crucial. In international arbitrations, parties may confront urgent issues such as the potential destruction of crucial evidence, risk of asset dissipation, or threats to confidentiality. Waiting for the formation of an arbitral tribunal may result in irreparable harm, while resorting to national courts might compromise confidentiality and defeat the purpose of the arbitration agreement. The Arbitration Rules address this concern through the provision of “emergency arbitration.” Should a party require urgent interim or conservatory measures prior to the formal constitution of the arbitral tribunal, the emergency arbitration mechanism is immediately available. An emergency arbitrator is expected to be appointed within three days of receiving the request and is expected to issue a procedural calendar for the emergency arbitration within an additional three days. Importantly, the Arbitration Rules anticipate a binding award within 15 days of receiving the case file, providing parties with a rapid avenue for relief where necessary.

The Arbitration Rules—Venue and Seat of Arbitration

The Hague CAA is designed to be as accommodating as possible to the unique needs and preferences of parties in the aviation industry. There are no geographic restrictions on where the place (also known as the “seat”) of arbitration can be located, nor are there restrictions on where the hearings can be held.

The place or seat of arbitration is the legal home of the arbitration and determines the procedural framework under which the arbitration operates. It is a legal construct with limited geographical relevance. It should not be confused with the venue of the arbitration, which may be an entirely different location (being the physical location where hearings take place).

The Arbitration Rules do not limit party choice on the place of arbitration. The place is often, although not always, selected in the arbitration agreement, or is otherwise agreed by the parties. If the parties do not agree, the sole arbitrator or tribunal is empowered to make a decision on the place of arbitration. In an Emergency Arbitration, absent the parties’ agreement, the place for the Emergency Arbitration will be The Hague.

Parties also face no geographic restrictions on where the hearings can be held. The venue for any hearings is within the parties’ discretion, allowing for both virtual and in-person formats. In the absence of an agreement, the arbitral tribunal will decide the location for hearings, taking into account relevant circumstances.

Although the Arbitration Rules provide extensive guidelines for hearings, they function as a starting point rather than as fixed rules. These provisions are designed to offer a balanced framework to streamline the arbitration process in the absence of an agreement between the parties. However, parties, if they so choose, may make any arrangements suitable to their own circumstances.

The Arbitration Rules—Confidentiality

The Arbitration Rules contain comprehensive provisions that protect the confidentiality of the existence of the arbitration, all materials created for the arbitration, all documents produced in the arbitration, and any awards. These confidentiality provisions cover all persons involved in the arbitration, whether directly or indirectly.

There are only a few exceptions to confidentiality under the Arbitration Rules, namely, the agreement of the parties; an application to a court to advance a legal right or claim or to enforce or challenge the award; where disclosure to a government body, regulator, or any other authority, court, or tribunal is required by law; for the purposes of seeking advice (such as from legal counsel) and the advising party agrees to be bound by the confidentiality obligations; or for an application for joinder or consolidation.

Support Provided by the Hague CAA

The Hague CAA (with the support of the NAI) assists the parties and the arbitral tribunal throughout the life cycle of an arbitration, providing support on a wide range of matters. Much of this support relates to the appointment and management of the arbitral tribunal.

For example, as detailed above, if the parties are unable to agree on the number of arbitrators, then the Hague CAA administrator will decide by choosing either one or three. Similarly, if the parties cannot agree on the appointment of either a sole arbitrator or the president of a three-member tribunal, the Hague CAA administrator will step in and make the appointment. The Hague CAA also facilitates selection of arbitrators via the List Procedure.

Furthermore, as described above, in the event that multiple claimants and/or respondents cannot agree on an arbitrator, the Hague CAA administrator shall directly appoint the entire arbitration tribunal. If the extended arbitration proceedings apply, the Hague CAA administrator will appoint the tribunal using the List Procedure.

The appointment of emergency arbitrators is likewise handled by the Hague CAA. If either party seeks urgent interim or conservatory measures prior to the constitution of the tribunal, the Hague CAA administrator shall directly appoint an emergency arbitrator to decide on the matter.

Challenges to arbitrators are further dealt with by the Hague CAA. A party may challenge the appointment of an arbitrator on the basis of a justifiable doubt as to their independence or impartiality. The Arbitration Rules provide that an independent committee will decide if a challenge is well-founded, and if so, the arbitrator will be replaced pursuant to the rules applicable to their original appointment.

The Hague CAA may further provide assistants to arbitral tribunals. At the arbitral tribunal’s request, the Hague CAA may appoint a qualified lawyer as secretary to facilitate the tribunal’s work and help ensure smooth proceedings.

Consolidation requests also are handled by the Hague CAA. As detailed above, an arbitration can be consolidated under the Arbitration Rules into a single proceeding with one or more other arbitrations upon a request from a party. If a party does not agree with a request for consolidation and cannot agree on the appointment of an independent third person to decide on the consolidation request, the Hague CAA administrator will appoint the independent third person.

Expenses Under the Hague CAA

Understanding the cost structure is important when choosing a dispute resolution mechanism. Arbitration under the Hague CAA is designed to provide a transparent and predictable framework for determining costs, following the NAI’s model.

The structure comprises administration costs, arbitrator fees, and disbursements. Administration costs cover the costs of the Hague CAA (supported by the NAI) in administering the case from start to finish. These expenses are scaled to the dispute amount, ranging from €660 to €75,000, as set forth by the NAI Executive Board. Arbitrator fees, which vary in accordance with the complexity of the case and time spent, range from €175 to €550 per hour. For ease of planning, a cost calculator is available on the Hague CAA website.

Compared to traditional litigation, arbitration under the Arbitration Rules is intended to be more cost-effective. The Arbitration Rules, by providing for expedited procedures, quick determinations on preliminary points of law, and the appointment of specialized arbitrators, aim to resolve disputes quickly. This approach not only saves time but also reduces associated costs. Additionally, it allows parties to avoid the prolonged timelines and high expenses often encountered in court litigation, potentially resulting in significant cost savings.

The default rule under the Arbitration Rules is that the unsuccessful party should bear the costs of the arbitration, although this is at the discretion of the tribunal. The tribunal also is empowered to require the unsuccessful party to cover the costs of the successful party’s legal assistance. This flexibility allows the tribunal to tailor cost orders to the specifics of the case, in contrast to traditional litigation where cost orders are sometimes capped.

Arbitration and the Cape Town Convention

Finally, it should be noted that arbitration does not undermine or replace the Cape Town Convention (CTC) in any way. Arbitration can operate where the CTC either does not apply or applies only indirectly. This is because, for the time being, arbitral tribunals are not recognized as “courts” for the purposes of Article 42 jurisdiction under the CTC. Thus, the international enforceability of arbitral awards relies upon the New York Convention. Recognition and enforcement of such awards may be denied if the subject matter of the arbitral award is incapable of settlement by arbitration under the law of the contracting state (i.e., not arbitrable), or if the award exceeds the scope of the arbitration agreement. Both conditions could be relevant if the CTC were applicable, potentially rendering the arbitral award unenforceable internationally.

Moreover, while the CTC focuses primarily on asset-based remedies, arbitration mainly addresses substantive rights beyond those remedies provided by the CTC. Thus, arbitration and the CTC complement each other, with arbitration serving as a useful mechanism to enforce contractual and other rights that fall outside the CTC’s scope.

Conclusion

The Hague CAA offers a valuable alternative to traditional litigation. With its specialist arbitrators, tailored ruleset, and supervisory powers, the Hague CAA is well-positioned to help aviation disputants resolve their issues swiftly, efficiently, and effectively, potentially enhancing the quality of substantive justice among the parties.

Aviation industry stakeholders looking to utilize the services of the Hague CAA can simply incorporate an arbitration clause into their contracts. Model clauses for this purpose are readily accessible on the Hague CAA website. Even if a dispute arises without a preexisting arbitration clause, parties can still opt for arbitration by executing a separate agreement.

The author would like to thank Maxwell Pillmore for his assistance in preparing this article.