GERMANY Trends and Developments Contributed by: Richard Prechtel and Matthias Reuleaux, activelaw Offenhausen.Wolter PartmbB
standard medium-haul flight is 53% more expensive for airlines than it was in 2019 due to state-imposed fees. This is far above the increase in costs in other European countries. This development triggers a fol - low-up problem for the aviation industry in Germany: reduced capacity (fewer flights and available seats) results in less competition for the affected routes, which then translates into higher ticket prices and, in the final step, prevents people from choosing air travel as their mode of transport. The average ticket price for an economy ticket in Germany was 61% more expen - sive in 2024 compared to 2019. Some commentators also point to the comparably high national requirements for blending fuel with “sustainable aviation fuel”, a fairly unique item within European countries. A further impact on the German air traffic market is the strong position (de facto quasi- monopolistic position) of Lufthansa after airlines like Air Berlin (2017) and Germania (2019) stopped opera - tions following the opening of bankruptcy proceed - ings – no other German airline stepped in (actually, Lufthansa took over more than 80 aircraft and various slots from the insolvent Air Berlin group). Legal Topics Dispute resolution While arbitration is a fairly established method for dis - pute resolution in the shipping industry (specialised arbitration tribunals for maritime matters have existed for over 70 years), aviation disputes in the wider sense (leasing contracts, sale and purchase agreements, and financing documents) predominantly contemplate conventional court proceedings. In particular, given the fact that most aircraft transactions (leasing, sale and finance) have cross-border elements, the New York Convention (Convention on the Recognition of Foreign Arbitral Awards, 1958) can be a valuable alter - native. For example, it is easier to obtain the recogni - tion of an arbitral award than a court decision in many jurisdictions, if the award complies with standard con - ditions contemplated by the New York Convention. This applies (to name just a few countries) to the rec - ognition of arbitration awards in China (including Hong Kong), Saudi Arabia or the UAE. In 2022, a specialised arbitration court for aviation disputes was established – the The Hague Court of
Arbitration for Aviation (the “Hague CAA”). The court is affiliated with the Netherlands Arbitration Institute, one of the oldest and most recognised arbitration institutes worldwide. It remains to be seen how the industry welcomes the opportunity to have disputes settled by a specialised arbitration court. The most prominent advantages offered by arbitration are: • confidentiality (unlike court decisions, arbitration awards are not published); • the speed of resolution (court procedures tend to last longer); and • neutrality (the “home-court problem” does not exist as the parties to an arbitration proceeding select the arbitrators for the arbitration tribunal). Sanctions Since the commencement of the Russia–Ukraine war, the aviation industry has been heavily exposed to the effects of sanctions implemented by the US, the EU, its members states and the UK. One topic with severe and broad effects is the requirement to implement a “no Russia” provision into sale and lease agreements (Regulation (EU) 2023/2878 and Regulation (EU) 2023/2875) (also known as the ”12th Sanction Pack - age”). The “no Russia clause requirement” places an obligation on aircraft lessors who are either based in an EU member state or whose business activities are performed from a EU member state to contractually prohibit the re-export of certain categories of sensitive items to or for the use in Russia. Aircraft and other space items are affected by such regulation. The regulation also imposes a notification duty on sell - ers and lessors to report breaches of the prohibition to “re-export” into Russia. The ”no Russia clause” must be implemented in any contract entered into by an EU-based aircraft owner or lessor relating to the sale, transfer or export of aircraft (and parts) and this regime includes the operation into and out of Russia on a routinely scheduled flight. There are certain specific forms of operation that are exempt from the regula - tion, which must be analysed in detail to assess how to benefit from such an exemption. Operators and owners domiciled in the EU must also consider the impact of US sanctions, as these (unlike EU sanctions) apply to a non-US person where that
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