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Iceland impounds air Berlin plane over unpaid charges

Iceland impounds air Berlin plane over unpaid charges

Old Oct 22, 17, 7:42 am
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Iceland impounds air Berlin plane over unpaid charges

From Reuters:


http://saudigazette.com.sa/article/5...unpaid-charges
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Old Oct 23, 17, 4:20 pm
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Could be an interesting mess - airberlin is technically correct that you literally cannot pursue any recovery action against a company undergoing insolvency proceedings unless the debt was incurred by the administrators following filing. The airport has overstepped its bounds here, and is breaking the law.
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Old Oct 23, 17, 4:32 pm
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And Air Berlin is unlikely to own the aircraft. Probably owned by some leasing company/bank.

Last edited by Mwenenzi; Oct 24, 17 at 2:58 am Reason: spelling
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Old Oct 23, 17, 5:19 pm
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I doubt that Iceland or the airport authority care particularly much about what a court in another nation has or has not ordered.
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Old Oct 23, 17, 5:53 pm
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It's an interesting issue. Iceland is not part of the EU, so I can't see it compelled to follow German law. Similar to Alitalia when they declared bankruptcy, the filing in Italy was not sufficient - they had to file locally in the US to be protected - otherwise, the JFK operator would have probably resorted to similar measures to collect.

On the other hand, it's also interesting to know the details of the bilateral agreement between Iceland and the EU/Germany that makes these flights possible and if it contains any language that provides for mutual observance of laws of each entity.

And then again, there's the issue if the plane actually belongs to Air Berlin or if it's leased.
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Old Oct 23, 17, 6:05 pm
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Originally Posted by Phoenixtinct View Post
It's an interesting issue. Iceland is not part of the EU, so I can't see it compelled to follow German law.
Irrespectively of being in the EU or not, application of German law depends on conflict of laws rules. And while there's a convention on conflicts of jurisdictions, there's no Rome I equivalent. I guess it all depends on what Icelandic (case) law says about applicable law to insolvency proceedings.

It's probably interesting too to know if they can keep the aircraft on the ground if it is repossessed by the lessor, i.e. if the airport has a claim against AB and only AB or if they can hold the owner of the plane responsible for any outstanding payments.

It's probably never going to end up in court and the lessor will just pay the pills to get his aircraft back ASAP.

PS: In case you're wondering. It's D-ABDX which, according to Airfleets, is leased from BOC Aviation.
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Old Oct 23, 17, 8:37 pm
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Originally Posted by Phoenixtinct View Post
It's an interesting issue. Iceland is not part of the EU, so I can't see it compelled to follow German law. Similar to Alitalia when they declared bankruptcy, the filing in Italy was not sufficient - they had to file locally in the US to be protected - otherwise, the JFK operator would have probably resorted to similar measures to collect.
I've checked and it appears that Iceland doesn't implement any of the treaties regarding cross-border insolvencies except the Scandinavian insolvency treaty of 1933 - this means they'll recognise any Nordic bankruptcy (Dutch, Finnish, etc) but not German.

That said, airberlin doesn't own the plane, and as such the airport has actually kind of deprived the legal owner of it. Which is, well, theft.

What's the penalties for stealing a $50,000,000 plane?
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Old Oct 24, 17, 2:20 am
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Impounding a vessel to claim dues is a very common practice in shipping. The fact that the aircraft is leased doesn't matter.
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Old Oct 24, 17, 2:37 am
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Originally Posted by kyanar View Post
That said, airberlin doesn't own the plane, and as such the airport has actually kind of deprived the legal owner of it. Which is, well, theft.
Sorry but that is absolute rubbish.
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Old Oct 24, 17, 3:27 am
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Originally Posted by Ldnn1 View Post
Sorry but that is absolute rubbish.
No, no it is not. You can't just take a third party's property. In any country which actually follows the rule of law, that's unlawful. If you owe money to a finance company, and they get a court sheriff/bailiff to come to your house and repossess things, they cannot just take random objects belonging to other residents or rented from another company.

EDIT: Done a bit of research on the background. In Isavia's Terms of Service, clause 3.6 purports to claim the right to prevent departure for various reasons, including "Airport charges or other charges related to that aircraft or its operator have not been paid and an acceptable guarantee for payment has not been provided". This seems to be backed up by Article 136 of the Icelandic Aviation Act.

The tough part is that legally, in the case of an insolvency, what happens is the company effectively ceases to exist, and begins operating as a new entity (most countries represent this by appending terms such as "(In Liquidation)", "(In Receivership)" or "(Under Administration)" to the name). This pseudo-entity is not only not liable under law of the country it is incorporated in (important note, since as Isavia points out German insolvency law is not recognised there), but it is legally not permitted to pay the debts of the insolvent real entity as that violates the priority of creditors. Under German law, Isavia is most likely an unsecured creditor, which means last on the priority list. As such, if airberlin were to pay them, the insolvency administrators could be prosecuted for treating one creditor as priority over another in breach of law.

They literally cannot legally pay it.

I suppose BOC Leasing could terminate their lease agreement and commence repossession actions, but would Isavia allow that? Based on their actions so far, probably not. Meaning BOC Leasing is almost certain to end up holding the bill - one of the issues the Aviation Working Group has been snarling about for the last decade.

Last edited by kyanar; Oct 24, 17 at 4:15 am
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Old Oct 24, 17, 5:34 am
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Originally Posted by kyanar View Post
I suppose BOC Leasing could terminate their lease agreement and commence repossession actions, but would Isavia allow that? Based on their actions so far, probably not. Meaning BOC Leasing is almost certain to end up holding the bill - one of the issues the Aviation Working Group has been snarling about for the last decade.
I suppose that BOC Leasing has an insurance policy for those cases (an airline going bust isn't exactly unheard of). That said, if they feel that it's worth going to trial in Iceland over this, I'm sure they'll do just that, though I suspect that settling this dispute will be cheaper. The revenue loss from having an Airbus chained to a rock in the Atlantic ocean will certainly dwarf what AB owns KEF.
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Old Oct 24, 17, 7:56 am
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Originally Posted by kyanar View Post
No, no it is not. You can't just take a third party's property. In any country which actually follows the rule of law, that's unlawful. If you owe money to a finance company, and they get a court sheriff/bailiff to come to your house and repossess things, they cannot just take random objects belonging to other residents or rented from another company.
As you have at least begun to realise in your edited post, you need to do your research into aviation law.

In many/most jurisdictions, airports (and air traffic authorities) have the right to detain an aircraft if there are outstanding charges owed in respect of that aircraft. That applies irrespective of who owns the aircraft.

In fact in the UK, the airport can detain an aircraft and demand payment of outstanding charges in respect of the entire fleet of the operator, even if the owner/lessor of the detained aircraft does not own any of the rest of that operator’s fleet. See here for an example: http://www.nortonrosefulbright.com/k...wers-in-the-uk

Whether such a fleet lien is possible in Iceland I don’t know, but clearly there is at least a statutory power of detention over particular aircraft as in this Air Berlin case.

The issue here is thus not one of theft, but of conflict of laws and the extent to which German insolvency law prevents (or does not prevent) the Icelandic airport from taking this action.
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Old Oct 24, 17, 2:54 pm
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It's indeed an interesting case. According to press reports, the aircraft (which does not belong to AB) is being held back because of bills not paid before AB's insolvency filing on Aug 15. Now while I'm far from an expert of insolvency law, my understanding is that wrt. those bills KEF airport has become a claimant just the same as many other suppliers and customers of AB, and AB is prevented by law from selectively paying any of those pre-insolvency claims. So my guess is that AB would be in violation of the law if they just paid those outstanding pre-insolvency bills.

With regards to the international component, please note that Iceland is part of EFTA, which does have some economic agreements with the EU, and thus any comparisons to any US examples might not serve as a good illustration here.

The relevant legal question is whether the airport has the right to deny take-off on grounds of unpaid pre-insolvency bills. I think we can expect the insolvency administrator for AB to sue the airport for damages.
As it looks AB has already cancelled all remaining flights to/from KEF until their planned shutdown at the end of this week.
I think once the insolvency proceedings on AB have been opened the owner of the aircraft will send a crew to KEF and request the plane to be allowed to leave. My guess is that the most KEF can ask for at that point are some one-time take-off fees.

One extra remark: there has been zero reports on any Icelandic court orders etc. to detain the aircraft, it appears to be a sole decision of the airport to deny takeoff. I don't think there has even been a formal attempt to detain the aircraft so far. It would be interesting to see whether this constitutes a breach in contractual agreement or maybe a breach of the airport's obligation of fair/equal treatment of airlines or something similar. If the airport is state-owned, it might even constitute a violation of some international or multinational trade or air traffic agreement.
Interesting field for lawyers...

Last edited by geosch; Oct 24, 17 at 3:06 pm
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Old Oct 24, 17, 4:50 pm
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Originally Posted by Ldnn1
As you have at least begun to realise in your edited post, you need to do your research into aviation law
Aviation law is not much different from any other kind. A plane is just another form of property, if very expensive property. Statutory powers in one case only apply in so far as other statutes apply or do not. In this case, Isavia can prevent the aircraft taking off, but that is literally the only option they appear to have. The statute basically just makes a game of chicken legal.

Originally Posted by geosch View Post
It's indeed an interesting case. According to press reports, the aircraft (which does not belong to AB) is being held back because of bills not paid before AB's insolvency filing on Aug 15. Now while I'm far from an expert of insolvency law, my understanding is that wrt. those bills KEF airport has become a claimant just the same as many other suppliers and customers of AB, and AB is prevented by law from selectively paying any of those pre-insolvency claims. So my guess is that AB would be in violation of the law if they just paid those outstanding pre-insolvency bills.
This guess would be correct.

Originally Posted by geosch View Post
The relevant legal question is whether the airport has the right to deny take-off on grounds of unpaid pre-insolvency bills. I think we can expect the insolvency administrator for AB to sue the airport for damages.
As it looks AB has already cancelled all remaining flights to/from KEF until their planned shutdown at the end of this week.

I think once the insolvency proceedings on AB have been opened the owner of the aircraft will send a crew to KEF and request the plane to be allowed to leave. My guess is that the most KEF can ask for at that point are some one-time take-off fees.
This is the interesting part. The wording of applicable law seems to imply that Isavia as an airport operator (it does appear to be state owned too) can indeed deny takeoff when fees are due on a particular aircraft, regardless of the owner. However, it would be inaccurate to call it "impounding" as Isavia does not have the right to seize or dispose of the aircraft. This contrasts with the UK's Fleet Lien powers, which have actually been challenged a few times with varying results as being a violation of both UN charters and EU law (the UK takes it one step further and asserts that even a lessor terminating a lease does not protect a given craft from being seized. This is grossly unfair and I'm not sure why lessors even allow their planes to fly into UK airspace given this). This, by the way, is likely why CAA used charter planes rather than Monarch's planes during the insolvency, as it would be rather awkward if their rescue flights got grounded by all the private airport operators.

Originally Posted by geosch View Post
It would be interesting to see whether this constitutes a breach in contractual agreement or maybe a breach of the airport's obligation of fair/equal treatment of airlines or something similar. If the airport is state-owned, it might even constitute a violation of some international or multinational trade or air traffic agreement
They're not a Cape Town Treaty signatory, and the only overseas bankruptcies they are required to recognise are Nordic ones, hence why it's extremely ugly. There are several very incompatible laws at play, and frankly I don't see how lawyers could help the situation.

I am curious what would happen if BOC were to terminate the lease and repossess the aircraft though. Would Isavia release the aircraft to the owner? If they're reasonable, probably. But they quite probably aren't reasonable.
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Old Oct 24, 17, 6:05 pm
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I also read in the local media that airBerlin collected official fees/taxes from passengers and did not remit them. This is a serious criminal offense in Iceland with personal liability for the airline officials responsible. Remember this is the only country that jailed bankers 😄
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