Dechert OnPoint: Georgia’s Civil Aviation Obligations

Dechert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by associates Irakli Sokolovski, Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.

Introduction

In 2016, the International Civil Aviation Organization (“ICAO”), a UN specialized agency established in 1944 to manage the administration and governance of the Convention on International Civil Aviation (the “Chicago Convention”), removed Georgia from its list of “red-flagged” countries following a successful safety audit. With Georgia’s aviation market subject to unprecedented growth in recent years, exemplified by a substantial number of new flights operating from Kutaisi and Batumi Airports, the country’s international obligations in the sphere of civil aviation have become more relevant and important.

Georgia is a signatory to three of the most important international instruments on civil aviation: (i) the Chicago Convention, ratified on 7 December 1993 by the Parliament of Georgia; (ii) Convention for the Unification of Certain Rules for International Carriage by Air (Montreal, 28 May 1999)(the “Montreal Convention”), adopted on 15 October 2010 by the President of Georgia; and (iii) the Common Aviation Area Agreement between the European Union and its Member States and Georgia (“EU CAA”), ratified on 8 February 2011 by the Parliament of Georgia. The latter agreement has acquired additional importance in light of the recent developments with regards to the entry into force of the Deep and Comprehensive Free trade Agreement (“DCFTA”) between Georgia and European Union (“EU”).

The EU CAA is one of the agreements which provide the legal basis for the European Common Aviation Area (the “ECAA”). The ECAA is the product of bilateral agreements between European countries regarding a single market for aviation services. In December 2004, the EU Council of Ministers authorized the European Commission to start negotiations with eight South-East European partner countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia, Romania, Serbia and Montenegro and the U.N. Mission in Kosovo) on a “European Common Aviation Area” agreement. The objective was to integrate the EU’s neighbors in South-East Europe into its internal aviation market, which at the time consisted of 25 EU Member States as well as Norway and Iceland. Georgia joined the list of signatories to the EU CAA in 2010.

This Onpoint aims to deliver an overview of Georgia’s obligations under the EU CAA as well as the general legal framework established by that agreement.

Objectives of EU CAA

Both Georgia and the EU explicitly recognize the importance of air transport in promoting trade, tourism and investment. Therefore, the EU CAA aims to create a Common Aviation Area (CAA) based on mutual market access to the air transport markets of the parties, with equal conditions for competition and respect of the same rules — including those in the areas of safety, security, air traffic management, social aspects and the environment. It was created with the aim to facilitate the expansion of air transport opportunities, including through the development of air transport networks to meet the needs of passengers and shippers for convenient air transport services.

The General spirit of the EU CAA is to create an open market for all air carriers. It aims to make it possible for air carriers to offer travelling and shipping to the public at competitive prices as well as ensure that services are provided in open markets; to ensure a level playing field for air carriers; and to allow fair and equal opportunities for air carriers to provide the agreed services. Both EU and Georgia recognize that subsidies may adversely affect air carrier competition and may jeopardize the basic objectives of the EU CAA.

Overview of main legal terms of the EU CAA

Basic freedoms: By virtue of EU CAA, the EU and Georgia grant each other the following basic rights for the conduct of international air transport by their air carriers:(i) the right to fly across its territory without landing; (ii) the right to make stops in its territory for any purpose other than taking on or discharging passengers, baggage, cargo and/or mail in air transport (non-traffic purposes); (iii) while providing an agreed service on a specified route, the right to make stops in its territory for the purpose of taking up and discharging international traffic in passengers, cargo and/or mail, separately or in combination.

Authorization and regulation of Carriers: Upon receipt of applications for operating authorization from an EU air carrier, the competent authorities of Georgia shall grant the appropriate authorizations with a minimal procedural delay. The same rights apply to Georgian Carriers in the EU, however with certain reservations. Namely, the air carrier shall have its principal place of business in Georgia and hold a valid operating certificate in accordance with the applicable law of Georgia, and effective regulatory control of the air carrier shall be exercised and maintained by Georgia.

Investment: The majority ownership or the effective control of an air carrier of Georgia by EU Member States or their nationals, or of an air carrier of the European Union by Georgia or its nationals, shall be permitted by virtue of a prior decision of the Joint Committee established by the EU CAA.

Competition and Subsidies: Importantly, the EU and Georgia acknowledge that it is their joint objective to have a fair and competitive environment for the operation of air services. Fair and competitive practices by air carriers are most likely to be ensured where these air carriers operate on a fully commercial basis and are not subsidized. Within the scope of the EU CAA any discrimination on grounds of nationality is prohibited. State aid, which distorts or threatens to distort competition by favoring certain undertakings or certain aviation products or services, is incompatible with the proper functioning of EU CAA, insofar as it may affect trade between the parties in the aviation sector.

Conclusions

EU CAA is an important tool for Georgia, as a developing regional transportation hub, to attract more international air traffic and improve its standing in the sphere of civil aviation, both in the EU and more generally under the ICAO. Full and smooth operation of the EU CAA will benefit many air carriers from both the EU and Georgia and aid in establishing Georgia’s position in the international civil aviation market.

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Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice.

Dechert Georgia is the Tbilisi branch of Dechert LLP, an international specialist Law firm that focuses on core transactional and litigation practices, providing world-class services to major corporations, financial institutions and private funds worldwide. With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit www.dechert.com or contact Nicola Mariani at nicola.mariani@dechert.com.