A great way to fly' is the slogan of our national carrier, Singapore Airlines. But not so these days, so it would seem. What with the risk of air crashes, air rage, economy class syndrome, claims for bodily injury in the skies ( see King v Bristow Helicopters Ltd, Morris v KLM Royal Dutch Airlines [2002] All ER 394 (Feb)) and more recently, terrorist attacks, it is no wonder the more down-to-earth amongst us are choosing to remain earthbound.

"9.11" was the day the world changed: increased airport security hassles, worldwide recession, dips in airline revenue, plummeting passenger loads, coupled with languishing airlines taking a sudden nose-dive, and even impacting lofty carriers; there is already an airport in California where local, national and regional carriers land their planes to be dismantled in what has been called an "airport graveyard".

That tragic event of "9.11" did not necessarily change the way we run our business or how we did it - but did fortify our underlying values and concerns.

Indeed, it showed a formatting of questions on safety, risk management, and getting the most from our time on the road or the runway; and answering these questions, whether philosophical or practical, and important as they are, has enhanced the scenario for us as lawyers, post "9.11".

Before that tragic day, there were the disasters of TWA 800, Swiss 111, Egypt Air 990, not forgetting our own Silkair disaster, and the more recent SQ 006 tragedy in Taipei, with our three pilots facing a probe in Taiwan, and possible prosecution.

Yet those local aircraft incidents saw several American firms in Singapore busy holding conferences with the families of the victims in five-star hotels, and executing contingency agreements allowed under their laws. Local solicitors merely played the role of agents, being a mere local port-of-call. Very few Singapore lawyers were actually briefed to advocate causes for the victims.

So, is there yet another unchartered area of law for local lawyers to explore? This throws into question local competence in the area and a headcount of the number of lawyers who practice Airline Disaster Law, or for that matter, Aviation Law in Singapore.

Internationally, the scene is different. With more and more regulations and company pacts, work is taking off for aviation lawyers elsewhere, but industry observers say that concerns about passengers, and the onslaught of recession could clip the airline industry's wings.

But disputes ranging from ground-staff strikes to birds - feathered nuisances - being sucked into jet engines and the safety hazards they pose not just to themselves, but passenger and plane, present just the wingtip of the problems faced by the aviation industry.

Other more dramatic issues range from air rage to terrorist hijackings - terrorists being the latest weapons of choice. But the bulk of the workload also revolves around three areas: finance, liabilities and claims, and regulatory matters.

The first of these can involve anything from sorting out funding for a new fleet, to drawing up a contract for catering services. The amounts of fees involved can be huge.

On the finance side, companies such as Airbus and Boeing are building lots of aircraft - but most don't have the money, so they have to borrow it. Another important growth area in recent years came as a result of airlines forming alliances. Airlines are getting together as part of a move to become more competitive, and this is the main single factor affecting the industry today. Legal and competition issues will naturally be thrown up.

The industry is on the verge of a new era. So far, aviation has not involved the type of conglomerates or global companies you see operating in fields of telecommunications or energy. Airlines have not been allowed to merge without being penalised through loss of traffic rights. But recently, there has been deeper integration because some alliances have sprung up to pool resources, for example equipment and engines, and now marketing alliances are springing up, so airlines are becoming virtually one operation.

The lawyer's role in the process may involve looking at the financing side of the deal and negotiating leveraged banking facilities. It is an amalgamation of acquisition, project finance and transport infrastructure, governing law, and arbitration.

Regulation is also an expanding area, with recent concentration on passenger health. Deep vein thrombosis (DVT) or the "economy class syndrome", and the quality of air in the aircraft cabin has been given much air-time and the media fanned awareness of DVT, with its reports of death in the air, the most recent being that of a female passenger, following a flight from Australia to Heathrow.

This may all be the focus for new regulation. At the moment, regulation is designed to ensure the safety of the flight - that the aircrafts are safe, and that the people flying them are fit to fly and so on but with hardly anything dealing with health, which is increasingly becoming the focus of attention, both from the public and the industry.

As air crashes and hijackings thrust the aviation industry into high-profile litigation, many aviation lawyers are beginning to see aviation law as a dynamic area that the ordinary person in the street can relate to, and a potential growth industry.

It is therefore surprising that there are so few practitioners - less than 10 in Singapore, around 100 in the whole of the United Kingdom, plying the skies, compared to others such as shipping. In fact, it seems to have developed into something of an elite club, though many in the industry maintain that aviation lawyers are 'more down to earth' than many.

Few, too, are there extending legal services in transactions involving aircraft financing and leasing, despite the Government's objective for Singapore to become the regional hub of the aviation industry.

Little wonder why this is so.

I believe that local aviation lawyers see one factor which invariably eliminates a Singapore-based transaction as being the issue of withholding tax with Singapore being at a disadvantage compared to certain other jurisdictions.

Usually, the transaction relating to the acquisition of an aircraft is structured in the form of a lease - be it an operating lease or a finance lease, and the transaction is invariably cross-border in nature. If the transaction is between a Singapore lessee and a foreign lessor, there is a requirement to withhold taxes on the rentals made to the foreign lessor and such requirements on withholding tax dismally discourages a transaction here, compelling the same to be structured to a more tax-efficient jurisdiction, which does compel the usage of the laws of that other jurisdiction; most of these transactions are thus done offshore.

Secondly, Singapore does not have an Aircraft Mortgage Register. Although our Air Navigation Act and the subsidiary legislation in the Air Navigation Orders were substantially taken from the UK provisions, the absence of such a register is an important departure in our laws. Thus, the interest of an owner or lender is seen to lack protection or lack adequate protection, and the few lawyers who handle such transactions recommend a jurisdiction where such a register exists. The concept of fractional ownership of an aircraft, initiated in the US, via joint ownership of an aircraft, which appears popular amongst ownership of executive jets, is also presently absent in Singapore.

Our national carrier has, as its policy objectives, the maintenance of a young fleet and thus sells or leases surplus aircrafts to other airlines. Much of its transactions are done in-house and the financing of aircraft usually involves cross-border issues based on English or US law, and thus warrants the use of foreign legal expertise. There is no reason why the local lawyer cannot gain the relevant expertise and experience to compete efficiently with foreign lawyers. Recent moves towards local and foreign law firm tie-ups, joint law ventures and formal law alliances and associateships, may see the dawn of a new era.

Other areas which can see growing interest would include product liability, aircraft manufacturers' liability, government liability for certification and inspection, air traffic controller's liability actions, security and safety regulations, insurance, cargo claims and negligence claims.

Despite "9.11" and the knee-jerk reaction worldwide causing a nose-dive in passenger traffic - and the industry experts' estimate that traffic will not return to pre-attack levels until 2007 - all is not lost in sunny Singapore. Barely six months on, Singaporeans are starting to pack their bags again, with a vengeance, as bookings at recent travel fairs show.

Singaporeans, either in a fit of cest la vie or having been yet again characteristically untouched by world events, however dire - save for the CNN moment - obviously think it is safe to take to the skies again.

For aviation lawyers, so long as the industry is poised yet again to take flight, it may still be a great way to fly after all.

Palakrishnan, SC
President
Law Society of Singapore

Your President Listens Members of the Law Society will continue to have the opportunity to meet Mr Palakrishnan, SC, President of the Law Society, at his fortnightly Saturday sessions at the Law Society's premises between 10.30am and 12noon. The sessions for next month will be on 8 and 22 June 2002