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India’s Aviation Reforms
Context:
In 1934, India’s skies weren’t truly its own. Governed by the colonial-era Aircraft Act of 1934, the aviation sector operated under a legal framework built to serve British interests—controlling airspace for administrative and military purposes, not nurturing an aviation industry for independent India.
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- Back then, the idea of widespread commercial aviation for Indian citizens seemed out of reach.
- But despite the sector’s evolution over the decades, the law itself remained virtually unchanged, long outpaced by technological advances and growing private sector participation.
India’s aviation sector is one of the fastest-growing in the world, currently ranked as the third-largest aviation market globally. The industry is experiencing rapid growth driven by increasing passenger demand, government initiatives, and infrastructure development. However, challenges such as high operational costs, infrastructure gaps, and reliance on overseas services persist.
Challenges of Outdated Framework
- Challenges of Old Law: This outdated framework created a host of challenges.
- Airlines—both public and private—were bogged down by bureaucratic inefficiencies, and new entrants faced an uphill battle due to sluggish licensing procedures.
- Air traffic management remained suboptimal, and passengers were often left unprotected by vague or nonexistent compensation rules for delays and cancellations.
- The law, a relic of a bygone era, simply couldn’t support the ambitions of a modern aviation economy.
- New Law: Fast forward to 2024, and India has taken a bold step forward with the introduction of the Bharatiya Vayuyan Adhiniyam, 2024, replacing the nearly century-old Aircraft Act.
- This long-overdue overhaul aims to modernise India’s aviation sector, streamlining operations, empowering passengers, and positioning the country as a global aviation hub.
- Yet, amid this progress, a critical issue remains unresolved: arbitration.
Reform in the Skies, Stagnation on the Ground
- The Bharatiya Vayuyan Adhiniyam, 2024 marks a significant shift.
- It promises more efficient licensing, improved air traffic management, and stronger passenger protections.
- However, it stops short of addressing a major gap—India’s ability to handle aviation-related commercial disputes effectively and credibly through arbitration.
- Currently, arbitration for such disputes is governed by the Arbitration and Conciliation Act, 1996, a general legal framework that lacks the depth and specialisation required for the complexities of international aviation.
- These disputes often involve technical issues, cross-border regulations, and international conventions—areas that require specific legal and sectoral expertise.
- Indian arbitration forums and courts, without dedicated aviation-focused institutions or professionals, struggle to meet these demands.
Arbitration Exodus
- India has made efforts to establish arbitration centres, such as the Delhi International Arbitration Centre and the Mumbai Centre for International Arbitration.
- Yet, these institutions have not gained global traction, especially in aviation.
- By contrast, the Singapore International Arbitration Centre (SIAC) now handles approximately 90% of corporate arbitration cases involving Indian parties—a telling sign of India’s limited presence in global arbitration.
- This persistent outflow of aviation disputes to jurisdictions like Singapore, London, and Paris reflects a lack of trust in India’s dispute resolution infrastructure.
- It’s not just a legal issue but an economic and policy one as well.
- Each case lost to a foreign arbitration centre represents lost revenue for Indian arbitrators, legal professionals, and institutions.
- Worse still, it sends a discouraging message to foreign investors—that India isn’t yet ready to handle the high-stakes demands of global aviation law.
What India Must Do?
To truly lead in aviation, India must now focus on building a robust and specialised arbitration ecosystem tailored to the aviation industry. This includes:
- Establishing Dedicated Aviation Arbitration Centres: These should feature expert panels well-versed in aviation law, technology, and international treaties.
- Ensuring Institutional Neutrality: Arbitrators must be appointed through mutually agreed or independent bodies, not solely by government nomination.
- Reducing Judicial Interference: Finality of arbitration awards must be respected to avoid long, costly court battles that deter international stakeholders.
- Incentivising Expertise Development: Law schools should introduce aviation law specialisations and promote academic research in this niche field.
- Learning from Global Leaders: Jurisdictions like Singapore and the UK offer proven models of specialised arbitration systems that India can adapt.
