During a conference call on the afternoon of February 14 this year, Prime Minister Narendra Modi and French President Emmanuel Macron were joined by representatives from Air India (AI), who announced that the airline had made a firm commitment to purchase 250 Airbus aircraft.
Later the same evening, US President Joe Biden announced that AI had also placed a firm order for 220 Boeing aircraft. These two mega announcements completed the AI order for 470 aircraft from both Airbus and Boeing.
But it was almost four months later at the Paris Air Show that the airline signed the purchase agreement for the mega fleet order. Incidentally, IndiGo also announced its largest order of 500 Airbus A 320s, a day before AI at the Paris Air Show.
Why was there a delay in AI signing the purchase agreement when the deal was announced in February? And why was the final signing done in France and not in India?
This delay led many to wonder if it had something to with Indian laws which makes aircraft, engine manufacturers and other original equipment manufacturers (OEMs), have greater faith in foreign laws than in Indian law in case of disputes.
However, various lawyers and analysts say it would be wrong to think that aircraft, engine manufacturers or other foreign companies do not have faith in Indian law. Vikrant Pachnanda, Partner, Fox and Mandal and an aviation attorney, explains that globally most airlines first announce a provisional agreement for purchase of aircraft and engines. Fox and Mandal is one of India’s oldest and premier law firms that was established 125 years ago.
“A provisional agreement is announced as happened in the case of Air India in February this year. This provisional agreement is basically a commercial decision whereby AI agreed to purchase 470 aircraft from both Boeing and Airbus at a particular price post negotiations between the parties. Subsequently the final purchase agreement was firmed up by both sides and involved lawyers as well who looked at everything from a legal perspective including which law will come into play in case of dispute,” Pachnanda says. He adds that normally English law is the preferred law for aircraft purchase agreements due to the English jurisdiction’s recognised body of commercial law and established precedents in large financial transactions.
“It has nothing to do with Indian law or any other law. English law has been a preferred choice of law for decades as far as aircraft purchase agreements are concerned,” Pachnanda emphasises. Another person who declined to be quoted added that English courts have in the past dealt with aviation related matters swiftly and without unnecessary delays. “Given aircraft deteriorate in value quickly if it is not maintained properly, swift adjudication in these matters is key,” he adds.
29/06/2023 Ashwini Phadnis/Federal
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