The Aviation Law Review - Edition 7, EGYPT

The Aviation Law Review - Edition 7

September 2019

I INTRODUCTION

Egypt is an important player in the Middle Eastern and African aviation markets largely because of its geographic location, which places it at the crossroads of two continents, making it an important transit destination. This is in addition to its old aviation tradition, which dates back to 1932 when the first Egyptian airline was established.

Aviation-related matters in Egypt are regulated by several general and specific laws, whose application is overseen by a number of authorities, chief among which is the Ministry of Civil Aviation and the Egyptian Civil Aviation Authority (ECAA). These authorities play a role in issuing licences and permits for carriers and aviation-related services and ensuring adequate management of airports and air navigation services, either directly or through the government-owned Egyptian Holding Company for Airports and Air Navigation and its subsidiaries.

The Egyptian Civil Aviation Law is the main legal instrument governing the regulation of aviation in Egypt. It incorporates the terms of the major international conventions to which Egypt is a party and provides, whether directly by reference, for a carrier liability regime for international carriage analogous to those stipulated in international treaties. Conversely, the Commercial Code regulates matters of domestic carriage and creates a liability regime that complements the general terms of the Egyptian Civil Code (ECC), the law of general application.

II LEGAL FRAMEWORK FOR LIABILITY

The general liability regime is governed by the ECC, which states in Article 163 that 'Every fault which causes injury to another imposes an obligation to make reparation upon the person by whom it is committed.' Reparation for contractual breaches is limited to direct and foreseeable damages, including lost profit, although for torts, such liability covers direct and unforeseeable damages. In the event of fraud (i.e., wilful negligence) and gross negligence in implementing a contract, the rules of tortious liability apply.

The parties may by contract extend their liability to cover consequential and unforeseeable damages as well as cases of force majeure, and may also limit it by agreement, although such a limitation does not apply in the event of fraud (i.e., wilful breach) or gross negligence.

In addition to the general civil liability regime, Egyptian law contains provisions that are applicable specifically to the aviation industry. Such provisions apply as lex specialis and override the ECC in the event of conflict. Rules of liability vary depending on whether the contractual relationship between the airline and the customer is governed by an international treaty or domestic law. In the event of international carriage, the rules of liability found in international treaties apply.

i International carriage

Article 123 of the Civil Aviation Law states that the rules of the Warsaw Convention in addition to 'other amending and complementing conventions shall apply' to international air transportation. Egypt is a party to all the major international aviation instruments on carrier liability including the 1929 Warsaw Convention; the 1955 Hague Protocol; the 1961 Guadalajara Convention; the 1975 Additional Protocols 1, 2 and 4 to the Montreal Convention; and the 1999 Montreal Convention, which Egypt ratified on 25 April 2005. Article 151 of the Egyptian Constitution provides for the incorporation of international conventions into domestic law following the satisfaction of the ratification and publication requirements. The international aviation treaties to which Egypt is a party met the constitutional requirements of their incorporation into domestic law and are therefore binding on Egyptian courts.

ii Internal and other non-convention carriage

Internal and other non-conventional carriage are subject to the general liability regime of the ECC, the Civil Aviation Law and the Commercial Code, which contains a chapter on air transport. Article 285 of the Commercial Code defers to the terms of international conventions to which Egypt is a party in matters relating to international air transport, and states that the Code applies to domestic air transport provided that the parties agree that the points of departure and arrival are located in Egypt.

Egyptian law provides for a form of strict liability where the carrier is deemed responsible for injuries to passengers as long as they were caused while passengers were in the custody of the carrier or its agents at the airport of departure, in the aircraft, at the airport of arrival, or any airport or place the aircraft lands in. The same applies to damage caused to luggage and cargo when the accident causing the damage takes place during air transport. Air transport is deemed to begin at the time the luggage and cargo are in the possession of the carrier or its agents in the airport of departure, arrival, during flight, or in any airport or place the aircraft lands in. The carrier will also be responsible for damages resulting from delay in delivery of luggage, cargo or passengers, where luggage and cargo will be deemed damaged if not delivered within 30 days of the scheduled delivery date.

The carrier will in all cases be held liable for delay or damage unless it establishes that the delay or damage was caused by an event of force majeure, a defect in the transported product, the error of the consignor or consignee, or the passenger.

To benefit from a liability cap for damage or delay, the carrier must include in the air waybill or ticket that it will be subject to the liability cap provided by the Commercial Code, otherwise liability will be unlimited. The cap is limited to 150,000 Egyptian pounds for damages incurred by a passenger, unless the passenger and the carrier agree to a higher cap. Compensation for damage incurred by luggage and cargo is capped at 50 Egyptian pounds per kilogram, unless the passenger discloses in advance that luggage or cargo is of a special nature and pays additional fees to the carrier, in which case the carrier will pay full compensation.

Any attempt by the carrier to waive or limit its liability by lowering the liability caps provided in the Commercial Code or to waive or limit its liability for fraud (i.e., wilful negligence) or gross negligence will be null and void.

iii Other legislation

Airlines should also be cognisant of Egyptian environment legislation. The Egyptian Environment Law (EEL) aims at protecting the environment and ensuring compliance with international environmental standards. Egypt is a party to several international environmental instruments including the Kyoto Protocol and the Vienna Convention for the Protection of the Ozone Layer. These instruments are binding on Egyptian courts and apply alongside the EEL, which provides for criminal sanctions in cases of breach. Claimants may also rely on the civil liability regime highlighted above for breaches of environmental and other laws that cause them harm.

Penalties under the EEL vary from fines to imprisonment, or both. For instance, Article 90 of the EEL states that those that intentionally dump (including through aircraft) hazardous substances in Egypt's exclusive economic zone shall be subject to a fine ranging between 300,000 Egyptian pounds and 1 million Egyptian pounds; and whoever throws rubbish and solid waste in places other than those designated by law can be subject to a fine ranging between of 1,000 Egyptian pounds and 20,000 Egyptian pounds.

Standards of compliance with environmental legislation are also set by the ECAA, which determines permitted levels of noise and emissions by aircraft using Egyptian airports and landing areas, in addition to permitted flight altitudes, speed, engine capacities and other conditions. Failure to comply can lead to the suspension or withdrawal of permits or licences issued.

III LICENSING OF OPERATIONS

i Licensed activities

All aviation-related operations must be licensed or approved by the Minister of Civil Aviation, the ECAA, or both. For example, the ECAA is responsible for licensing aviation personnel operating on aircraft in Egypt (including pilots, crew, engineers and air traffic control officers), all of whom must satisfy licensing requirements, including passing mandatory tests. Licence terms and retention requirements vary depending on the licensed activity. For example, pilot licences are valid for six to 12 months, and pilots must undergo medical and other examinations to retain the licence.A maintenance engineer's licence is valid for 12 months, and the engineers must demonstrate that they practised the licensed activity to retain the licence.

The ECAA may also accredit foreign-licensed personnel subject to certain conditions, including that they be licensed in a state that is party to the Chicago Convention, that this state has a bilateral agreement with Egypt that authorises the reciprocal recognition of licences, that the licensee passes a test and that the licensee works for an Egyptian company (Egyptian citizens are exempt from this last requirement).

ii Ownership rules

In 2015, the Civil Aviation Regulations were amended to permit non-Egyptians to own up to 40 per cent in companies engaging in (1) scheduled international flights for the transportation of passengers and cargo, (2) scheduled and charter domestic fights, and (3) air taxi operations; and up to 100 per cent in airlines engaging in international charter flights transporting passengers and cargo.

To set up an Egyptian airline, a number of conditions must be met, including obtaining the Minister of Civil Aviation's approval; satisfying minimum capital requirements; obtaining all permits and licences (and ensuring they remain up to date), including a valid air operator certificate (AOC) and an airworthiness certificate for each aircraft operating in Egypt; and possessing (owned or leased) at least two aircraft for airlines engaging in scheduled flights for passengers, and one aircraft for charter airlines and scheduled flights for cargo.

Following establishment, the Egyptian carrier must obtain an operating licence by demonstrating that it meets certain conditions, including having a bank account at a bank licensed by the Central Bank of Egypt, depositing the capital of the company in this account, providing a business plan, acquiring premises equipped with the necessary installations and facilities to ensure it can operate, and employing the required technical and administrative personnel.

Companies offering agency services, however, must be fully owned by Egyptians. This restriction is in line with agency legislation, which precludes foreigners from owning shares in commercial agency companies operating in Egypt.

iii Foreign carriers

Foreign carriers must be licensed by the Egyptian Minister of Civil Aviation. The licence will be valid indefinitely if it is issued based on an international treaty to which Egypt and the operator's state are parties (including a bilateral air transport treaty), otherwise the licence will be valid for up to one year. Foreign carriers must also obtain an ECAA permit that authorises them to fly over Egyptian territory.

To obtain an operating licence, the foreign carrier must meet several requirements including being a national of a state party to an air transport agreement to which Egypt is also a party, being authorised by the aviation authorities in its state of registration to engage in air transport, and complying with Egyptian labour laws with respect to the hiring of Egyptian and foreign employees.

Furthermore, the aircraft to be operated in Egypt must satisfy certain conditions including:

1. being registered in its state of nationality;
2. having a valid AOC issued by its state of nationality;
3. bearing the marks indicating its nationality and registration;
4. having licensed pilots and crew (who must be in the number and of the level provided in the aircraft manual); and
5. benefiting from insurance coverage.

IV SAFETY

Egyptian law emphasises the importance of compliance with maintenance programmes applicable to aircraft, which vary depending on an aircraft's type and model. The ECAA conducts regular inspections of aircraft and maintenance operations (including weighing exercises, flight tests, accessing aircraft and test equipment) to ensure they have complied with their programmes. Failure to comply can lead to the revocation of the AOC.

The Civil Aviation Law also provides the ECAA with the powers to follow any procedure to prevent the commission of a crime that may affect the safety of aviation in Egypt, and requires all crew members to report any accident that takes place aboard an aircraft. Reported incidents are subsequently investigated by the Ministry of Civil Aviation.

The Ministry of Civil Aviation's General Administration for Investigation and Prevention of Aircraft Accidents investigates aircraft accidents on Egyptian territory. When the aircraft is not registered in Egypt, representatives from the aircraft's state of registration and operator's state of origin, among others, are invited to participate in the investigation. They are entitled to visit the site of the accident, inspect the wreckage, take testimony, access evidence and provide input to local investigators.

V INSURANCE

All aircraft operators in Egypt must obtain third-party liability insurance against dangers to passengers, luggage and cargo, and damage to persons on the ground. All crew members and workers employed by the carrier that are exposed to the dangers of operating an aircraft must also be insured. The insurer must be authorised to provide insurance services by the laws of the state where the aircraft is registered. In Egypt, only Egyptian joint-stock companies with minimum issued capital of 60 million Egyptian pounds may provide insurance services. Reinsurance providers are not bound by such a requirement.

An operator may be exempt from having to seek insurance from a licensed insurance provider in the aircraft's state of registration if it deposits a bond in the treasury of the state of registration or a licensed bank in that state, or if the state of registration provides an undertaking that the operator will not benefit from any judicial immunity in the event of a dispute over the bond. The amount of the bond is determined by the ECAA.

Compliance with the mandatory insurance rules is evidenced by placing the insurance certificate aboard the aircraft or depositing a certified copy of the certificate with the ECAA.

VI COMPETITION

The Egyptian Competition Act was promulgated in 2005 to fight anticompetitive behaviour. The Competition Act contains provisions against abuse of dominance, bid rigging, vertical and horizontal restraints, price fixing, market allocation, and anticompetitive agreements in general, and provides for civil and criminal penalties for breaches, although the default penalties are of a civil nature unless the head of the Competition Authority requests that criminal prosecution take place, in which case the case file will be transferred to the Office of the Attorney General for processing.

A company will be deemed dominant in a market if it holds a market share that exceeds 25 per cent and has an effective impact on prices or volume of supply in the market notwithstanding competitors' attempts to limit this impact. While this provision can arguably apply to certain airlines operating flights on certain routes, the Competition Authority does not appear to have investigated airlines. National carriers do not benefit from an exemption from competition legislation, although the Competition Act explicitly exempts public utilities directly managed by the state from liability.

The penalty for cartels is a fine of between 2 per cent and 12 per cent of the total revenue of the product subject to the offence during the period the offence was committed. If it is impossible to calculate the total revenue, the penalty shall be a fine of between 500,000 Egyptian pounds and 5 million Egyptian pounds.

Cooperation agreements between operators will be scrutinised by the Competition Authority if they have negative effects on competition in Egypt. Egyptian competition legislation deems agreements between competitors to be anticompetitive if they tend to cause any of the following:

1. raising, decreasing or stabilising product or service prices;
2. allocating markets on the basis of geographical zones, distribution centres, types of customers or products or services, market share, seasons, or periods of time;
3. coordinating with respect to participating or refraining from entering in tenders, bids and other supply offers; or
4. restricting the manufacturing, production, distribution or marketing process of commodities, including the restriction of the type or size of a product or service, or limiting its availability.

The Competition Authority may provide an exemption to the foregoing if the benefits of an agreement between competitors (to customers) outweigh its anticompetitive effects. This exemption can be relied on by the aviation industry.

VII ESTABLISHING LIABILITY AND SETTLEMENT

i Procedure

Liability is confirmed by means of a court judgment or the award of an arbitral tribunal. The parties can settle their disputes at any time, even after a judgment or an award is issued. That being said, claims will be guided by the limitation periods provided by law.

Limitation periods vary depending on the type of claim brought by the plaintiff. While the general limitation period provided by law is 15 years, this period is reduced to seven years in commercial claims (which typically apply to supply contracts between airlines and their catering companies, or disputes between agents and airlines in relation to their business, loan agreements with banks or airline leasing companies), and three years for tort claims.

Other lex specialis provide shorter limitation periods. Accordingly, claims relating to domestic transport are subject to the terms of the Commercial Code and Civil Aviation Law, which state that liability claims relating to loss or damage to luggage and cargo are subject to a one-year limitation period from the date of delivery, whereas claims for injury to, or death of, passengers are subject to a two-year limitation period, which starts running from the date of the injury or death, as applicable. The same limitation period applies to claims brought by or on behalf of third parties injured on the ground, although unlike those in a contractual relationship with the airline, their claims are not subject to a liability cap in the case of domestic flights. With respect to international flights, however, caps will be governed by the relevant international conventions, if applicable.

Carriage disputes are generally subject to the jurisdiction of the court where the respondent is domiciled. Parties may also agree to refer their disputes to arbitration as Egypt is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and has enacted its own commercial arbitration law, provided that a written arbitration agreement exists between the parties.

Disputes regarding compensation for damage to third parties on the ground are subject to the jurisdiction of the court in the area of the accident, although the parties may agree to subject the dispute to the jurisdiction of a court in any other state.

The liability regime (as well as liability caps and defences) for international air transport, however, varies depending on the applicable convention or protocol. For example, under the Warsaw Convention carriers can avoid liability for death or injury of individuals if they establish that they had taken all necessary measures to avoid the incident causing the injury or death; whereas in the 1999 Montreal Convention carriers may not limit or exclude their liability for injuries of death in claims not exceeding 100,000 special drawing rights (SDR) for each passenger, although they may be able to limit or exclude their liability for damages exceeding 100,000 SDR if they, their servants or agents did not act negligently or were not responsible for any wrongful act or omission, or if the damage was solely caused by a third party.

Egyptian law recognises the vicarious liability of employers for the act of their employees (without prejudice to an employer's right to seek damages from the employee should it establish that the employee was responsible for the injury). The law also provides for joint and several liability when multiple persons are responsible for an injury. It follows that pilots may, in principle, be subject to a claim for delay, damage to cargo, or injury to or death of passengers, although a claimant must overcome the evidentiary burden of proving that the pilot acted negligently (considering pilots are not a party to the contract with the consignor or passenger). Even then, a pilot found to be acting negligently may limit his or her liability to the caps provided by Egyptian law.

The liability of pilots for international carriage and travel is governed by the applicable international convention. For example, the 1999 Montreal Convention provides employees and agents of a carrier with the right 'to avail themselves of the conditions and limits of liability . . . unless it is proved that they acted in a manner that prevents the limits of liability from being invoked in accordance with this Convention'. Egyptian law deems fraud (wilful breach) and gross negligence to amount to acts that prevent the limitation of liability.

ii Product liability

Manufacturers of aircraft are also liable to owners and passengers and their heirs for injury or deaths caused by manufacturing defects. The manufacturer's liability towards aircraft owners is contractual in nature, may be limited or waived by agreement and prescribes within one year of the sale unless the manufacturer wilfully hides the defect. Passengers or their heirs may pursue manufacturers in torts, where the action will prescribe after three years.

iii Compensation

Unless capped by agreement or law, as is the case in the relationship between passengers and consignors and carriers, compensation is generally calculated based on the foreseeable and direct damages resulting from a breach of contract, including lost profit. In case of torts, all direct damages are compensable irrespective of whether or not they were foreseeable at the time the act causing the injury took place. Where appropriate, judges can also impose moral damages, whose assessment is subject to the judge's sole discretion.

Unless guided by specific legal provisions (e.g., terms of international aviation conventions that provide for different defences against liability), judges will typically assess whether the respondent acted reasonably and will factor possible contributory negligence on the part of a claimant prior to ruling on the case. Heirs of the deceased can also claim damages.

VIII DRONES

In 2017, the Law No. 216 of 2017 (the Drones Law) was enacted to regulate the use, trade and circulation of drones. The Drones Law defines a drone as any object that can fly unmanned by using any type of technology, irrespective of its shape or size, and is remotely operated or controlled.

Article 2 of the Drones Law prohibits any person (including government authorities), from importing, manufacturing, compiling, circulating, possessing, trading or using drones prior to obtaining a permit from the Ministry of Defence, according to the terms, conditions and procedures specified in the executive regulations of the Drones Law (the Drones Regulations).

Drones may be used for economic, commercial, sports, scientific, and research activities subject to obtaining the approval of various security agencies. A registry has been created at the Ministry of Defence in which all drones as well as the names of those licensed to manufacture, import, own, operate and trade in drones are documented.

IX VOLUNTARY REPORTING

With the exception of the reporting obligations discussed in Section IV, there are no voluntary reporting mechanisms provided under Egyptian aviation legislation. Once the investigation of a crime is handled by the prosecution it has discretion to withhold information from the public to ensure that the investigation progresses smoothly.

X THE YEAR IN REVIEW

On 8 January 2019, Egypt's Court of Cassation adjudicated a case on the interpretation of Articles 22 and 23 of the 1999 Montreal Convention in relation to a lawsuit filed by a passenger claiming damages for the loss of his belongings. The Court ruled that in assessing the amount of compensation for lost possessions, judges may rely on information published on official websites administered by international organisations such as the United Nations and specialised agencies (e.g., the IMF), on the basis that they reflect public information (whether or not the parties to a dispute invoke such information as evidence). As such, the court consulted the IMF's website to determine the amount of compensation owed to the plaintiff following the conversion of SDR units into euros (then into Egyptian pounds) according to the rate applicable at the time the case was filed before confirming that the plaintiff was entitled to damages based on that conversion rate. While this case relates to the valuation of SDRs, the principle introduced by the court was about the use of online information found on websites administered by international organisations in general and will likely have an impact on the way Egyptian courts examine claims under international treaties going forward.

XI OUTLOOK

In January 2019, Egypt inaugurated the Sphinx International Airport (SPX) in Western Cairo. The new airport is located 12km from the great pyramids of Giza, and its location will hopefully serve to promote 'one-day tourism'.

SPX is also expected to alleviate the pressure on Cairo International Airport, Egypt's main airport, and serve international carriage operations to the growing districts of 6th of October and Sheikh Zayed in Western Cairo, as well as the governorates of Fayoum and Beni Suef.

Furthermore, the Ministry of Civil Aviation is preparing to inaugurate the International Administrative Capital Airport in the coming weeks. The new airport will service the new administrative capital and neighbouring areas such as the city of Suez and Ein Sokhna and is modelled on international standards.