Global Knafaim Leasing Ltd & Anor v The Civil Aviation Authority & Ors

A statutory fleet lien permitting detention of one aircraft for charges incurred by other aircraft is not inherently incompatible with Article 1 of the First Protocol. The legislation is proportionate where it pursues the public interest in securing payment for airport and air-navigation services and gives the authority a discretion. Its exercise may nevertheless be unlawful in exceptional circumstances if it imposes an unfair and disproportionate burden. The court should allow the legislature a wide margin of appreciation and will intervene only where the measure lacks a reasonable foundation or its particular application is disproportionate. The same analysis applies under applicable EU fundamental-rights principles. Proportionate use of the power did not constitute an abuse of a dominant position under Article 102 TFEU.

The claimants owned and leased an aircraft operated by Zoom Inc. After Zoom became insolvent, the aircraft was detained at Glasgow Airport by the Civil Aviation Authority and BAA for unpaid airport and Eurocontrol route charges. The claimants paid more than US$2 million to secure its release, including charges incurred by other aircraft in Zoom’s fleet.

The claim challenged the statutory fleet-lien powers under the Civil Aviation Act 1982, the Transport Act 2000 and the Civil Aviation (Chargeable Air Services)(Detention and Sale of Aircraft for Eurocontrol) Regulations 2001. The issues were whether the legislation or its application breached Article 1 of the First Protocol, EU law or competition law, and whether Zoom Inc. was the operator of two aircraft.

1. The claim was dismissed. Sections 88 of the Civil Aviation Act 1982 and 83 of the Transport Act 2000, together with the Eurocontrol Regulations, lawfully permitted detention of an aircraft for charges incurred by another aircraft operated by the person in default.

2. The legislation was not itself incompatible with Article 1 of the First Protocol. Detention was a temporary restriction on use rather than a deprivation of possessions. Payment required for release was a contribution and a control of property in the public interest. The relevant question was whether there was a fair balance and a reasonable relationship of proportionality between the means used and the legitimate aim pursued.

3. The statutory power had a reasonable foundation. Securing payment for essential airport and air-navigation services was a substantial public interest. Whether the fleet lien was the best available method was immaterial. The court had to respect the legislature’s margin of appreciation.

4. The exercise of the power could nevertheless be unlawful in an individual case if it were unfair and disproportionate. Exceptional circumstances might include misleading the lessor, an assurance that the power would not be exercised against its aircraft, or deliberate targeting of a particular lessor without good reason. The present case was harsh but did not fall outside the circumstances in which the power could properly be exercised.

5. The claimants’ ability to obtain information about Zoom’s financial position and to terminate the lease, restrict United Kingdom flights or require further security was relevant to proportionality. Their failure to use contractual powers to obtain information supported the conclusion that the burden was not unlawful.

6. The EU charging provisions adopted a user-pays principle but did not restrict enforcement to the operator. Article 14.3 of Commission Regulation (EC) No 1794/2006 permitted effective enforcement measures, including detention, in accordance with applicable law. Since the exercise was proportionate under Article 1 of the First Protocol, it also complied with EU fundamental-rights principles.

7. BAA’s proportionate exercise of a statutory power was not an abuse under Article 102 TFEU. There was no evidence that it affected the structure of competition, weakened competition or affected trade between Member States. In any event, the exercise was objectively justified by legitimate public-interest objectives.

8. Eurocontrol and BAA were entitled to rely on the call-sign and past practice as evidence of the operator unless contrary evidence was produced. The claimants failed to discharge the evidential burden of showing that Zoom Inc. was not the operator of the two aircraft.