Mateusz Maszczynski is a serving international flight attendant with experience…
In the last few days, it’s emerged that Etihad Airways has filed a claim in London’s High Court against the administrators of the now-defunct Air Berlin. The move is an attempt to move jurisdiction of a huge €2 billion lawsuit from the Berlin Regional Court where the insolvency administrators brought a case against Etihad to an English courtroom. It remains unclear why Etihad is attempting to move jurisdiction but it’s likely that lawyers acting for the airline think a London court might be more open to their arguments.
Back in December, we learned that the administrators of Air Berlin were seeking damages of at least €500 million in relation to Etihad’s role in the collapse of the budget airline. The Berlin Regional Court, however, provisionally set the value in dispute at around €2 billion and demanded Etihad respond to the claim by the end of January.
The dispute centres on a so-called “comfort letter” which Etihad sent Air Berlin in April 2017. Etihad, which owned a 29% stake in Air Berlin had been propping up the loss-making carrier for several years – the comfort letter reassured creditors that the Abu Dhabi-based airline would continue funding Air Berlin for at least another 18-months.
Four months after the letter was sent, Etihad withdrew financial support and Air Berlin was plunged into insolvency. The administrators claim Etihad is in breach of contract because the Comfort Letter was a legally binding document.
The new case which was brought by Etihad and filed at the High Court in London on Tuesday remains sealed but in a statement, Etihad said it was seeking exclusive jurisdiction over the dispute in an English court, arguing that it holds no liability for the collapse of Air Berlin. It’s also believed that Etihad is questioning the validity of the Comfort Letter and is instead pointing to a Facility Agreement signed between the two parties – essentially a loan agreement with specific terms and conditions.
There’s a good possibility that Etihad will argue that the Facility Agreement trumps the Comfort Letter. Previously, Etihad said Air Berlin’s losses had accelerated faster than originally forecast.
“The insolvency administrator’s case has no basis, and we are confident that we will prevail wherever the case is determined,” an Etihad spokesperson told us.
“Filing the case in Berlin, however, is a breach of a jurisdiction agreement between Etihad and Air Berlin under which the disputed matters are subject to the exclusive jurisdiction of the English courts. Since Etihad’s initial investment in Air Berlin as a UK public company, our relationship has been formally governed by English law and has been subject to the jurisdiction of the English courts. Therefore, the High Court in London is the proper venue for this dispute.”
London has become a very popular destination for international litigation and one report suggested more than three-quarters of those who use London’s commercial courts were foreign. Some lawyers argue that English law is the preferred governing law for business transactions worldwide, helped by a rich history and independent judiciary.
The insolvency administrator for Air Berlin, Professor Lucas F. Flöther dismissed the new case brought by Etihad:
“Evidently, Etihad is anxious not to have the dispute decided by the German courts. In our view the Berlin District Court has jurisdiction. In any event, the Berlin District Court, as the court first seized, will have to determine whether it has jurisdiction,” he explained.
“If the Berlin District Court determines that it does have jurisdiction, it will also decide on the merits of the dispute. As far as the level of liability is concerned, only the commitments made in the Comfort Letter will be decisive, not the value of, or provisions contained within, the Facility Agreement.”
In 2016, Etihad recorded a loss of $1.95 billion USD on the back of its failed equity investment strategy. The airline stopped funding both Air Berlin and Alitalia as it looked to shore up its own losses but it continues to invest in a number of other airlines. New reports suggest Etihad is considering increasing its stake in India’s loss-making Jet Airways, although the longterm plan remains unclear.
Updated at 0805GMT on 26th January 2019 to reflect further information provided by Etihad Airways, as well as to include comment from an Etihad spokesperson.
Mateusz Maszczynski is a serving international flight attendant with experience at a major Middle East and European airline. Mateusz is passionate about the aviation industry and helping aspiring flight attendants achieve their dreams. Cabin crew recruitment can be tough, ultra-competitive and just a little bit confusing - Mateusz has been there and done that. He's got the low down on what really works.