13TH LEIDEN – SARIN INTERNATIONAL AIR LAW MOOT COURT

COMPETITION, 2022

IN THE MATTER OF NATIONALITY OF AIRLINES

STATE OF ATLANTIS V. STATE OF MIDGARD

MEMORIAL SUBMITTED ON BEHALF OF STATE OF MIDGARD

TEAM NUMBER – 44 - RESPONDENT

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TABLE OF CONTENTS

LIST OF ABBREVIATIONS ................................................................................................... iii

LIST OF SOURCES ................................................................................................................. iv

STATEMENT OF RELEVANT FACTS ................................................................................ vii

ISSUES....................................................................................................................................... x

SUMMARY OF ARGUMENTS .............................................................................................. xi

JURISDICTION OF THE COURT ....................................................................................... xiii

ARGUMENTS ........................................................................................................................... 1

1. MIDGARD WAS ENTITLED TO SUSPEND ATLANTIS AIRLINES’ SALES OF

TICKETS PENDING RESOLUTION OF THE DISPUTE, GIVEN THE NEED FOR

IMMEDIATE ACTION ............................................................................................................. 1

1.1. Article 4 (2) empowers Midgard to take immediate action .............................................. 2

1.1.1. The Majority ownership of the airline is vested in the designating state .................. 2

1.1.2. The Effective control of the airline is vested in the designating state....................... 3

1.1.3. Atlantis Airlines has its principal place of business in the State of Atlantis............. 4

1.1.4. Airline fails to operate in accordance with the conditions prescribed under this

agreement ............................................................................................................................ 5

2. MIDGARD WAS ENTITLED TO REVOKE ATLANTIS AIRLINES OPERATIONAL

AUTHORIZATION UNDER ARTICLE 4 OF THE ASA........................................................ 6

2.1. Atlantis Airlines is majority-owned by Dorado and its nationals ..................................... 7

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2.2. Atlantis Airlines is being effectively controlled by the State of Dorado .......................... 8

2.3. Atlantis Airlines doesn’t have its principal place of business at Atlantis ....................... 10

3. MIDGARD FOLLOWED THE REQUIRED PROCEDURE FOR CONSULTATIONS .. 11

3.1. Every effort was made by Midgard to resolve the dispute through consultation ........... 11

3.2. The terms of the Air Services Agreement have been followed by Midgard .................. 14

4. ATLANTIS’ RETALIATORY ACTIONS AGAINST ODIN AIRWAYS ARE

INAPPROPRIATE, DISPROPORTIONATE AND UNLAWFUL ........................................ 15

4.1. The actions by Atlantis do not constitute a valid countermeasure.................................. 15

4.2. The retaliatory actions by Atlantis were disproportionate .............................................. 18

SUBMISSIONS ....................................................................................................................... 21

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LIST OF ABBREVIATIONS

Abbreviations Expansions

Annex Annexure

Art. Article

ASA Air Services Agreement

CAA Civil Aviation Agency

CAAM Civil Aviation Authority of Midgard

CEO Chief Executive Officer

EU European Union

Edn. Edition

ICAO International Civil Aviation Organization

ICJ International Court of Justice

ILC International Law Commission

MOU Memorandum of Understanding

No. Number

p. Page

Para Paragraph

UK United Kingdom

UN United Nations

US United States

v. Versus

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LIST OF SOURCES

INTERNATIONAL CONVENTIONS

1. Charter of the United Nations (adopted 26 June 1945, entered into force 24 October

1945) (UN Charter)

2. Statute of the International Court of Justice (adopted 26 June 1945, entered into force 24

October 1945)

3. Convention on International Civil Aviation (adopted 7 December 1944, entered into force

4 April 1947) 15 UNTS 295 (Chicago Convention)

4. Rules for Settlement of Differences, Doc 778212, 1975.

INTERNATIONAL CASES

1. Hungary v Slovakia, ICJ GL No 92, [1997] ICJ Rep 7.

2. France v. United States, 74 A.J.I.L. 785 (1980).

3. Rex v. London County Council, CA 1931.

4. Australia v. United States, D.O.T. Order 93-5-31 (1993).

5. FYR Macedonia v, Greece, (2011) ICJ Rep 644, [164].

INTERNATIONAL DOCUMENTS

1. European Union Council Regulation No. 2407/92

2. Gerald Fitzmaurice, Second Report, YILC, 1957, vol II.

3. ICAO, Policy and Guidance Material on the Economic Regulation of International Air

Transport (Doc 9587) (Fourth Edition – 2017).

4. Manual on Regulation of International Air Transport, ICAO Doc. 9626.

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5. Regulation No. 1008/2008/EC of the European Parliament and of the Council of 24

September 2008 on common rules for the operation of air services in the Community, OJ

L 293, 31 October 2008, pp. 3–20.

6. ICAO Model Agreements for Air Transport Services.

7. United Kingdom Treaty Series No. 3 (1946), Cmd. 6747.

8. United Kingdom Treaty Series No. 76 (1977), Cmnd. 7016.

OTHER SOURCES

BOOKS

1. Brian F. Havel and Gabriel S. Sanchez, The Principles and Practice of International

Aviation Law, Cambridge University Press, 2014.

2. Shawcross CN and Beaumont KM, Air Law, LexisNexis, 2013.

3. Aust A, Handbook of International Law, Cambridge University Press, 2010.

4. Federica Paddeu, Justification and Excuse in International Law, 2018.

ARTICLES

1. Ron Harnden, Corporations: Corporate Citizenship - Principal Place of Business, 1972.

2. PPC Hannapel, Airline Ownership and Control and Some Related Matters, Air & Space

Law XXXVI/2, 2003.

3. Michael Carney, Isabelle Dostaler, Airline ownership and control: A corporate

governance perspective, Journal of Air Transport Management, 2006.

4. Deiró, Giselle. Jurisdiction and Conflicts of Laws in Contracts of International Carriage

by Air. Air & Space Law 37, 2012.

5. Dr. Sanat Kaul, Chicago Convention Revisited: Review of Chicago Convention and

Bilateralism in Air Services, Current Developments in Air and Space Law.

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6. Elmar M. Giemulla, Airline Nationality: A Reconstruction of the EU Ownership And

Control Rules, 12 (2018).

7. Vinogradov, Wouters and Jones, Transforming Potential Conflict into Cooperation

Potential: The Role of International Water Law.

8. Lori Fisler Damrosch, Retaliation or Arbitration--Or Both? The 1978 United States-

France Aviation Dispute, 74 American Journal of International Law (1980).

9. On Proportionality of Countermeasures in International Law, Thomas M. Franck, 102

The American Journal of International Law (2008).

10. The Role of Proportionality in the Law of International Countermeasures, Enzo

Cannizzaro, 12 European Journal of International Law (2001).

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STATEMENT OF RELEVANT FACTS

INTRODUCTION

The present case is related to the issue of nationality of Atlantis Airlines in relation to the

retaliatory actions carried out by the State of Midgard. The State of Midgard had alleged that

Atlantis Airlines does not fulfil the criteria of nationality as required under the Air Services

Agreement.

BACKGROUND

The States of Atlantis and Midgard had entered into an ASA governing air traffic between the

two countries. In accordance with the ASA, Atlantis and Midgard had each designated one

airline to operate services between the two States, Atlantis Airlines for Atlantis and Odin

Airways for Midgard. Both the airlines were fully owned by the government of their

respective countries.

THE SALE

As Atlantis Airlines ran into serious financial trouble, it approached the neighbouring country

of Dorado to sell a proportion of its shares to the in return for investing the capital needed to

prevent the airline’s collapse. Out of its 100,000 Class A “ordinary” shares and 50,000 Class

B shares, the State of Atlantis sold shares in Atlantis Airlines as follows:

a. 49,000 Class A shares to Golden Air, an airline which was 100% owned by the State

of Dorado;

b. 50,000 Class B shares to Golden Air; and

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c. 21,000 Class A shares to Ms Lemuria, a wealthy individual who was a national of

Atlantis but is resident in Dorado and has chaired Golden Air as a non-executive

director.

The State of Atlantis retained only 30,000 Class A shares in Atlantis Airlines.

CONCERNS OF THE STATE OF MIDGARD

The relations between the State of Dorado and the State of Midgard were not good. Due to the

above transaction, Midgard was worried about Dorado’s increased influence in the region,

and that Golden Air would stand to profit from flights between Atlantis and Midgard. The

State of Midgard was also concerned that, with significant investment by Golden Air, Atlantis

Airlines would be able to offer a far superior passenger experience on the route than Odin

Airways, which meant that Odin Airways was likely to lose market share in the longer term

once demand recovered.

THE INVESTIGATION

The Civil Aviation Authority of Midgard launched an investigation into the arrangements at

Atlantis Airlines, demanding the State of Atlantis to provide immediate evidence that Atlantis

Airlines continued to comply with the nationality requirements to be designated under the

ASA. Atlantis Airlines sent the relevant transaction documents to the CAAM. However,

Atlantis Airlines no longer meets the nationality requirements under the ASA and demanded

that the transaction be reversed within 10 days. Atlantis did not do so, hence on 1st August

2020, Midgard has taken immediate action suspending Atlantis Airlines’ right to sell tickets

from its Middleville office and through its www.atlantisairlines.mi website.

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CONSULTATIONS

On 3 August 2020, the State of Atlantis entered into bilateral consultations with the State of

Midgard over their conflicting interpretations of the ASA. The consultations continued for

four weeks. As even after multiple rounds of talks no progress had been made; On 31 August

2020, Midgard refused to continue with the bilateral consultations and revoked Atlantis

Airlines’ operational authorization, citing Article 4(1) of the ASA. In response, on 1

September 2020, Atlantis revoked Odin Airways’ permission to operate to Atlantis, ending all

nonstop air services between the two countries.

APPEAL BEFORE THE INTERNATIONAL COURT OF JUSTICE

As the two states could not agree on a common interpretation of the ASA, Atlantis, with the

consent of Midgard, started preparations to bring the dispute before the International Court of

Justice by way of this Application.

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ISSUES

The State of Midgard will argue the following contentions before the International Court of

Justice -

(a) Midgard was entitled to suspend Atlantis Airlines’ sales of tickets pending

resolution of the dispute, given the need for immediate action.

(b) Midgard was entitled to revoke Atlantis Airlines’ operational authorization under

Article 4 of the ASA, given that:

i. Atlantis Airlines is not majority owned and effectively controlled by Atlantis

and its nationals; and

ii. Atlantis Airlines:

1. Does not have its principal place of business in Atlantis; and/or

2. Is majority-owned and/or effectively controlled by Dorado and its

nationals, and Dorado does not have an air services agreement with

Midgard.

(c) Midgard followed the required procedure for consultation.

(d) Atlantis’ retaliatory actions against Odin Airways are inappropriate,

disproportionate and unlawful.

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SUMMARY OF ARGUMENTS

1. Midgard was entitled to suspend Atlantis Airlines’ sales of tickets pending

resolution of the dispute, given the need for immediate action.

It is humbly submitted that Midgard has the right to take immediate action by suspending the

sales of tickets as the transaction between Atlantis Airlines and Golden Air violates Article 4

(1) of the ASA. Moreover, Atlantis Airlines is substantially owned and effectively controlled

by Golden Air and the principal place of business can’t be said to be the State of Atlantis.

Moreover, this transaction also violates Article 7 (1) of ASA which provides for fair and equal

opportunity. Further, Article 4 (2) of the ASA empowers Midgard to take immediate action to

stop this non-compliance. Hence, Midgard has the right to suspend the sales of tickets.

2. Midgard was entitled to revoke Atlantis Airlines’ operational authorization under

Article 4 of the ASA, given that, Atlantis Airlines is not majority owned and

effectively controlled by Atlantis and its nationals, and does not have its principal

place of business in Atlantis.

It is humbly submitted that Atlantis Airlines is not majority-owned by Atlantis as Atlantis

holds only 30% equity shares of the airline, thus, losing the criteria of 50% equity share of

substantial ownership. Also, the key positions in the board are held by the Dorado and its

nationals and even the chairman and CEO of this joint cooperation is Ms. Lemuria who is a

resident of Dorado for the last six years and had chaired Golden Air as a non-executive

director. Thus, the interest of Ms. Lemuria lies with Dorado and since she’s in charge of day

to day activity, Atlantis has lost its control over Atlantis Airline. Thus, Atlantis Airline is

effectively controlled by Golden Air. This violates Article 4(1) of the ASA and empowers

Midgard to revoke the operational authorization of Atlantis Airlines’.

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3. Midgard followed the required procedure for consultation.

It is humbly submitted that the State of Midgard followed the required procedure for

consultation in the present dispute concerning the nationality of airlines. Consultation plays a

major role in the prevention and resolution of disputes in bilateral air services agreements.

Considering this, every effort was made by Midgard to make this consultation a success.

Moreover, Midgard has also followed the terms of the ASA and has come to the court with

clean hands.

4. Atlantis’ retaliatory actions against Odin Airways are inappropriate,

disproportionate and unlawful.

It is humbly submitted that the retaliatory actions by the State of Atlantis against Odin

Airways are inappropriate, disproportionate and unlawful. The actions by Atlantis did not

constitute a valid countermeasure. It can also be noted that no illegal act has been performed

by the State of Midgard and an act as a response to a legal action may not count as a

countermeasure. Atlantis has not fulfilled the conditions required for a valid countermeasure

to take place and the actions by Atlantis are also wrong according to the theory of rights

forfeiture. Further, Atlantis was not entitled to take any retaliatory action as it was itself at

wrong and it is a settled principle of law that a party shall not be permitted to take advantage

of its own wrong.

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JURISDICTION OF THE COURT

This dispute is brought before the court under Article 36, Paragraph 1 of the Statute of the

International Court of Justice. It states that:

“The jurisdiction of the Court comprises all cases which the parties refer to it and all matters

specially provided for in the Charter of the United Nations or in treaties and conventions in

force.”

The State of Atlantis and State of Midgard both accept the jurisdiction of the International

Court of Justice.

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ARGUMENTS

ISSUE 1 - MIDGARD WAS ENTITLED TO SUSPEND ATLANTIS AIRLINES’

SALES OF TICKETS PENDING RESOLUTION OF THE DISPUTE, GIVEN THE

NEED FOR IMMEDIATE ACTION.

It is humbly submitted that Midgard is entitled to suspend Atlantis Airlines’ sales of tickets

pending resolution of the dispute, given the need for immediate action. It is rightly pointed

out in the case of Hungary v. Slovakia1 where it was observed that an act that precludes an

international obligation can only be allowed if it is necessary and such grounds are to be

permitted only if there are exceptional circumstances. In the case in hand. it was necessary to

take as despite giving ten days to reverse the transaction, Atlantis paid no heed. Thus, it was

necessary to take immediate action. Also, the International Law Commission in Article 33 of

the Draft Article on International Responsibility of States2 that an “essential interest” shall be:

I. "Grave and imminent peril";

II. “Only means” of safeguarding that interest;

III. "Seriously impaired an essential interest" of the State towards which the obligation

existed;

This act of Atlantis has put Midgard in imminent peril as Atlantis Airlines is majority owned

and effectively controlled by Dorado which is an enemy state of Midgard. It may hamper the

1
Hungary v Slovakia, ICJ GL No 92, [1997] ICJ Rep 7.
2
Draft Article on International Responsibility of States, Art. 33.
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safety measures of Airlines and could compromise national security, given the reliance on the

civilian commercial airline fleet for needed lift capacity in times of international conflict.3

Also, Atlantis has left no option for Midgard to take immediate action as despite giving ten

days to reverse the transaction they did not do so. 4 Further, the Cooperation Agreement

between Atlantis and Dorado or the tripartite MOU impairs the obligation of Atlantis Airline

to be majority-owned and effectively controlled by the state of Atlantis. Therefore, Midgard is

entitled to take immediate action under Article 4 (2) of the ASA.5

1.1. Article 4 (2) empowers Midgard to take immediate action.

Article 4 (2) itself empowers Midgard to take immediate action if there is non-compliance

with Article 4 (1).

1.1.1. The Majority ownership of the airline is vested in the designating state.

Article 17 of the Chicago Convention provides that, “Aircraft shall have the nationality of the

State in which they are registered.”6 It is submitted that “substantial ownership” is broadly

considered to mean more than 50 per cent equity ownership. As per the manual of the ICAO

on Regulation of International Air Transport, the criterion for ownership of an airline is a test

3
Dr. Sanat Kaul, Chicago Convention Revisited: Review of Chicago Convention and

Bilateralism in Air Services, Current Developments in Air and Space Law, ISBN: 978-81-

923638-4-4, 6 (2012).
4
Compromis, Para, 15.
5
Air Service Agreement, Atlantis-Midgard, Art. 15.
6
International Civil Aviation Organization (ICAO), Convention on Civil Aviation ("Chicago

Convention"), 7 December 1944, (1994) 15 U.N.T.S. 295, Article 17.

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of who has substantial ownership. In assessing what constitutes “substantial ownership” 7,

States generally focus on the amount of ownership of the air carrier held by certain parties,

usually considering that more than 50 percent of the equity in an air carrier constitutes

“substantial ownership”. But, it is evident from the distribution of the shares that Golden Air

owns all of the Class B shares i.e., further, 49,000 of Class A voting shares of Atlantis

Airlines are owned by the Golden Air, and a further, 21,000 voting shares are owned by Ms.

Lemuria who is a resident of Dorado and has also sat previously as a non-executive director

of the Golden Air.8 Also, according to the Shareholders Agreement, each shareholder is

entitled to cast one vote per Class A, and thus Atlantis holds only 30% equity share thus

losing the criteria of 50% equity shares. Hence, Atlantis Airline is not substantially owned by

the State of Atlantis.

1.1.2. The Effective control of the airline is vested in the designating state.

It humbly submitted that according to the Shareholders Agreement, out of twelve members in

the board of directors, six have to be the nationals of Dorado and another one is reserved for

Ms. Lemuria who has also been a non-executive director of Atlantis Airlines.9 Thus, the

nationals of Dorado and Ms Lemuria have a decisive influence on the running of the business

of the airline. Further, Ms. Lemuria is to be appointed as the CEO of the airline and would be

in charge of the day to day actions of Atlantis Airlines meaning that effective control in case

of day to day actions also lies with someone who has previously been a part of Golden Air.

Thus, there may be a conflict of interest. As national airlines also sit along with country

delegations in bilateral air service negotiations and Golden Air has effective control over

7
Manual on Regulation of International Air Transport, ICAO Doc. 9626.
8
Compromis, Para. 9.
9
Shareholder Agreement, State of Atlantis, Golden Air & Ms. Lemuria, Art. 5.

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Atlantis Airlines, it may sit as an advisor on the negotiating table. This will undermine the

integrity of bilateral air transport negotiations.10

1.1.3. Atlantis Airlines has its principal place of business in the State of Atlantis.

It is humbly submitted that the essence behind the principal place of business was that this

approach would enable a state to designate air carriers as it sees qualified (including those

with majority national ownership) to use and benefit from its entitled market access rights

under a bilateral agreement. But here, the majority ownership lies with Golden Air of Dorado.

Hence, they would be entitled to get benefits from market access.11 At the same time, it would

reinforce the obligation on the part of the designating party to maintain effective regulatory

control over the airline it designates. Such control is envisioned primarily through licensing

which can include both economic and operational elements. Also, the principal place of

business includes that an airline has a substantial amount of its operations and capital

investment in physical facilities in the territory of the designating Party. But the Article 4

(1)(a) of Appendix 2 of the Co-operation Agreement states that the decision of capital

investment will be taken by the joint planning of Atlantis Airlines and Golden Air. Also, the

directors of Golden Air have a right to refuse the board approval as per Article 5 of the Co-

operation Agreement.12 Thus, it can be said that Atlantis Airlines is established and

incorporated in the territory of Atlantis in accordance with relevant national laws and

regulations; the principal place of business of Atlantis Airline is not Atlantis.

10
Supra 3.
11
Appendix 5, ICAO Template Air Services Agreements,

https://www.icao.int/Meetings/AMC/MA/ICAN2009/templateairservicesagreements.pdf.
12
Cooperation Agreement, State of Atlantis-Golden Air, Art. 4 (1)(a).

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1.1.4. Airline fails to operate in accordance with the conditions prescribed under this

Agreement.

It is submitted that Article 713 provides that each contracting party shall allow a fair and equal

opportunity for each designated airline to compete in providing the international air

transportation governed by this Agreement. It is pertinent to note that the phrase fair and

equal opportunity is associated with the operation of the agreed air services and not with the

sharing of benefits.14 Thus, it may be possible to argue that fair and equal opportunity for the

operation of agreed service should be related to the use of agreed airports, landing and user

charges, market share, etc. The adoption of this view would preclude a party from intervening

in the market to ensure a fair and equal sharing of benefits for fair and equal opportunity

would relate to the availability of opportunity to compete, rather than to the sharing benefits.

However, Atlantis Airline has been defying such an approach in the current dispute with the

State of Midgard. Midgard was very concerned when it heard about the investments in

Atlantis Airlines. Instead of being an equal competitor, it would be Golden Air who would

stand to profit from flights on the Undersea City – Middleville route despite not being the

party to the agreement. Also due to investment by the enemy state, Atlantis Airlines would be

able to offer a far superior experience causing Odin Airways to lose market share in the

longer term. Thus, this transaction violates Article 7 (1) of the Air Service Agreement.

Thus, it is quite evident that the investment by Golden Air in Atlantis Airline is in violation of

ASA as Atlantis Airline is now being substantially owned and effectively controlled by the

State of Dorado. Moreover, this transaction defies Article 7 of ASA, thus violating Article 4

(1) (e). Despite all these violations, Midgard has given a time of ten days to Atlantis to

13
Air Service Agreement, Atlantis-Midgard, Art. 7.
14
Supra 11.

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reverse the transaction acting in good faith. But, Atlantis did not do so and to stop this non-

compliance of provision of the Air Service Agreement, Midgard had to take immediate action

of suspending the sales of tickets of Atlantis Airlines as prescribed under Article 4 (2) of

ASA. Hence, Midgard was entitled to suspend Atlantis Airlines’ sales of tickets pending

resolution of the dispute, given the need for immediate action.

ISSUE 2 - MIDGARD WAS ENTITLED TO REVOKE ATLANTIS AIRLINES

OPERATIONAL AUTHORIZATION UNDER ARTICLE 4 OF THE ASA.

It is humbly submitted that Article 1 of the Chicago Convention15 provides that every

contracting party has exclusive sovereignty over the airspace of their territory and it is

pertinent to note that the principles of majority ownership and effective control were

introduced in order to protect the sovereignty as well as to not to allow a nation which is not a

party to the Air Services Agreement to reap benefits indirectly from the contract. 16

It is clear from the facts of the present case that there was hostility between Midgard and

Dorado. Therefore, it presented a risk to the sovereignty of Midgard. Further, a hostile nation

shall not be permitted to benefit from the ASA especially when no such agreement had been

entered into between Midgard and Dorado.17

It is also pertinent to note that Golden Air and Atlantis Airlines have been involved in a Share

Purchase Agreement which has resulted in effective control as well as ownership.

15
Supra 6, Art. 1.
16
Elmar M. Giemulla, Airline Nationality: A Reconstruction of the EU Ownership And

Control Rules, 12 (2018).

17
Ibid.

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2.1. Atlantis Airlines is majority-owned by Dorado and its nationals.

Atlantis Airlines is majority-owned by Golden Air of Dorado and its Nationals as it is evident

from Para 9 of the facts of the present case:

“9. The share capital of Atlantis Airlines consists of 100,000 Class A “ordinary” shares and

50,000 Class B shares. The State of Atlantis sold shares in Atlantis Airlines as follows:

a. 49,000 Class A shares to Golden Air, an airline which is 100% owned by the State of

Dorado, for 49 million Atlantis Dollars (A$);

b. 50,000 Class B shares to Golden Air for A$50m; and

c. 21,000 Class A shares to Ms Lemuria, a wealthy individual who is a national of Atlantis but

is resident in Dorado, for A$21m. Ms Lemuria is very experienced in the aviation industry

and previously sat on the board of Golden Air as a non-executive director.”18

It is evident from the distribution of the shares that Golden Air owns all of the Class B shares

i.e., further, 49,000 Class A voting shares of Atlantis Airlines are owned by the Golden Air,

and a further, 21,000 Voting Shares are owned by Ms. Lemuria who is a resident of Dorado

and has also sat previously as a non-executive director of the Golden Air.

The Association of Ms. Lemuria with Golden Air defeats the very purpose for which such

ASAs are entered which is to safeguard the security of the air services in the nation as well as

to not allow non-party to benefit from the Agreement.

Therefore, it can be fairly concluded that Golden Air owns the majority shares of Atlantis

Airlines and thereby violates the ASA.

18
Compromis, Para. 9.

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2.2 Atlantis Airlines is being effectively controlled by Dorado.

The European Union Council Regulation explicitly defines “Effective Control” as ‘a

relationship constituted by rights, contracts or any other means which, either separately or

jointly and having regard to the considerations of fact or law involved, confer the possibility

of directly or indirectly exercising a decisive influence on an undertaking, in particular by:

(a) the right to use all or part of the assets of an undertaking; (b) rights or contracts which

confer a decisive influence on the composition, voting or decisions of the bodies of an

undertaking or otherwise confer a decisive influence on the running of the business of the

undertaking.’19

The Memorandum of Understanding signed among the parties confers the right to use a part

of assets of the Atlantis Airlines to the Golden Air further, as discussed earlier the majority

voting Shares either reside with Ms. Lemuria or the Golden Air which confers them the

decisive influence on running the business of the Atlantis Airlines.

Also, according to the Shareholders Agreement, out of twelve members on the board of

directors, six have to be the nationals of Dorado and another one is reserved for Ms. Lemuria

who has also been a non-executive director of Atlantis Airlines. Thus, the nationals of Dorado

and Ms Lemuria have a decisive influence on the running of the business of the Airlines.

Further, Ms. Lemuria is to be appointed as the CEO of the Airlines and would be in charge of

the day to day actions of Atlantis Airways meaning that the effective control in case of day to

day actions also lies with someone who has previously been a part of Golden Airlines and

thus, the interests of the airline might be compromised.20

19
European Union Council Regulation No. 2407/92.
20
Supra, 9.

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Further, in the case of Rex v. London County Council,21 the council, as the statutory authority

for the grant and renewal of cinematograph licenses, refused to renew the license of a

cinematograph company registered in England on the ground that the large majority of the

shares were held by alien enemies. Lord Reading, C. J., held that the council were entitled in

the exercise of their discretion to refuse the renewal. The court put its decision upon the

following rather special ground:

"If the Council are of opinion that the exhibition of cinematograph films accompanied by

music should not be entrusted to a company so largely composed of persons whose interest or

whose desire at present is or may be to inflict injury upon this country, can it be held as a

matter of law that the Council have travelled beyond the limits allowed to them? I think not."

In the present case, the probability of interests Ms Lemuria and the Other Voting members

from Dorado is very high. Therefore, the effective control of Atlantis Airlines was

compromised.

Further, Article 4 (f) of Regulation 1008/2008 of the European Parliament of the Council of

24 September 2008 on common rules for the operation of air services in the Community

provides that -

“Member States and/or nationals of Member States own more than 50% of the undertaking

and effectively control it, whether directly or indirectly through one or more intermediate

21
Rex v. London County Council, CA 1931.

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undertakings, except as provided for in an agreement with a third country to which the

Community is a party.”22

In the present case, Ms Lemuria had previously been part of the Golden Air. Thus, it can be

fairly concluded that Golden Air is both directly and indirectly controlling Atlantis Airlines.

2.3 Atlantis Airlines doesn’t have its principal place of business at Atlantis

It is humbly submitted that the concept of principal place of business was intended to allow a

state to designate air carriers as it deems fit (including those with majority national

ownership) to use and benefit from its rightful market access rights under a bilateral

agreement. It is because, for reason of their size and prominence, they would be best

positioned to benefit from this new market access.23

This concept helps the contracting parties to maintain effective regulatory oversight over the

airline it appoints. The primary means of achieving this control is through licensing, which

can involve both economic and operational features. Under the Air Services Agreement, there

is a requirement that an airline's primary place of business must be located in the territory of

the contracting parties. However, according to Article 4(1)(a) of Appendix 2 of the

cooperation agreement, Atlantis Airline and Golden Air will jointly decide on capital

investment. Moreover, as stated in Article 5 of the co-operation agreement, the directors of

Golden Air have the option of rejecting the Board's approval. Hence, it can be said that

Atlantis Airlines is incorporated and based in the state of Atlantis; it does not conduct its

22
Regulation No. 1008/2008/EC of the European Parliament and of the Council of 24

September 2008 on common rules for the operation of air services in the Community, OJ L

293, 31 October 2008, pp. 3–20.

23
Section 5: ICAO Model Agreements for Air Transport Services,

-MEMORANDUM FOR THE RESPONDENT-

 11

primary commercial activities in Atlantis, as required by applicable national laws and

regulations.

ISSUE 3 - MIDGARD FOLLOWED THE REQUIRED PROCEDURE FOR

CONSULTATION

Consultation, in an international dispute usually involves the exchange of views and

information and acts as a dispute prevention and resolution tool.24 It is humbly submitted that

the State of Midgard followed the required procedure for consultation in the present dispute

concerning the nationality of airlines. Consultation plays a major role in the prevention and

resolution of disputes in bilateral air services agreements. Considering this, every effort was

made by Midgard to make this consultation a success. Moreover, Midgard has also followed

the terms of the ASA and has come to the court with clean hands.

1. Every effort was made by Midgard to resolve the dispute through consultation.

It is humbly submitted that the concept of consultations has been a popular method of dispute

resolution in bilaterals beginning with Bermuda I agreement between the United States and

the United Kingdom in 1946.25 Since then, Bermuda I became the prototype for bilaterals

throughout the world over the next thirty years. This agreement contained several provisions

relating to the settlement of disputes. Article 8 of the agreement provided that either nation

may request consultation between the aeronautical authorities of both nations in the event that

it considers it desirable to modify the terms of the annexe of the agreement (i.e., routes to be

operated on by carriers designated by each nation and rates to be charged by such carriers).

24
Vinogradov, Wouters and Jones, Transforming Potential Conflict into Cooperation

Potential: The Role of International Water Law.

25
United Kingdom Treaty Series No. 3 (1946), Cmd. 6747.

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The scope of consultations as a means of dispute resolution was expanded in Bermuda II 26,

where in addition to intended revocation or suspension of operating authorizations 27, the

consultation procedure has been applied to doubts concerning the designation of an airline 28,

to intended rejection of additional designations on routes reserved for limited designations 29,

and to doubts concerning the qualifications of a designated airline30. Further, the Rules for the

Settlement of Differences by ICAO suggest a preference for consultations and negotiations

rather than adjudication and sanctions.31 But, in many cases like United States v. France32 and

Australia v. United States33, sanctions have also been threatened to encourage hard

bargaining.

The provisions for consultation in the Air Services Agreement between Atlantis and Midgard

mirror the provisions in the Bermuda II agreement. Article 4 (1) of the Air Services

Agreement provides that:

“Each Contracting Party shall have the right to withhold, revoke, suspend or limit the

operating authorizations of an Airline designated by the other Contracting Party in the event

of any of the following:

a. such airline is not able to prove upon request that either:

26
United Kingdom Treaty Series No. 76 (1977), Cmnd. 7016.
27
United Kingdom Treaty Series No. 76 (1977), Cmnd. 7016, Art. 5(2).
28
United Kingdom Treaty Series No. 76 (1977), Cmnd. 7016, Art. 3(1)(B).
29
United Kingdom Treaty Series No. 76 (1977), Cmnd. 7016, Art. 3(5).
30
United Kingdom Treaty Series No. 76 (1977), Cmnd. 7016, Art. 3(6).
31
Rules for Settlement of Differences, Doc 778212, 1975.
32
United States v. France, 74 AJIL 746 (1980),
33
D.O.T. Order 93-5-31 (1993).

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 13

I. the majority ownership and effective control of such airline are vested in the designating

State, its nationals, or both; or

II. such airline:

i. has its principal place of business on the territory of the designating State; and

ii. is not majority owned or effectively controlled by any third country, its nationals, or both,

where such third country has no existing air services agreements with the Contracting Party

seeking to withhold, revoke, suspend or limit the operating authorization.”34

As pointed out earlier, the majority ownership as well as effective control of Atlantis Airlines

has been compromised. Thus, Midgard was entitled to suspend the operational authorization

of Odin Airways.

Article 4 (2) of the Air Services Agreement further states that:

“Unless immediate action is essential to prevent further non-compliance with paragraph 1 of

this Article, the rights established by this Article shall be exercised only after consultation

with the other Contracting Party. Unless otherwise agreed by the Contracting Parties, such

consultations shall begin within a period of sixty (60) days from the date of receipt of the

request.”35

In the present case, as discussed earlier, immediate action was required as it was jeopardizing

the national security as well was benefitting an alien to the Air Services Agreement. It is

essential to point here that even though immediate action was required, Midgard followed the

consultation process even though it was not obligated to do the same.

34
Air Service Agreement, Atlantis-Midgard, Art. 4(1).
35
Air Service Agreement, Atlantis-Midgard, Art. 4(2).

-MEMORANDUM FOR THE RESPONDENT-

 14

2. The terms of the Air Services Agreement have been followed by Midgard.

In the present Air Services Agreement between the State of Midgard and the State of Atlantis,

Article 15 states the procedure of settlement of disputes. Article 15 (1) states,

“If any disagreement arises between the Contracting Parties relating to the interpretation or

application of this Agreement, the Contracting Parties shall in the first-place endeavour to settle

their dispute by bilateral consultations.”36

This provision has been followed by the State of Midgard and it had promptly arranged

consultations to resolve the dispute successfully.

Further, Article 15 (2) states,

“If the Contracting Parties fail to reach a settlement by consultation, the dispute may at the

request of either Contracting Party be submitted for decision to the International Court of

Justice.”37

Moreover, all the contracting parties undertook to comply with any decision by the International

Court of Justice.38

The provisions make it clear that the State of Midgard had complied with all the conditions given

under the Air Services Agreement. The action taken by the State of Midgard mirrors the actions

taken by the Contracting parties in previous notable cases. 39

36
Air Service Agreement, Atlantis-Midgard, Art. 15(1).
37
Air Service Agreement, Atlantis-Midgard, Art. 15(2).
38
Air Service Agreement, Atlantis-Midgard, Art. 15(3).
39
Supra 32, 33.

-MEMORANDUM FOR THE RESPONDENT-

 15

ISSUE 4 - ATLANTIS’ RETALIATORY ACTIONS AGAINST ODIN AIRWAYS ARE

INAPPROPRIATE, DISPROPORTIONATE AND UNLAWFUL.

It is humbly submitted that the retaliatory actions by the State of Atlantis against Odin

Airways are inappropriate, disproportionate and unlawful.

1. The actions by Atlantis do not constitute a valid countermeasure

Under International Law, countermeasures are unilateral measures adopted by a state (the

‘injured state’) in response to the breach of its rights by the wrongful act of another state (the

‘wrongdoing’ or ‘target’ state) that affect the rights of the target state and are aimed at

inducing it to provide cessation or reparations to the injured state.40 They can be considered as

measures taken by a State in response to the internationally wrongful act of another State and

aimed at inducing the latter State to comply with its legal obligations. 41

As explained by the ICJ in the Gabcíkovo-Nagymaros Project case42, countermeasures might

justify otherwise unlawful conduct “taken in response to a previous international wrongful

act of another State and [...] directed against that State.” This is also reflected in Article 22

of the ILC Articles on State Responsibility, which stipulates that “the wrongfulness of an act

of a State not in conformity with an international obligation towards another State is

precluded if and to the extent that the act constitutes a countermeasure taken against the

latter state.”43

40
Federica Paddeu, Justification and Excuse in International Law (2018).
41
Ibid.
42
Supra 1.
43
Responsibility of States for Internationally Wrongful Acts, Art. 22.

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Countermeasures are a response to a wrongful act committed by the target state, a wrongful

act that must actually exist.44 It may occur that, after the event, it is determined that a prior

wrongful act did not objectively exist and that the state taking countermeasures has therefore

acted wrongfully. In a famous case45, Greece found that its countermeasures were wrongful

acts because Macedonia’s conduct, which Greece alleged had triggered its own response, did

not constitute a violation of its obligations towards Greece under the Accord. A mere good

faith belief that a wrongful act exists is not enough to justify the reactive measures. 46 In the

present situation, no wrongful act is committed by Midgard, hence, the actions by Atlantis

can’t be said to be a valid countermeasure.

The conditions of lawful countermeasures under customary international law are codified in

the ILC Articles on State Responsibility. In particular, Article 49 provides:

“1. An injured State may only take countermeasures against a State which is responsible for

an internationally wrongful act in order to induce that State to comply with its obligations.

2. Countermeasures are limited to the non-performance for the time being of international

obligations of the State taking the measures towards the responsible State.

3. Countermeasures shall, as far as possible, be taken in such a way as to permit the

resumption of performance of the obligations in question.”47

44
The Role of Proportionality in the Law of International Countermeasures, Enzo Cannizzaro,

12 European Journal of International Law (2001).

45
FYR Macedonia v, Greece, (2011) ICJ Rep 644, [164].
46
Lori Fisler Damrosch, Retaliation or Arbitration--Or Both? The 1978 United States-France

Aviation Dispute, 74 American Journal of International Law (1980).

47
Responsibility of States for Internationally Wrongful Acts, Art. 49.

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In the present situation, Midgard cannot be said to be responsible for an internationally

wrongful act because it has come to the court with clean hands. Midgard is also complying

with all its obligations; hence a countermeasure to induce Midgard to comply with its

obligations is not proper. Moreover, the actions by Atlantis are not taken in such a way as to

permit the resumption of performance of the obligations but in a way to end the scope of

negotiations.

A state adopting countermeasures must also fulfil certain procedural conditions. First of all,

the injured state must call on the target state to provide cessation or reparation (sommation).

The purpose of sommation is to give the target state an opportunity to review its conduct,

offer justifications or excuses if any exist and to comply with its obligations of cessation or

reparation.48 Additionally, the injured state must notify the target state of its decision to take

countermeasures and make an offer to negotiate with that state.49 In the present situation,

Midgard was not given any opportunity or notice to review its conduct and hence, it could not

comply with its obligations of cessation or reparation. It was not even notified by Atlantis that

countermeasures are being taken and no offer of negotiation was made.

At last, according to the theory of rights forfeiture, the legality of countermeasures derives

from the fact that the wrongdoing state has, by its conduct, forfeited the legal protection of its

rights. As a result, when the injured state adopts countermeasures against it, it does not breach

the target state’s rights since the target state has forfeited the law’s protection of those

rights.50 But since no wrong or illegal act has been done by Midgard, the question of a

countermeasure doesn’t even arise.

48
Supra 40.
49
Supra 40.
50
Supra 40.

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Hence, it can be noted that no illegal act has been performed by the State of Midgard and an

act as a response to a legal action may not count as a countermeasure. Atlantis has not

fulfilled the conditions required for a valid countermeasure to take place and the actions by

Atlantis are also wrong according to the theory of rights forfeiture.

2. The retaliatory actions by Atlantis were disproportionate

Proportionality is a core principle in international law, which provides that the legality of an

action shall be determined depending on the respect of the balance between the objective and

the means and methods used as well as the consequences of the action. This principle implies

an obligation to appreciate the context before deciding on the legality or the illegality of an

action.51

Countermeasures must, as reflected in Article 51 of the Articles on State Responsibility, be

proportionate, that is, “commensurate with the injury suffered, taking into account the gravity

of the internationally wrongful act and the rights in question.”52 The determination of

proportionality is both quantitative and qualitative and must take into account the injury

suffered, the gravity of the wrongful act and the rights in question (both those affected by the

prior wrong and those affected by the countermeasure), the type of measure adopted by the

injured state, degree of intensity and the purpose of the measure. Hence, it can be noted that a

countermeasure that is disproportionate to the injury suffered amounts to punishment or

51
On Proportionality of Countermeasures in International Law, Thomas M. Franck, 102 The

American Journal of International Law (2008).

52
Responsibility of States for Internationally Wrongful Acts, Art. 51.

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reprisal and is therefore contrary to the object and purpose of the law governing

countermeasures. Consequently, its wrongfulness is not precluded. 53

In the present situation, a balance has not been maintained between the methods used and the

consequences. Atlantis has taken a serious decision that effectively ended the air services

between Atlantis and Midgard which may have a profound impact on the relationship

between the two countries.54

Furthermore, it is said by Thomas M. Franck in “On Proportionality of Countermeasures in

International Law” that:

“In determining whether a countermeasure is proportionate, the first task is to examine

whether the initial provocation was unlawful. If it was not, the countermeasure, ipso facto,

would be disproportionate and unlawful. That, however, is not the end of the inquiry. Even if

the unlawfulness of the initial provocation can be demonstrated, that would not, by itself,

establish the proportionality, and, thus, the legality, of the response. Only if the provocation

is unlawful and the countermeasure is proportionate would its unlawfulness be cured. If a

response, even to an unlawful action, is disproportionate, it would be as unlawful as (or even

more unlawful than) the provocation itself”55

In the present case, the initial act of Midgard was lawful as it was entitled to suspend the

operational authorization in the event of failure of Atlantis to prove that Atlantis and its

nationals controlled the majority shares as well as had effective control over the airline.

Therefore, the actions of Atlantis were disproportionate and therefore unlawful.

53
Ibid.
54
Compromis, Para, 18.
55
Supra 40.

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At last, the International Court of Justice has pointed out that the principle ‘inadimplenti non

est adimplendum’ that has been translated by the yearbook of the International Law

Commission as “not being required to respect an obligation if the other party to the contract

did not respect its own”.56

The State of Atlantis, in complete contravention to the contractual obligations under the ASA,

contracted with a Dorado which is a hostile nation to Midgard. It is pointed out by Gerald

Fitzmaaurice in YILC57 that reciprocal treaties can be revoked in case of any fundamental

breach by the other party. As the ASA is reciprocal in nature, it can be said that Midgard is

not required to follow its obligations under the ASA and the retaliatory actions by Atlantis

were completely inappropriate.

Further, Atlantis was not entitled to take any retaliatory action as it was itself at wrong and it

is a settled principle of law that a party shall not be permitted to take advantage of its own

wrong.

56
ILC 1999 Vol 1.
57
Gerald Fitzmaurice, Second Report, YILC, 1957, vol II.

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SUBMISSIONS

May it please the Court, for the forgoing reasons, to adjudge and declare that:

1. Midgard is entitled to suspend Atlantis Airlines’ sales of tickets pending resolution of the

dispute, given the need for immediate action;

2. Midgard is entitled to revoke Atlantis Airlines’ operational authorization under Article 4

of the ASA;

3. Midgard followed the required procedure for consultation;

4. Atlantis’ retaliatory actions against Odin Airways were inappropriate, disproportionate

and unlawful.

And for this act of kindness the Respondent shall as duty bound ever humbly pray.

All of which is most respectfully submitted.

Place: The Hague, Netherlands Agents for the Respondent

-MEMORANDUM FOR THE RESPONDENT-