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Amended
MoU that sets the record straight
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By
Frederica Jansz
The
Memorandum of Understanding (MoU) signed between Emirates Airlines
and the Government of Sri Lanka (GOSL) has been amended in full by
Attorney General K. C. Kamalasabayson to the extent that it will
not override the 1998 shareholders agreement so as to give more
concessions to Emirates Airlines.
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K.C.
Kamalasabayson |
Charitha
Ratwatte |
Sheikh
Ahmed bin Saeed Al Maktoum |
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It
is to the government's credit it responded to public criticism and
decided to take a fresh look at the entire MoU and much credit also goes
to Attorney General Kamalasabayson for sticking to his principles.
Some
of the more significant changes in the amended MoU has removed the
monopoly enjoyed by SriLankan Catering (SLC) but ensured that SLC will
continue to pay its concession fees to Airport and Aviation Services
Limited Sri Lanka (AASL) until a second caterer is introduced.
The
amended MoU has also secured clauses for ground handling of cargo at the
airport both within and outside the terminal building to be open to
third parties.
Moreover,
any other local carriers in addition to SriLankan Airlines
may be licenced by the Director General Civil Aviation (DGCA) to
fly within the 'Initial Period' (ending in March next year) to any
destination whereby the
full bilateral allocations are not being utilised in full by SriLankan
Airlines.
Tripartite
agreement
The
amended MoU is now a tripartite agreement between the GOSL, SriLankan
Airlines Ltd., and Emirates
Airlines. The AG has changed the June 2, MoU signed by Treasury
Secretary Charitha Ratwatte and Chairman, Emirates Airlines, Sheikh
Ahmed bin Saeed Al Maktoum which had completely ignored SriLankan
Airlines as an entity and was signed only between the GOSL and
Chairman, Emirates Airlines.
With
regard to item 1. (a) the amended MoU states that with effect from July
31, 2003, until March 30, 2004, (which is termed as the "Initial
Period' in the original 1998 shareholders agreement) for the remainder
of this period Sri Lankan carriers in addition to the airline may be
licenced by the DGCA for scheduled international public air
transportation services pursuant to air navigation rules.
This
in effect means that other local carriers may be licenced to fly to
international destinations within the 'initial period' provided the full
bilateral agreements are not being utilised by SriLankan Airlines. For
instance, at present SriLankan has nine flights a week to the UK.
According to the present bilateral agreement between the GOSL and the
UK, Sri Lanka has an allocation of 14 frequencies per week.
SriLankan
Airlines plans to increase their operations to the UK by the end of this
year to 10 or 12 flights every week. Therefore, if the balance two or
four frequencies are not serviced by SriLankan, the government may
licence another local carrier to service the remaining frequencies.
At
present, SriLankan Airlines does not fly to Rome, Milan, Berlin,
Stockholm, Amsterdam and Beirut while US and Canadian destinations are
also not serviced although agreements do exist.
After
March 2004, the bilateral agreements may be re-negotiated. At this
instance SriLankan Airlines may not be given a monopoly of the
frequencies available to the government.
Clause
1, (a) of the June 2, MoU under the sub title 'The Investor' referring
to Emirates Airlines, stated, "with effect from 31st July 2003, and
for the then remainder of the Initial Period, Sri Lankan carriers in
addition to the airline may be licenced by the DGCA for passenger
services pursuant to the Air Navigation Rules, save in respect of the
following destinations (hereafter jointly the 'Destinations' and each a
'Destination') where the airline, subject as hereafter mentioned, will
be and remain for the Initial Period the sole holder of any licence
issued or issuable by the DGCA for passenger services pursuant to the
Air Navigation Rules, namely, the UK, Germany, France, Switzerland,
Italy, the GCC countries, India, Thailand, China/Hong Kong, Japan,
Malaysia, Singapore and the Maldives."
All
Middle Eastern destinations SriLankan Airlines flies to are included
which are Oman, UAE, Kuwait, Qatar, Bharain and Saudi Arabia.
This
clause in effect meant no other carrier could be given the licence to
fly to any of the above destinations. It must be noted here that these
are not just destinations but countries, SriLankan Airlines continues to
fly to.
Section
(i) under this same clause further states that for permission to be
granted to another carrier to fly a passenger service to any of the
above named destinations, it can be done so only if SriLankan airlines
does not operate to any such destination for a period of three years
from the date of this MoU.
This
clause in itself was a non-starter. For instance, this section is in
complete contradiction to item A (i) on page one of the MoU, which
states that the duration of the Initial Period of this MoU is until
March 31, 2004.
Monopoly
If,
SriLankan Airlines were to continue a monopoly of
its present operational destinations for another three years from
the date of this MoU, which was to be effected on July 31, 2003, then
this means the Initial Period referred to in the MoU is extended to
beyond March 31, 2004 until the year 2006.
The
AG has maintained that what is termed the 'Initial Period' shall not
exceed beyond March 2004.
Another
binding section (ii) under the same clause, added that in respect of
India as a destination, the two parties have agreed that SriLankan
Airlines must be assured of a continuous weekly capacity of 10,000 seats
as well as ensuring that Cochin and Hyderabad be designated and made
available as additional points in India to be served by the airline.
This clause has been completely deleted in the amended version of the
MoU.
With
regard to catering, Attorney General Kamalasabayson has maintained that
SriLankan Catering Services Limited will relinquish the exclusive right
to provide airline catering at the airport with effect from the day the
amended MoU is signed.
Also,
that third parties may undertake cargo handling at the airport with
effect from this year if the amended MoU is signed by the three parties
concerned.
Concession
fee
None
of these changes however shall be construed to relieve SriLankan
Airlines of any obligation or payment due to AASL including concession
fees as agreed in March 1998.
Chairman,
Airport & Aviation Services (Sri Lanka) Limited (AASL), Hemasiri
Fernando in a letter to the Secretary, Ministry of Transport, Highways
and Civil Aviation on June 9, 2003, had voiced concern that Sri Lankan
Catering (SLC) might refuse to pay the franchise fee under the clauses
of the June 2 MoU.
SLC
currently owes AASL Rs. 4.3 million per month, but would have continued
to enjoy the monopolistic situation until a second caterer is
introduced.
The
AG has determined however that irrespective of whether a second caterer
is now introduced, SriLankan Airlines will not be allowed to ignore its
payment of concession fee to AASL and such concessions will cease to
exist when the amended MoU is implemented.
The
AG has determined that the indemnity clause in the June 2 MoU can only
be amended to maintain that the GOSL will have no power to interfere
with parliamentary processes including functioning of select committees
of parliament acting under the parliamentary privileges act or the
functioning of the permanent commission to investigate allegations of
bribery and corruption. This is conditional to the fact that such
inquiry can be conducted only if there exists
prima facie evidence of a breach or misconduct by the investor.
With
regard to the open skies policy signed in the previous MoU solely with
Dubai, Kamalasabayson has amended to have an agreement with the Ministry
of Communication in the UAE.
In
this context His Excellency Mohamed Yahya Al Suweidi, assistant under
secretary for civil aviation of
the UAE will lead a delegation to Sri Lanka and is expected to
arrive on September 15th, in order to negotiate an open skies policy
with the Sri Lankan government.
Local
directors on the board of SriLankan Airlines meanwhile will continue to
retain executive functions as per the 1998 shareholders agreement.
The
AG has revoked the terms and conditions in the June 2 MoU which stated
that the GOSL directors shall exercise only non-executive functions in
relation to the airline and shall not involve themselves in the day to
day management of the airline.
The
million dollar question now is whether Emirates will agree to the
amended MoU?
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The
re-drafted MoU
This
memorandum of understanding is made the ..2003 at Colombo, Sri
Lanka.
Between
(1)
Charitha Ratwatte in his capacity as the Secretary to the
Treasury, acting for and on behalf of the government of the
Democratic Socialist Republic of Sri Lanka (hereinafter together
with its successors, the "GOSL")
And
(2)
SriLankan Airlines Ltd. a company incorporated under the
laws of Sri Lanka (the Airline)
And
(3)
Emirates, the international airline of the United Arab
Emirates, a corporation incorporated in the Emirate of Dubai,
United Arab Emirates (hereinafter together with its successors,
the "Investor")
Hereafter
each a "Party" and jointly the "Parties"
Whereas
A
Pursuant to various agreements, SriLankan Airlines Limited
(hereinafter the "Airline") or its subsidiary SriLankan
Catering Services Limited is entitled, amongst other concessions,
to the following concessions (hereinafter jointly the
"Concessions")
(i)
to be the sole holder of any Licence of the type issued to
a SriLankan air carrier for Passenger Services issued or issuable
by the DGCA pursuant to the Air Navigation Rules and to continue
to enjoy such status for the duration of the Initial Period (as
such capitalised expressions are 'defined in that shareholders'
agreement (hereafter the "Agreement") dated 30th March,
1998 and made between the GOSL (I), the Investor (2) and the
Airline (then known as "Air Lanka Limited")
(ii)
to be and remain the sole ground handling agent at
Bandaranaike International Airport, Colombo, Sri Lanka (hereafter
the "Airport") for the period of ten (10) years from 1st
April 1998; and
(iii)
to be and remain the exclusive provider of airline catering
at the Airport for the period of ten (10) years from 1st April
1998.
B.
The Investor is a shareholder in the Airline and in
accordance with the terms of the Agreement has the management of
the Airline until the Termination Date defined in the
Shareholders' Agreement dated 31 March 1998.
C.
The GOSL in furtherance of its economic policies has
requested the Investor to agree to certain relaxation in the
Concession and, subject as hereafter mentioned, the Investor is
willing to express the following understanding.
Now
this Memorandum of Understanding witnesseth as follows:
1.
The Investor
In
response to the request of the GOSL and subject as hereafter
mentioned, including the performance by the GOSL of the provisions
of paragraph 2 below, the Investor is willing to agree to the
following:
(a)
with effect from 31st July, 2003 and for the then remainder
of the Initial Period, SriLankan carriers in addition to the
Airline may be licensed by the DGCA for Scheduled International
Public Air Transportation Services pursuant to the Air Navigation
Rules, save in respect of the following destinations (hereafter
jointly the "Destinations" and each a
"Destination") where the Airline, subject as hereafter
mentioned, will be and remain for the Initial Period the sole
holder of any License issued or issuable by the DGCA for Scheduled
International Public Air Transportation Services pursuant to the
Air Navigation rules; namely, the UK, Germany, France,
Switzerland, Italy, the GCC countries, India, Thailand, China/Hong
Kong, Japan, Malaysia, Singapore and the Maldives.
(b)
Notwithstanding anything contained in the provisions of
item B 1. (Franchise Agreement for Catering) of the Side Letter
dated 30th March 1998 between the Airport and Aviation Services
Sri Lanka Ltd., (AASL) and the Airline with effect from....2003,
the Airline, through its subsidiary, SriLankan Catering Services
Limited, will relinquish the exclusive right to provide airline
catering at the Airport for the then remainder of the (10) years
period from 1st April 1998.
(c)
Notwithstanding anything contained in the provisions of
item A 1. (Ground Handling Franchise Agreement) of the Side Letter
dated 30th March 1998 between the Airport and Aviation Service Sri
Lanka Ltd (AASL) and the Airline, with effect from ......2003, the
third parties other than the Airline may undertake Cargo Handling
at the Airport.
(d)
Nothing in (b) and (c) above shall be deemed to be
construed to relieve the Airline of any obligation or payment due
to the AASL including concession fees as agreed in the Side Letter
dated 30th March 1998.
2.
The GOSL
In
consideration of the willingness expressed by the Investor in
paragraph 1 above, the GOSL is willing to agree to the following:
(a)
in furtherance of its economic policies, to establish
between the Government of UAE and the GOSL, through the relevant
Aeronautical Authorities, as quickly as possible.
(b)
Unless there exist prima facie evidence of a breach or
misconduct by the investor, to the extent that is lawful and
within its control, to cause to be withdrawn or cancelled any
enquiry, present or future by any public body into the acquisition
by the Investor of its shareholding in the Airline and/or its
management of the Airline, it being acknowledged and agreed by the
Parties that:
(i)
GOSL has no power to interfere with Parliamentary processes
including functioning of Select Committees of parliament acting
under the Parliamentary Privileges Act or the functioning of the
Permanent Commission to Investigate Allegations of Bribery and
Corruption:
(ii)
for the purposes of this provision, the expression
"Public body" excludes any court of law.
(c)
throughout the term of the Agreement to ensure that the
GOSL directors shall exercise only the functions in relation to
the Airline as set out in the Share Holders' Agreement and the
corresponding provisions in the Articles of Association of the
Airline the and shall not involve themselves in the day to day
management of the Airline; and
(d)
with immediate effect and henceforth for the remainder
period of the Shareholders' Agreement to indemnify the Investor,
the Airline, any concerned subsidiary of the Airline from any
claims by third parties including, without limitation, any
shareholders in or directors (past or present) nominated by the
GOSL to the board of directors of the Airline, arising from the
provisions of this Memorandum of Understanding and any action
taken in pursuance thereof.
3.
Further Action
The
Parties acknowledge that in order to make effective the provisions
of this Memorandum of Understanding a number of actions will have
to be taken and a number of agreements will have to be concluded
with various third parties including, without limitation, the
Airline and one or more of its subsidiaries, and that, absent such
actions and agreement's, the provisions of this Memorandum of
Understanding will not be fully effective and accordingly, subject
as herein mentioned, the Parties undertake on or before..., 2003
to take such actions and to negotiate, execute and deliver any and
all such agreements and any required further instruments and
documents as may be required in order to make fully effective the
previsions of this Memorandum of Understanding.
4.
General Provisions
(a)
the Parties acknowledge the terms of the Agreement, subject
to the provisions of this Memorandum of Understanding, and the
need to implement fully, subject as aforesaid, the obligations and
responsibilities of each Party to the other Party under the
Agreement.
(b)
Time shall be of the essence in the performance of this
Memorandum of Understanding.
(c)
The singular shall include the plural and vice versa:
(d)
The recitals form part of this Memorandum of Understanding.
(e)
The headings do not form part of and shall not be taken
into account in the interpretation or construction of this
Memorandum of Understanding.
(f)
If any provision or term of this Memorandum of
Understanding or any part thereof shall become or be declared
illegal, invalid or unenforceable for any reason whatsoever
including but without limitation by reason of the provision of any
legislation or other provisions having the force of law or by
reason of any decision of any Court or other body or authority
having jurisdiction over the Parties such terms or provisions
shall be divisible from this Memorandum of Understanding provided
always that if any such deletion substantially affects or alters
the commercial basis of this Memorandum of Understanding the
Parties shall negotiate in good faith to amend and modify the
provision and terms of this Memorandum of Understanding as may be
necessary or desirable in the circumstances.
(g)
The following provisions of the Agreement are, mutatis
mutandis, incorporated herein, namely, article 11.2 (Notices),
11.4 (Language), 11.9 (Announcements), 11.10 (Confidentiality),
11.11 (Costs and Expenses), 11.13 (Choice of Law), 11.14
(Arbitration) and 11.15 (Waiver of Sovereign Immunity).
In
Witness whereof this Memorandum of Understanding is executed and
delivered on the date first above mentioned.
Charitha
Ratwatte
Secretary
to the Treasury, acting for and on behalf of the Government of the
Democratic Socialist Republic of Sri Lanka.
Sheikh
Ahmed bin Saeed Al Maktoum Chairman, Emirates, acting for and on
behalf of Emirates, the International airline of the United Arab
Emirates
....acting
for and on behalf of SriLankan Airlines Ltd. |
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