I am Aria Zafeiri on behalf of the legal website analyseto.gr. In this interview we will discuss about Aviation Law and upcoming Brexit effects with Dr. Steven Truxal, Senior Lecturer at City University London and Programme Director of the LLM in International Business Law. The answers are a summary of the author and not a direct quote of the Professor.
A.Z.: Good evening Professor.
S.T.: Good evening.
Question: Competition among airline companies is considered to be very tough nowadays. Thereby, according to your opinion, does this situation result in violation of business ethics for the sake of profit or would you say that competition is irrelevant?
Answer: In my opinion, competition is really important especially in the airline industry which is a very highly competitive industry due to high entry/exit costs and the cost of the machinery. From my perspective, there is generally a culture which supports finding the best and the smartest way to make money. Yet, I do not find that there are necessarily unethical issues arising.
Nonetheless, should ethics be defined as anti-competitive behaviour then the US case could be examined. Based on my research experience, the US airline market was deregulated in 1978 while the respective EU market was civilized in the late 2000s. Although initially there were business strategies from the side of the US, the EU managed to catch up with that.
Question: As regards with anti-trust regulations, would you support that in the context of airline industry the US laws are substantially different from the EU ones? If they are, could you give us a review of their scope?
Answer: Regulators, law enforcement agencies, the European Commission and the US Department of Justice have adopted different views concerning the anti-trust behaviour which consists of competition laws whereby firms are anti-competitive and which therefore harm competition on a market.
In particular, the US is mainly focused on public interest. Moreover, it has an “ex-post” approach because action takes place in retrospect (in simple terms, it happens after the damage is done). On the contrary, the European rules are quite precise about the definitions of workable competition and consumer welfare.
Hence, there are evident dissimilarities since public interest is widely defined whereas consumer welfare is quite specific.
Overall, there are two different leading cultural aspects which impact on regulators in the way that regulators enforce US and EU competition law (anti-trust).
Question: Notwithstanding the Brexit, London remains the dominant financial centre in Europe. Are there any immediate challenges for British businesses in connection with the free movement of goods and services? From a legal aspect, what are your speculations about the future?
Answer: The tradition of Britain in the global economy should be taken into account in this case. Transportation industry for example constitutes part of the global economy. This is ascribable to the fact that it includes the airline, shipping and fishing industries which are transnational for they encourage moving across borders.
In particular, the UK position in the wider global economy is quite vague at the moment. Of course, no changes have taken place in terms of the law but in terms of the political landscape the UK airlines or shipping companies will more and more be regarded as UK rather than European players. Interestingly, that is a potential advantage for the UK in the short run.
Furthermore, to my opinion, the laws will require a bilateral negotiation between the UK and other countries to secure the right for UK based firms to do business elsewhere. Specifically in the airline industry this is crucial.
Question: In relation with the right of the UK to fly to sovereign countries such as Canada, do you believe that it will be called into question because of the Brexit? How would you evaluate oncoming circumstances?
Answer: Currently, the right of the UK to access Canada for instance is provided under the EU-Canada Multilateral Agreement on Air Services. Given Brexit, I estimate that the UK will be required either to attach itself to the EU Air Services Agreement with Canada or to negotiate a new agreement.
Besides, the EU and the US negotiated for 10 years the existing EU/US Open Skies Bilateral Agreement. In my view, this agreement would not have been achieved had the EU not been so large; a feature which rendered its bargaining position quite strong.
Conversely, the UK position compared to its US counterparts will be different because the former is a relatively small market. As a result, in the airline, fishing or shipping industry the UK will not have quite as strong of a voice as perhaps many would like to think.
Question: What is the impact of Brexit on business industry in the U.K.? More precisely, would there be any long and short term implications for the UK and international businesses and of course, the wider UK economy?
Answer: There is quite a lot of economic re-regulation which will need to happen. The UK will accept existing EU laws or it may review them. In any case, there is going to be quite a lot of work for regulators, policy makers and lawyers. Additionally, I expect that in that time of reworking, the legal landscape is likely to give weigh to some uncertainty for business which will probably impact on the UK economy in the short run.
Even more, the already existing conditions are not favourable given that the pound is quite weak, the prices of goods have risen hence there is significant inflation and salaries are not increasing at the same rage. By that means, consumers will feel squeezed and they may be in a worse position than before. In a longer term though, the situation will stabilise.
Nevertheless, there will not be further serious effects yet as far as consumers and business are concerned.
Lawyers in the UK on the other appear quite excited about the prospects and the possibilities that Brexit brings with regard to new business for them. On that account, I speculate that the legal field and the sectors of civil service, government and regulators will thrive.
Question: Greece’s ongoing sovereign debt crisis continues to affect growth in the Greek economy. A major public sector privatisation program and public sector restructuring is currently underway. UK consultants, law firms and auditors are already involved in the first phase of privatisations. Importantly, many UK companies are active in Greece including Vodafone, Dixons, Marks & Spencer, British Airways and Astra Zeneca, while around 35,000 British citizens live in Greece. Do you find that the tough circumstances in the Greek market have negative consequences in the business activity of the forenamed British companies?
Answer: Since the foresaid companies have assets and debts in another sovereign country then there is a risk exposure. Consequently, the involvement of UK companies in the Greek market has affected them.
Admittedly, that risk which they took on was at a time when the Euro was much weaker compared to the Pound. In that event, they have committed themselves to even more risk in general terms because of the exchange rate fluctuation. Thus, I assume that they are more exposed than they initially were.
Question: In the face of the new situation derived from Brexit, which repercussions are to be expected for British companies that have expanded their business activity in EU member states?
Answer: The Euro and the pound will continue to face challenges in the coming years. Perhaps after Brexit the UK is unlikely to have any influence on the direction of the European Union with respect to future management of bailouts and financial issues. On that analysis, the UK companies which are exposed to the risk under the EU mechanism will not be able to be protected by the UK regulator.
Still, the Brexit will not influence a private company’s decision to invest in markets within the EU. Certainly though these companies will have to consider whether there will be extra costs or whether it will be possible to employ British people at the management.
A.Z.: I wish to sincerely thank you for your time.
S.T.: Thank you too.