Team 21 Respondent Memorial PDF

THE INTERNATIONAL AIR LAW MOOT COURT COMPETITION 2017
CASE CONCERNING THE STATE SUBSIDIES TO AIRLINES
THE STATE OF LILLIPUT V. THE STATE OF BLEFUSCU
MEMORIAL SUBMITTED ON BEHALF OF THE STATE OF BLEFUSCU
TEAM NUMBER 21- RESPONDENT

i
TABLE OF CONTENTS

LIST OF ABBREVIATIONS ................................................................................................. iv
LIST OF SOURCES ............................................................................................................... vi

A. INTERNATIONAL CONVENTIONS ...................................................................... vi
B. JUDICIAL DECISIONS ............................................................................................. vi
1. International Court of Justice ..................................................................................... vi
2. Permanent Court of International Justice ................................................................... vi
3. National Decisions..................................................................................................... vii
C. DOCUMENTS OF INTERNATIONAL ORGANIZATIONS AND
ASSOCIATIONS ................................................................................................................ vii
D. ARTICLES AND BOOKS ......................................................................................... vii
1. Articles ...................................................................................................................... vii
2. Books ......................................................................................................................... vii
3. OTHER SOURCES ........................................................ Error! Bookmark not defined.
STATEMENT OF RELEVANT FACTS ............................................................................ viii

A. INTRODUCTION ..................................................................................................... viii
B. THE FACTS RELEVANT ....................................................................................... viii
QUESTIONS PRESENTED .................................................................................................... xii
SUMMARY OF ARGUMENTS ............................................................................................ xiii
JURISDICTION OF THE COURT ......................................................................................... xv
ARGUMENTS .......................................................................................................................... 1
A. THE STATE OF LILLIPUT’S FINANCIAL CONTRIBUTIONS TO
ADVENTURE AIRLINES PROVIDES AN UNFAIR COMPETITIVE
ADVANTAGE IN VIOLATION OF ARTICLE 6 (FAIR COMPETITION) OF THE
ASA. ....................................................................................................................................... 1
1. Financial contribution (subsidies) to Adventure Airlines by the State of Lilliput
provides an unfair competitive advantage. ......................................................................... 1
ii
i. The State of Lilliput is liable under Article 2 of Blefuscu Regulation 1:12 for
providing subsidies to Adventure Airlines, with its financial grants in the present
dispute. ........................................................................................................................... 1
ii. Wikileak’s dumping of official communiqué provides information of grant of
subsidies by the State of Lilliput to its designated airlines. ........................................... 1
2. Financial Contributions by State of Lilliput to Adventure Airways is in violation to
Art.6 of ASA ...................................................................................................................... 3
3. The contributions made by State of Lilliput towards Adventure Airlines are not
solely to meet the needs of the catastrophic times and economic turmoil, as it claims. .... 4
B. BLEFUSCU’S REGULATION 1:12 IS A PERMISSIBLE EXERCISE OF
REGULATORY AUTHORITY UNDER INTERNATIONAL LAW BECAUSE OF
THE CONSEQUENCES OF LILLIPUT’S ILLEGAL SUBSIDIES ON THE
MARKET FOR FLIGHTS FROM LILLIPUT TO BLEFUSCU. .................................. 5
1. The State of Blefuscu has the jurisdiction under regulatory authority granted by
International law to institute Regulation 1:12. ................................................................... 5
2. The effects doctrine allows Blefuscu to legislate on acts conducted outside the
territorial limits of Blefuscu but having an effect within the State of Blefuscu................. 7
i. The applicability of the ‘effects’ doctrine ................................................................ 7
ii. Widespread acceptance in the United States ........................................................... 7
iii. Precedential examination of U.S. Cases. Governing Effects Doctrine................... 7
C. BLEFUSCU’S ACTIONS IN REVOKING THE OPERATING AUTHORITY
WERE CONSISTENT WITH ARTICLE 4 (REVOCATION AND SUSPENSION OF
AUTHORIZATION) OF THE ASA. .................................................................................. 9
1. Swift Airways was unsuccessful in proving that the majority ownership and effective
control of Swift Airways in terms of Article 4 (Revocation and Suspension of
Authorization) of the bilateral ASA, and hence the revocation of operating authority. .... 9
i. Stake Sale of Swift Airways to Laputo Airlines necessitated investigation. ......... 10
ii. Swift Airways’ sale agreement was in violation of the “nationality” clause. ....... 10
i. “Nationality” clause and its widespread international acceptance. ........................ 11
ii. Blefuscu’s action is to prevent a non-Party State through its carrier from gaining,
indirectly an unreciprocated (“free rider”) benefit. ...................................................... 12
2. Majority Ownership ‘AND’ effective control- Fulfillment of both conditions. ....... 13
D. BLEFUSCU IS JUSTIFIED IN REVOKING THE OPERATING AUTHORITY
OF SWIFT AIRWAYS AS IT DERIVES AN UNFAIR COMPETITIVE
iii
ADVANTAGE FROM THE RECEIPT OF STATE SUBSIDIES, EVEN IF THOSE

SUBSIDIES DO NOT COME DIRECTLY FROM THE STATE OF LILLIPUT. .... 15
1. Factual Analysis validates the claim of Swift Airways’ receipt of indirect ‘State
Subsidies’ from the Lilliputian government..................................................................... 16
i. Governmental ‘support’ exists towards Swift Airways.......................................... 16
ii. The sale of a 49 percent stake of Swift Airways to Laputo Airlines is not purely a
commercial transaction as the State of Lilliput ‘promoted the negotiations.’ ............. 16
2. The State of Lilliput’s ‘support’ in promoting the negotiations of the successful deal
can be classified as ‘indirect’ subsidy. ............................................................................. 17
i. Nomenclature of a ‘subsidy’ .................................................................................. 17
ii. Legitimate exercise of Regulation 1:12 and revoking the operating authority by
due process of law ........................................................................................................ 18
E. LILLIUT’S RETALIATORY ACTIONS AGAINST BLEFUSCU’S AIRLINES
ARE LEGALLY INAPPROPRIATE UNDER INTERNATIONAL LAW.................. 19
1. Lilliput’s action towards excluding all Blefuscudian carriers from operating to, from,
or within Lilliputian airspace may be a valid “counter-measure” under international law,
yet the move has a massive ‘procedural lapse’ as both parties are signatories to the
VCLT, 1969 and legal recourse holding validity, would have been under the VCLT. ... 19
i. General international law does not prohibit countermeasures. .............................. 19
ii. The counter-measure imposed is not in conformity with Part III of Responsibility
of States for Internationally Wrongful Acts, 2001 and previous ICJ Pronouncements.
20
iii. The countermeasure and the doctrine of ‘proportionality’ ................................... 21
2. Relevance of the Air Services Agreement Arbitration case in the present dispute. .. 21
i. The answer to the second question by the Arbitration Tribunal ............................ 22
ii. The similarity of the actions to the present dispute, yet a crucial “divergence”
persists. ......................................................................................................................... 23
iii. Since both States of Lilliput and Blefuscu are parties to the VCLT, 1969;
Lilliput’s recourse lay under Art. 60 of the VCLT. ..................................................... 24
SUBMISSIONS ....................................................................................................................... 25
iv
LIST OF ABBREVIATIONS

Art. Article
ALJ Administrative Law Judge

ASA Air Services Agreement
ATCONF Worldwide Air Transport Conference
CAA Civil Aeronautics Authority
C.A.B Civil Aeronautics Board
CAAB Civil Aviation Authority of Blefuscu
Chicago Convention 1944 Convention on International Civil Aviation
Compromis Statement of Agreed Facts
Designated Airlines Adventure Airlines and Swift Airways collectively
DOT Department of Transportation
Dissent. Dissenting
Draft Articles 2001 Draft Articles on Responsibility of States for
Internationally Wrongful Acts
GATS 1994 General Agreement on Trade in Services, Marrakesh
Agreement Establishing the World Trade Organization, Annex
1B
IASTA International Air Services Transit Agreement
ICAO International Civil Aviation Organization
ICAO Doc International Civil Aviation Organization document
ICJ International Court of Justice
ILC International Law Commission
Op. Opinion
p. Page
pp. Pages
Para. Paragraph
Paras. Paragraphs
PCIJ Permanent Court of International Justice
RIAA Reports of International Arbitral Awards
SCM Agreement 1994 Agreement on Subsidies and Countervailing Measures,
Marrakesh Agreement Establishing the World Trade
Organization, Annex 1A, 1869 U.N.T.S. 14
v
U.A.E. United Arab Emirates

U.N. United Nations
U.N. Charter 1945 United Nations Charter
U.N. Doc United Nations Document
U.N.G.A. United Nations General Assembly
U.N.G.A. Res United Nations General Assembly Resolution
U.N.T.S. United Nations Treaty Series
U.S. United States
VCLT 1969 Vienna Convention on the Law of Treaties
Vol. Volume
WTO World Trade Organization
YBILC Year Book of the International Law Commission
vi
LIST OF SOURCES
A. INTERNATIONAL CONVENTIONS
Charter of the United Nations (adopted 26 June 1945, entered into force 24 October
1945) (UN Charter)
Statute of the International Court of Justice (adopted 26 June 1945, entered into force
24 October 1945)
Convention on International Civil Aviation (adopted 7 December 1944, entered into
force 4 April 1947) 15 U.N.T.S. 295 (Chicago Convention)
Vienna Convention on the Law of Treaties (adopted 23 May 1969, entered into force
27 January 1980) 1155 U.N.T.S. 331 (VCLT)
Responsibility of States for Internationally Wrongful Acts 2001, annex to U.N.G.A.
Res. 56/83 of 12 December 2001.
B. JUDICIAL DECISIONS
1. International Court of Justice

Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v Belgium ) [2002]
ICJ Reports 3, Separate Opinion of President Guillaume.
Gabčikovo-Nagymaros Project (Hungary/Slovakia), Judgment, I.C.J. Reports [1997]
Nicaragua case, Case concerning Military and Para-Military activities in and against
Nicaragua v. USA, (1986) ICJ Rep 14.
Barcelona Traction, Light and Power Co. Case (Belgium v Spain) [1970] ICJ Reports 3,
[78]
2. Permanent Court of International Justice

Mavrommatis Palestine Concessions Case (1924) PCIJ Series A, No. 2, 12.
Factory at Chorzow (1928) PCIJ Series A, No.17;
Panevezys-Saldutiskis Railway Case (1939) PCIJ Series A/B, No.76.

vii
3. International Arbitral Tribunal

Arbitral Award of 9 December 1978 in the case concerning the Air Services
Agreement of 27 March 1946 between the United States of America and France,
United Nations, Reports of International Arbitral Awards (RIAA), Vol. XVIII
4. National Decisions
United States v. Aluminium Co. of America, 148 F.2d 416 (2nd Cir. 1945)

C. DOCUMENTS OF INTERNATIONAL ORGANIZATIONS AND
ASSOCIATIONS
ICAO Working Paper on the Liberalization of Air Carrier Ownership and Control,
Worldwide Air Transport Conference (ATCONF) Sixth Meeting, Montréal, 18 to 22
March 2013, ATConf/6-WP/12.
Worldwide Air Transport Conference (ATCONF) Sixth Meeting, Montréal, 18 to 22
March 2013, ATConf/6-WP/12.
D. ARTICLES AND BOOKS
1. Articles
Austen Parrish, ‘The Effects Test: Extraterritoriality’s Fifth Business’ (2008) 61
Vanderbilt Law Review 1455.
Darren Bush & Carrie Mayne, In (Reluctant) Defense of Enron: Why Bad Regulation
Is to Blame for California’s Power Woes (or Why Antitrust Law Fails to Protect Against
Market Power When the Market Rules Encourage Its Use), 83 Or. L. Rev. 207 (2004)
Najeeb Samie , The Doctrine of "Effects" and the Extraterritorial Application of Antitrust
Laws, Lawyer of the Americas, Vol. 14, No. 1 (Spring, 1982
2. Books
Ruwantissa Abeyratne, Competition and Investment in Air Transport- Legal and
Economic Issues (Springer International Publishing 2016)
viii
STATEMENT OF RELEVANT FACTS
A. INTRODUCTION
The present dispute before the Hon’ble International Court of Justice (hereinafter
“ICJ”) stems from numerous issues between the State of Lilliput (the “Applicant”) and
the State of Blefuscu (the “Respondent”) based on the bilateral Air Services
Agreement (hereinafter the “ASA”) and refers to the arising differentiations between
the above said Parties concerning ‘State Subsidies to Airlines’.
B. THE FACTS RELEVANT

1) Civil Aviation between Lilliput and Blefuscu
Civil Aviation between the State of Lilliput and the State of Blefuscu is currently
regulated by a bilateral ASA, negotiated and duly signed between the Parties on 23
July 2010 and has been operative since 1 September 2010.
In pursuance of the ASA, the Applicant has designated two airlines to commence and
operate the agreed bilateral international air services between the Applicant State and
the Respondent State as follows:
a. Adventure Airlines
Timeline Ownership and Control Status of
Airline
100 per cent publicly owned by the
2010-2014 State of Lilliput. Official State
100 per cent owned by a ‘not-for- Carrier of
profit’ government corporation Lilliput
2014- Till Date established by the State of Lilliput.
b. Swift Airways
Timeline Ownership and Control
100 per cent privately owned by nationals of
Lilliput, with a majority stake owned by a
2010- 2014 Lilliputian conglomerate heavily invested in
mining interest.
ix
• 49 per cent stake of Swift Airways was

sold to Laputo Airlines, while the
nationals of Lilliput own the remaining
51 per cent shares.
• As part of the Sale Agreement, Laputo
Airlines has been given the right to
2014-Till Date select Swift Airways’ Chief Executive
and to appoint majority members of
Swift members of Swift Airways’
Board of Directors.
• Laputo Airlines has a veto over route
expansion by Swift Airways.
• Swift Airways retains its own distinct
branding and corporate headquarters in
Lilliput.
2) Lilliput devastated by natural disasters and a failed coup attempt

Spring 2014 Lilliput devastated by a series of natural disasters such as
massive wildfires destroyed crops. Government’s attempts at
neutralizing such damage by diverting a nearby river lead to
extensive flooding and a health epidemic ensued
Summer 2014 With natural disasters subsiding, the State of Lilliput faced an
imminent threat from an impending coup by the Big-Endians, a
religious minority in Lilliput. Such press reports accelerated the
flight of foreign capital from the Lilliputian economy, further
damaging a battered economy.
September 2014 The Government of Lilliput publicly declared it had retaken
control and suppressed the attempted coup. It also announced
that it had taken emergency economic measures to recapitalize
many of Lilliput’s struggling industries and to restore
confidence to the economy.
x
3) Blefuscu’s Regulation 1:12 and Consequent Complications
[3.1. Passing of Blefuscu Regulation 1:12]

In 2012, Blefuscu passed regulation 1:12 giving its administrative authorities, inter
alia the Civil Aviation Authority of Blefuscu (hereinafter, the “CAAB”) sweeping
powers to address illicit state subsidization of foreign air services.
[3.2. Wikileaks’ Release of Mail Communiqué]

In April 2015, Wikileaks released a trove of internal communications by the
Lilliputian government containing details about the period surrounding the coup,
which went onto reveal the following:
i. That Adventure Airlines had sustained $ 28 million worth of losses till late
September 2014.
ii. That the Lilliputian Government also forgave Adventure Airlines for $7
million in debts to the State of Lilliput owed for unpaid charges and taxes.
iii. That Adventure Airlines and Swift Airways (hereinafter, the “designated
airlines”) was restructured in the manner, aforementioned above under Clause
(1) in 2014, under instructions of the Lilliputian Government.
[3.3. Investigation of Lilliput’s designated airlines by CAAB]

In April 2015, based on the Wikileaks’ e-mails release, CAAB issued notices to the
designated airlines of the Applicant State, stating initiation of investigation upon
suspicion that the designated airlines had unfairly benefitted from the receipt of State
subsidies.
[3.4. CAAB declares findings of its investigation]

In July 2015, CAAB declared the findings of its investigation, stating both designated
airlines to have derived an unfair competitive advantage from the receipt of the State
Subsidies, however, without any evidence of unfair pricing practices. Pertinent to note
that the rates charged by the designated airlines and Blefuscu’s carriers flights were in
line with market conditions and competitive with each other.
xi
[3.5. CAAB rescinds operating authority of Lilliputs’ designated airlines]

Both States immediately commenced consultations under the bilateral ASA. Having
failed to reach a satisfactory resolution thereafter, in August 2015, the CAAB
exercised its authority under Regulation 1:12 and rescinded the operating authority of
both the designated airlines to fly on routes originating and terminating from Blefuscu.
Upon Lilliput’s objection to the stated action by Blefuscu, which were negated by
Blefuscu, stating it was acting in pursuance of its rights under the ASA.
[3.6. Lilliput imposes counter-measures]

The State of Lilliput thereafter, upon lawful exercise of its general international law
rights of “self-help, tu quoque and lawful retaliation’, barred all Blefuscudian carriers
from operating to, from or within the Lilliputian airspace. Such an announcement was
through a Presidential decree and did not refer to the bilateral ASA or any other
Treaty.
[3.7. Matter submitted to the ICJ, post failed negotiations]

In September 2015, the States entered yet again into bilateral negotiations over their
competing interpretations of the ASA, the revocation of operating authority of
Lilliput’s designated airlines as well as the financial history of Lilliput’s Airlines.
However, after six months of unsuccessful negotiations, both States have now agreed
to bring their dispute before the International Court of Justice, by way of this
Compromis.
xii
QUESTIONS PRESENTED
The State of Blefuscu will argue the following contentions:
a. Have Lilliput’s contributions to Adventure Airlines provided an unfair
competitive advantage in violation of Article 6 (Fair Competition) of the ASA?
b. Whether Blefuscu’s Regulation 1:12 is a permissible exercise of regulatory
authority under international law, because of the consequences of Lilliput’s
illegal subsidies on the market for flights from Lilliput to Blefuscu?
c. Whether Blefuscu’s action, in revoking the operating authority of Lilliput’s
two designated airlines, was consistent with Article 4 (Revocation and
Suspension of Authorization) of the ASA?
d. Whether Blefuscu’s action in revoking the operating authority of Swift
Airways was legal, as Swift Airways derives an unfair competitive advantage
from the receipt of State subsidies ‘indirectly’?
e. Whether the retaliatory measures imposed on the Blefuscudian carriers by the
State of Lilliput legally appropriate under international law?

xiii
SUMMARY OF ARGUMENTS
The bilateral AIR SERVICES AGREEMENT (“ASA”) executed between the

GOVERNMENT OF THE STATE OF LILLIPUT and the GOVERNMENT OF THE STATE
OF BLEFUSCU, signed on 23 July 2010, and in force since 1 September 2010 grants
designated airlines of both Contracting Parties, to international civil air rights between the
two States. Since both parties are signatories to the 1969 Vienna Convention of the Law of
Treaties, the Court should strive to apply its provisions in a manner that is consistent with
similar provisions of international law, in resolving the competing ‘interpretations’ arising out
this ASA by both Parties, in the present dispute.
The State of Blefuscu will first show that the State of Lilliput’s financial contributions
to Adventure Airlines amounted to illicit state subsidization of the concerned airlines, and the
CAAB, the regulatory authority of civil aviation in Blefuscu, was empowered to take
necessary action under Blefuscu’s Regulation 1:12. Furthermore, this action directly
contravenes Article 5 of the bilateral ASA between the parties and thus, the State of Lilliput is
guilty of violating the same. Lastly, the 1944 Chicago Convention itself allows any action in
case of war and emergency under Article 89, the State of Lilliput was not facing such a
situation and hence, the Applicant cannot seek an exemption from liability under the same.
Second, the State of Blefuscu, shall proceed to show that Blefuscu’s Regulation 1:12
is not impermissibly ‘extraterritorial’ in effect as international law, allows the requisite
regulatory authority to institute such a legislation. Moreover under the recognized principle of
“effects doctrine”, The State of Blefuscu was empowered under the doctrine, as the effects of
such subsidization of the designated airlines of the State of Lilliput had the potential to affect
the Blefuscudian economy in the long run.
Next, the State of Lilliput, shall assert that Blefuscu did not act unilaterally in
revoking the operating authorizations of Swift Airways of the State of Lilliput. Swift Airways
was unable to prove majority ownership as well as effective control, vested in the nationals of
Lilliput as per the widespread acceptance of the ‘nationality’ clause. Since, the stake sale of
Swift Airways, had the potential of granting non-Party “free-rider” benefits to Laputo
Airlines, which was not a Party to the bilateral ASA between the States of Lilliput and
Blefuscu, the action taken in rveoking the operating authority of Swift Airways, in operating
xiv
flights between Lilliput and Blefuscu, was in pursuance of Article 4 of the bilateral ASA.
Thus, the State of Blefuscu shall prove that its actions were consistent with Article 4 of the
bilateral ASA.
Fourth, the State of Lilliput will prove that Swift Airways received financial
contribution from the State of Lilliput. Lilliput’s role was not only limited to finding
interested parties to the sale, but also promoting the negotiations of the same with Laputo
Airlines. This engagement on the part of the State of Lilliput can be termed as indirect
influence, and hence Swift Airways is also in receipt of State Subsidies, albeit indirectly
through its stale stake to Laputo Airlines, promoted by the State of Lilliput.
Lastly, the State of Lilliput will prove that its retaliatory actions of imposing countermeasures
on designated Airlines of Blefuscu and excluding the said carriers from Lilliputian airspace, is
consistent with the general law on countermeasures but not with the customary international
law on treaties. Both the States of Lilliput and Blefuscu, are members to the 1969 Vienna
Convention of Law of Treaties. If indeed, the State of Lilliput was aggrieved with Blefuscu’s
actions on the designated airlines of Lilliput, it would have been termed as a breach under the
bilateral ASA. Therefater, it could have either suspended or terminated the ASA, which the
State of Lilliput chose not to do. And hence, Lilliput’s retaliatory actions are legally
inappropriate under international law.
xv
JURISDICTION OF THE COURT

The State of Blefuscu claims that the International Court of Justice has the requisite
jurisdiction over the current dispute involving the matter of state subsidies to airlines, that has
arose between the State of Lilliput and the State of Blefuscu. The Respondent invokes the
Jurisdiction of this Court in pursuance of Article 36 (1) of the Statute of the International
Court of Justice. Art. 36 (1) of the Statute, which reads:
“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.”
This particular jurisdiction derives its conformity from the Court’s established practice,
wherein a Special Agreement (Compromis) between the Applicant and the Respondent, is
brought before the ICJ for the adjudication of the dispute. Such Special Agreements, have
been agreed in many cases and adjudicated by this Court, inter alia as in the Asylum case
(Colombia v. Peru), 1950, The North Sea Continental Shelf cases (Federal Republic of
Germany v. Denmark, Federal Republic of Germany/ Netherlands), 1968, the Gabčíkovo-
Nagymaros Project case (Hungary/Slovakia), 1997. Thus, the present matter before the Court
is based upon two aspects requiring adjudication: first, the legality of the competing actions of
each of the States party to this dispute; second, the contending interpretations of the bilateral
ASA signed between the disputing States.
Lastly, Art. 14 (2) of the ASA envisages any disagreement between its Contracting Parties,
may at the request of either Party, be submitted for decision to the ICJ, post failure to reach
settlement by negotiation, as in this matter. Thus, as per Art. 14 (3) of the ASA, the State of
Blefuscu, the Respondent in the present dispute, undertakes to comply with any decision of
the ICJ given under Art. 14 (2) of the ASA.

1
ARGUMENTS
A. THE STATE OF LILLIPUT’S FINANCIAL CONTRIBUTIONS TO

ADVENTURE AIRLINES PROVIDES AN UNFAIR COMPETITIVE
ADVANTAGE IN VIOLATION OF ARTICLE 6 (FAIR COMPETITION) OF
THE ASA.
1. Financial contribution (subsidies) to Adventure Airlines by the State of Lilliput

provides an unfair competitive advantage.
i. The State of Lilliput is liable under Article 2 of Blefuscu Regulation 1:12 for providing
subsidies to Adventure Airlines, with its financial grants in the present dispute.
Article 2 of Blefuscudian Regulation 1:12 defines subsidies and what constitutes a
subsidy.1 It’s primary purpose is to deal with ‘illicit’ State subsidies provide by other
States’ to their designated airlines, which holds the potential to distort the competitive
market regime.
ii. Wikileak’s dumping of official communiqué provides information of grant of subsidies

by the State of Lilliput to its designated airlines.
In April 2015, Wikileaks released a trove of internal communications by the Lilliputian
government containing details about the period surrounding the coup. The e-mails
revealed that Adventure Airlines had sustained 28 million U.S. dollars’ worth of losses to
that point in 2014.2 According to the e-mails, subsidies were provided in form of by the
government of Lilliput. Furthermore, in July 2015, the CAAB released the result of its
investigation, finding that Adventure Airlines had received State subsidies, and to have
derived an unfair competitive advantage therefrom.3 The State of Lilliput is guilty of
violating Blefucudian Regulation 1:12 on two counts:
Firstly, in form of forgiving $USD 7 million in debts to the State of Lilliput owed for
unpaid airport charges and taxes 4 , which falls under the Art. 2(1)(ii) of Blefuscu’s

1
Annex 2 to the Compromis.
2
Compromis, Paras. 11 and 12.
3
Compromis, Para. 21.
4
2
Regulation 1:125. Such bailout market intervention, as in this particular case of Adventure
Airlines, gives a competitive advantage to the recipients and other market participants are
left particularly weak.6
Secondly, infusion of $USD 100 million in the not-for-profit corporation which manages
and operates Adventure Airlines to this day7, is clearly granting of subsidies under Art.
2(1)(i) of Regulation 1:128.
Thirdly, creation of such an not-for-profit government corporation with 100 percent of the
shares of Adventure Airlines, which continues to manage and operate Adventure Airlines
to this day9, clearly fall under the definition of subsidies given in Art. 2(1)(iv)10.
The European Commission has recently opened, a similar series of in-depth investigations,
as done by the State of Blefuscu, into cases of potential state aid to airlines from regional
airports in several EU Member States. The concern is that airlines receiving such aid
obtain an undue economic advantage that competitors do not enjoy, thereby distorting
competition within the EU single aviation market.11
iii. Adventure Airways is violative of Art. 3 of Blefuscudian Regulation 1:12 as it derives

benefit from a non-commercial advantage.12

5
The Art. 2 defines subsidies as - “a financial contribution by a government or regional body
or other public organization, that is to say, where - (ii) revenue of a government or regional
body or other public organization that is otherwise due is foregone or not collected;
6
Financial Regulatory Reform: A New Foundation or More of the Same?, 22 Loy. Consumer
L. Rev. 233, 236 (2009); James B. Stewart, Eight Days: The Battle to Save the American
Financial System, New Yorker, Sept. 21, 2009, at 74.
7
Compromis, Para 14.
8
The Art. 2 defines subsidies as - “a financial contribution by a government or regional body
or other public organization, that is to say, where - i) a practice of a government or regional
body or other public organization involves a direct transfer of funds such as grants, loans or
equity infusion, potential direct transfer of funds to the company or the assumption of
liabilities of the company such as loan guarantees
9
Compromis, Para 14
10
The Art. 2 defines subsidies as - “a financial contribution by a government or regional
body or other public organization, that is to say, where - (iv) a government or regional body
or other public organization makes payments to a funding mechanism or entrusts or directs a
private body to carry out one or more of the type of functions illustrated under (i), (ii) and
(iii) which would normally be vested in the government and, in practice, in no real sense
differs from practices normally followed by governments;
11
<http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52012DC0556>
Accessed on 1 December, 2016.
12
Art. 3 (Unfair Pricing Practices) - Unfair pricing practices shall be deemed to exist on a
particular air service to or from Blefuscu where foreign air carriers
(a)benefit from a non-commercial advantage, and
3
Markets are competitive in general, irrespective of the number of competitors in the

market, and in cases of large markets, such as in the present dispute before the Court;
selective bailouts can cause immense imbalances. 13 Even after sustaining $USD 28
million worth of losses to that point in 201414 the Adventure Airlines is able to preform in
the same market prices, due to the subsidies. Therefore, the subsidies received have given
Adventure Airlines benefit from a non-commercial advantage.15 Thus, it is pleaded that
Adventure Airlines has received subsides from the Government of Lilliput and has
received unfair market advantage.
2. Financial Contributions by State of Lilliput to Adventure Airways is in violation

to Art.616 of ASA
The ASA states 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” 17 and “Each Contracting Party shall take all appropriate
action within its jurisdiction to eliminate all forms of discrimination or unfair competitive
practices adversely affecting the competitive position of a Designated Airline of the other
Contracting Party.”18
The State of Lilliput has violated the Art. 6 of ASA by forgoing of debts and infusing capital,
as these provide Adventure Airlines an unfair advantage over the other airways and thus
violating the conditions of Fair Competition.

(b)charge air fares which are sufficiently below those offered by competing Blefuscudian air
carriers to cause injury.
13
54 Herbert Hovenkamp, Antitrust Policy After Chicago, 84 Mich. L. Rev. 213, 226-227
(1985).
14
15
Art. 3 of Blefuscu Regulation, Annex to Compromis.
16
Art. 6 of bilateral ASA- 1. 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.
2. Each Contracting Party shall take all appropriate action within its jurisdiction to eliminate
all forms of discrimination or unfair competitive practices adversely affecting the competitive
position of a Designated Airline of the other Contracting Party.
17
Art. 6 (1) of bilateral ASA.
18 Art. 6 (2) of bilateral ASA.
4
Furthermore, in the opinion of the International Civil Aviation Organization (ICAO)19, each
party would: “a) recognize that State aids/subsidies which confer financial benefits on a
national carrier or air carriers that are not available to competitors in the same
international markets can distort trade in international air services and can constitute or
support unfair competitive practices; and b) accordingly, agree to take transparent and
effective measures to ensure that its State aids/subsidies to certain air carriers do not
adversely impact on other competing air carriers.” The contribution that Adventure Airlines
was privileged to have, were not available to the designated airlines in Blefuscu and this has
led to distortion in the trade which violated the conditions of fair competition. Thus, financial
contribution made by the State of Lilliput is in flagrant violation of Art. 6 of ASA, as it is
responsible for creating distortive market competition.
3. The contributions made by State of Lilliput towards Adventure Airlines are not
solely to meet the needs of the catastrophic times and economic turmoil, as it
claims.
The State of Lilliput has been going through tumultuous times and catastrophic situations,
which has made it an ailing economy. The economy has suffered a lot for which the
government has called for remedial means to revive the nation. The Art. 89 of the 1944
Chicago Convention also states that such contribution measures are only allowed against
“war and emergency conditions” 20 , which is not applicable in this case. Moreover,
Adventure Airlines’ reported debts were partially accrued prior to the onset of the
Economic emergency caused by the natural disasters and political unrest, and significantly
increased during that period. A precise accounting is unavailable. It is uncertain whether
Adventure Airlines would have been able to continue operations absent the emergency

19
Policy and Guidance Manual on Economic Regulation of International Air Transport (Doc
9587), Part 8, Third Volume,
<http://www.icao.int/Meetings/atconf6/Documents/Doc%209587_en.pdf>, accessed on 1
December, 2016.
20
Chicago Convention, Art. 89: War and emergency conditions - In case of war, the
provisions of this Convention shall not affect the freedom of action of any of the contracting
States affected, whether as belligerents or as neutrals. The same principle shall apply in the
case of any contracting State, which declares a state of national emergency and notifies the
fact to the Council.
5
measures which took place in the months immediately following the end of the coup
attempt.21
Government subsidy as a justifiable ground to avert economic crisis poses a problem, while
a crisis may likely recur in a particular industry, it is not likely that the cause of the crisis
will be the same. The only strategically correct step is a discussion of economic
examination of the ex-ante regulation of failed markets and the economy as a
whole.22Therefore, it is pleaded that the contributions made by the State of Lilliput to the
Adventure Airlines clearly amounts to granting of subsidies and results in distortion of
market competition and creation of unfair advantage for the recipient, thus the State of
Lilliput liable for violation of Art.6 (Fair Competition) of the bilateral ASA.
B. BLEFUSCU’S REGULATION 1:12 IS A PERMISSIBLE EXERCISE OF

REGULATORY AUTHORITY UNDER INTERNATIONAL LAW BECAUSE
OF THE CONSEQUENCES OF LILLIPUT’S ILLEGAL SUBSIDIES ON THE
MARKET FOR FLIGHTS FROM LILLIPUT TO BLEFUSCU.
1. The State of Blefuscu has the jurisdiction under regulatory authority granted by
International law to institute Regulation 1:12.
The primary source of regulatory authority for States in public international law is usually
considered to be territorial jurisdiction. A State has jurisdiction to regulate within its
territory, including in respect of events, persons or things in its territory (including cross-
border events which are only partially in its territory), and external acts which have
‘effects’ within its territory.23 It has been recognized that a state always has jurisdiction
regarding matters of essential national interest.24

21
Clarifications, Para 9.
22
Darren Bush & Carrie Mayne, In (Reluctant) Defense of Enron: Why Bad Regulation
Is to Blame for California’s Power Woes (or Why Antitrust Law Fails to Protect Against
Market Power When the Market Rules Encourage Its Use), 83 Or. L. Rev. 207 (2004)
23
Crawford, Brownlie’s Principles of Public International Law, p. 462; Austen Parrish, ‘The
Effects Test: Extraterritoriality’s Fifth Business’ (2008) 61 Vanderbilt Law Review 1455;
24
Crawford, Brownlie’s Principles of Public International Law, 462; Third Restatement
(Foreign Relations) (1986) s.402(3); Bowett, Jurisdiction: Changing Patterns of Authority, 10;
Akehurst, Jurisdiction in International Law, 157ff; see further Arrest Warrant of 11 April
6
The Permanent Court of International Justice held that it is an elementary principle of

international law that a State is entitled to protect its subjects, when injured by acts
contrary to international law committed by another State, from whom they have been
unable to obtain satisfaction through the ordinary channels. By taking up the case of one of
its subjects and by resorting to diplomatic action or international judicial proceedings on
his behalf, a State is in reality asserting its own rights – its rights to ensure, in the person of
its subjects, respect for the rules of international law.25
Similarly, the International Court of Justice has held that within the limits prescribed by
international law, a State may exercise diplomatic protection by whatever means and to
whatever extent it thinks fit, for it is its own right that the State is asserting.26 The idea that
territoriality should be the main basis of jurisdiction has been re-articulated by the US
Supreme Court in Morrison v National Australia Bank.27
Thus, when such State Subsidies as provided in the by the State of Lilliput in the present
dispute, creates an unfair economic advantage for the designated airlines of Lilliput. Thus,
it is well within the regulatory authority and jurisdiction of the state of Blefuscu to protect
its own national carriers from such anti-competitive practices.

2000 (Democratic Republic of the Congo v Belgium ) [2002] ICJ Reports 3, Separate Opinion
of President Guillaume, at [6].
25
Mavrommatis Palestine Concessions Case (1924) PCIJ Series A, No. 2, 12. See also,
similarly, Factory at Chorzow (1928) PCIJ Series A, No.17; Panevezys-Saldutiskis Railway
Case (1939) PCIJ Series A/B, No.76.
26
Barcelona Traction, Light and Power Co. Case (Belgium v Spain) [1970] ICJ Reports 3,
[78]
27
561 US 247 (2010). The presumption was controversially applied to the Alien Tort Statute
in the case of Kiobel v Royal Dutch Petroleum , 569 US, 133 S.Ct. 1659 (2013). See further
e.g. Mann, The Doctrine of Jurisdiction in International Law, 21ff.
27
Mann, The Doctrine of Jurisdiction in International Law, 3 (emphasis in original).
Similarly, Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v Belgium )
[2002] ICJ Reports 3, Joint Separate Opinion of Judges Higgins, Kooijmans and Buergenthal,
at 45.
7
2. The effects doctrine allows Blefuscu to legislate on acts conducted outside the
territorial limits of Blefuscu but having an effect within the State of Blefuscu.
i. The applicability of the ‘effects’ doctrine

The "effects" doctrine is a basis for exercising jurisdiction, developed in order to reach
aliens abroad whose conduct occurs beyond the borders of the enforcing State, but has an
effect within that State.28 Its origin lies in the "objective" application of the territorial
principle.29 The doctrine asserts that activities abroad, even those of foreign citizens, may
be regulated because of their impact on interests within the territorial State's domain. It
seeks to satisfy the concept of territoriality by treating the impact of the prohibited
conduct as much a part of the crime as the conduct itself.
ii. Widespread acceptance in the United States

In the antitrust area, the doctrine of "effects" is generally accepted in the United States.
An American writer adds to this idea that United States Courts "have assumed
jurisdiction under the antitrust laws over acts and contracts substantially and directly
affecting, or interfering with, United States foreign trade even though such acts were
done, or contracts executed outside of our borders."30 The doctrine of "effects" was first
introduced to antitrust law in the opinion of Judge Learned Hand in the Alcoa case.31 This
opinion became the foundation for the application of the "effects" doctrine in the antitrust
area.
iii. Precedential examination of U.S. Cases. Governing Effects Doctrine

In Alcoa, the United States moved from the use of "acts" occurring simultaneously in and
out of the territory, to "economic effects" within the territory (unaccompanied by the
"acts" occurring within the territory) as a jurisdictional base.32 In prior antitrust cases,

28
W. Fugate, Foreign Commerce and the Antitrust Laws 37 (2d ed. 1973); see Kintner and
Hallgasten, Application of United States Antitrust Laws to Foreign Trade and Commerce -
Variations on " American Banana" Since 1909, 15 B. C. Indus. & Com. L. Rev. 343 (1973);
Simson, The Return of "American Banana": A Contemporary Perspective on American
Antitrust Abroad, 9 J. Int'l L. & Econ. 233 (1974)
29
B. Hawk, United States, Common Market and International Antitrust: A Comparative
Guide 32 (1979).
30
W. Fugate, Foreign Commerce and the Antitrust Laws 37 (2d ed. 1973)
31
United States v. Aluminium Co. of America, 148 F.2d 416 (2nd Cir. 1945)
32
Common Market and American Antitrust: Overlap and Conflict, 61 (Rahl ed. 1970) at 382
8
some act essential to effectuate the restraint had occurred within the country, and the
defendants had included United States corporations.33 With the exception of Alcoa, all
foreign commerce decisions upholding Sherman Act jurisdiction were based in whole or
in part upon allegations or proof of some conduct within the United States. In the case of
foreign defendants, they were found to have either acted or allegedly acted within the
United States or abroad pursuant to an agreement with a United States party who had
acted within the United States.34 As an instance the controversial case of United States v.
Watchmakers of Switzerland Information Center, Inc., contained allegations of conduct
with the United States by domestic and foreign members of a Swiss Cartel whose
primary purpose was allegedly to regulate the prices of watches exported from
Switzerland to the U.S.35 Alcoa thus became the landmark case in which jurisdiction
against foreign nationals36 was based solely on the "effects" of foreign acts within the
United States. Judge Learned Hand stated that acts committed by aliens outside of the
territorial United States are within the subject matter jurisdiction of the United States
courts under the Sherman Act "if they were intended to affect imports [into the United
States] and did affect them.37
Nevertheless, Alcoa became the major source of support for the rule of the Restatement
(Second) of Foreign Relations Law of the United States, which states:
18. Jurisdiction to Prescribe with Respect to Effect within Territory.

A State has jurisdiction to prescribe a rule of law attaching legal consequences to
conduct that occurs outside its territory and causes an effect within its territory, if

33
Ibid.
34
The cartel cases explain this argument: See e.g., United States v. Imperial Chem. Indus. Ltd.
100 F. Supp. 504 (S.D.N.Y. 1951); United States v. Timken Roller Bearing Co., 83 F. Supp.
284 (N.D. Ohio 1949), aff'd. 341 U.S. 593 (1951); United States v. General Electric Co., 82
F. Supp. 753 (D.N.J. 1949); United States v. National Lead Co., 63 F. Supp. 513 (S.D.N.Y.
1945), aff'd. 332 U.S. 319 (1947).
35
See United States v. Watchmakers of Switzerland Information Center, Inc. (1963) Trade
Cas. para. 70, 600 (S.D.N.Y. 1962), order modified, (1965) Trade Cas. para. 71, 352
(S.D.N.Y. 1965
36
See, Restatement (Second) Foreign Relations Law of the United States, § 30 (1965); See
e.g., Pacific Seafarers Inc. v. Pacific Far East Line, Inc., 404 F.2d 804, 815 (D.C. Cir. 1968),
cert, denied, 393 U.S. 1093 (1969)
37
Laws,
Lawyer of the Americas, Vol. 14, No. 1 (Spring, 1982), pp. 23-59.
9
either (a) the conducts and its effects are generally recognized as constituent elements
of a crime or tort under the law of states that have reasonably developed legal
systems, or
(b) (i) the conduct and its effects are constituent elements of activity to which the rule
applies;
(ii) the effect within the territory is substantial;
(iii) it occurs as a direct and foreseeable result of the conduct outside the territory;
and (iv) the rule is not inconsistent with the principle of justice generally recognized
by states that have reasonably developed legal systems.38
The Commission of the European Economic Community has also substantially adopted
the doctrine of "effects" in applying its competition rules.39
The competitive advantages enjoyed by Lilliput’s carriers cripples the capacity of

Blefuscu’s designated carriers to compete with them in the international aviation
market, which will surely manifest itself with the passage of time and is wholly illegal
to ignore. Thus, the State of Blefuscu has the jurisdiction under the “effects doctrine”
to legislate on the instant matter to protect its’ own national interests, which it did by
instituting Blefuscu Regulation 1:12 and as such is a completely legally valid action
on the part of the State of Blefuscu, in the present dispute.
C. BLEFUSCU’S ACTIONS IN REVOKING THE OPERATING AUTHORITY

WERE CONSISTENT WITH ARTICLE 4 (REVOCATION AND
SUSPENSION OF AUTHORIZATION) OF THE ASA.
1. Swift Airways was unsuccessful in proving that the majority ownership and
effective control of Swift Airways in terms of Article 4 (Revocation and
Suspension of Authorization) of the bilateral ASA, and hence the revocation of
operating authority.
Blefuscu’s actions in revoking the operating authority of Swift Airways, one of the
designated airlines of the State of Lilliput, was done due to violation of the traditional

38
Jennings, General Course on International Law, 121 Recueil des Cours 329, 524 (1967) at
Page 521.
39
Laws, Lawyer of the Americas, Vol. 14, No. 1 (Spring, 1982), pp. 23-59.
10
“nationality” clause; clause (a) of Art. 4(1) of the bilateral ASA. Swift Airways was
unable to establish that post its 49 percent stake sale to Laputo Airlines, the majority
ownership and effective control of Swift Airways vested in nationals or corporations
of the State of Lilliput or in Lilliput itself.
i. Stake Sale of Swift Airways to Laputo Airlines necessitated investigation.

Privately owned Swift Airways was in severe financial distress at the time of the coup
in Lilliput and upon lobbying the Lilliputian government for a loan,40 the Lilliputian
government declined to oblige.41 The government instead brokered a sale of a stake in
Swift Airways to Laputo Airlines,42 the official carrier of the State of Laputo.43 The
Lilliputian government’s action in brokering the sale was solely limited to finding
interested buyers and promoting the negotiations.44
ii. Swift Airways’ sale agreement was in violation of the “nationality” clause.
Subsequently, to successfully comply with Lilliput’s municipal laws on foreign
ownership of airlines as well as numerous bilateral agreements to which the Lilliput is
a party, the sale of the stake was so structured, that Laputo Airlines would purchase 49
percent stake of Swift Airways.45 Laputo Airlines in turn paid the fair market value for
its shares in Swift Airways and is now its largest shareholder.46 The remaining 51
percent of shares are still owned by nationals of Lilliput, vesting the majority
ownership within Lilliput.47
However, the sale agreement of the above transaction was so structured to endow
Laputo Airlines with the following rights:48
a. The right to select Swift Airway’s Chief Executive
b. The right to appoint the majority of the members of Swift Airways’ Board of
Directors.

40 Compromis, Para. 15.
42 Ibid.
44 Clarifications, Para. 7.
11
c. The right of veto, over route expansion by Swift Airways.

Swift Airways, in turn retained its own distinct branding and corporate headquarters
situated in Lilliput.
As a result of this sale agreement, while the majority ownership remained to be vested
in the nationals of Lilliput, effective control on the other hand, had been transferred
over Laputo Airlines, and was henceforth not vested in either the nationals/
corporations of Lilliput or the Lilliputian government itself. Thus, Swift Airways
principally, violates the “nationality” clause under clause (a) of Art. 4(1) of the
bilateral ASA.
i. “Nationality” clause and its widespread international acceptance.

States have traditionally retained the right to withhold, revoke or impose conditions on
the operating permission of a foreign air carrier that is not “substantially owned and
effectively controlled” by the designating State or its nationals.49 This “nationality”
clause criterion has been used, since the 1940s, in the overriding majority of air
service agreements, and continues to be included in many newly negotiated bilateral
accords,50 applicable even in the case of the bilateral ASA negotiated and signed
between the State of Lilliput and the State of Blefuscu.51
The rationale for the nationality clause is that it provides a convenient link between
the carrier and the designating State by which parties to the agreement can:52
a. Implement a “balance of benefits” policy for the airlines involved.
b. Prevent a non-Party State through its carrier from gaining, indirectly, an
unreciprocated (“free rider”) benefit;53 and
c. Identify the country that is responsible for safety and security oversight.

49
Worldwide Air Transport Conference (ATCONF) Sixth Meeting, Montréal, 18 to 22 March
2013, ATConf/6-WP/12.
50
Ibid.
51
Compromis, Para. 2.
52
Para 1.2, ICAO Working Paper on the Liberalization of Air Carrier Ownership and Control,
2013, ATConf/6-WP/12.
53
Discussed in Greater detail under Argument C(1)(iv) below.
12
It is primarily for the three reasons outlined above, that the majority of States, have
continued to use the traditional “nationality” clause in bilateral agreements, not only
leaving it unchanged in existing agreements but also adopting it as part of new air
service records.54 However, as demonstrated by State Practice over the past decade,
an increasing number of countries are now willing to accept air services operated by
airlines that have substantial ownership or are multi-or trans-national in character.55
However, the important observation to be made is as regards effective control, States
are skeptical even though they might have adopted a relaxed position as far as
majority ownership is concerned. And so, is the case with the State of Blefuscu in the
present dispute.
ii. Blefuscu’s action is to prevent a non-Party State through its carrier from
gaining, indirectly an unreciprocated (“free rider”) benefit.
As regards, Blefuscu’s action of revoking the operating authority of Swift Airways,
the reason is primarily as a result of shift of effective control of Swift Airways to
Laputo Airlines. It is because of such a shift that concern (b) quoted above is
unequivocally triggered- A non-Party through its carrier from gaining, indirectly, an
unreciprocated (“free rider”) benefit. As previously stated, with the commercial
transaction culminating between Swift Airways and Laputo Airlines, the latter became
the largest shareholder of the former. Combined with possessing of effective control
of Swift Airways to Laputo Airlines (the official carrier of the State of Laputo), it
would have allowed the State of Laputo, a non-Party State to the bilateral ASA
between Lilliput and Blefuscu, through its carrier, from indeed gaining indirectly, an
unreciprocated (“free rider”) benefit in air transportation services between Lilliput
and Blefuscu, much to the convenience of the State of Laputo.56

54
Para. 3.1, Para 1.2, ICAO Working Paper on the Liberalization of Air Carrier Ownership
and Control, Worldwide Air Transport Conference (ATCONF) Sixth Meeting, Montréal, 18
to 22 March 2013, ATConf/6-WP/12.
55
Para 2.2., Para 1.2, ICAO Working Paper on the Liberalization of Air Carrier Ownership
and Control, Worldwide Air Transport Conference (ATCONF) Sixth Meeting, Montréal, 18
to 22 March 2013, ATConf/6-WP/12.
56
Compromis, Para. 16- “Laputo Airlines had long wanted an affiliate in Lilliput’s region of
the world.”
13
It is solely with the intention to address this particular concern, that the State of
Blefuscu revoked the operating authority of Swift Airways, in pursuance of Art. 4(1)
of the ASA.57
2. Majority Ownership ‘AND’ effective control- Fulfillment of both conditions.

As regards fulfillment of the conditions specified under clause (a) of Art. 4(1), both
conditions have to be fulfilled, not either of the two. The State of Blefuscu proceeds to
put forth three significant cases from the United States (hereinafter, the “U.S.”),
which lays down the “de facto” control test, which emphasizes this very point. If it
may please this Court, it may take cognizance of the points, having persuasive value,
in the absence of an applicable international standard on the same. The ICAO
expressly admits the same when it observed, “Something that we should think further
is on how to define “control” in terms of management since ICAO connects control
with safety.”58
i. The case of Willye Peter Daetwyler, d.b.a. Interamerican Airfreight Company’s

Foreign Permit (1971).59
Interamerican Air Freight Corp. applied with the U.S. Civil Aeronautics Board
(hereinafter, the “CAB”) for operating authorization as a U.S. citizen international
airfreight forwarder. While there was no disputing U.S. citizens owning 75 percent of
the stock and that two-thirds of the board of directors were U.S. citizens, the CAB
found that Mr. Daetwyler, a Swiss national exercised direct control over the
operations of the company and was denied an operating certificate.60
What is significant is that the CAB ruled that the intent of the Congress in enacting the
statute () was that air carriers be “owned and controlled” by U.S. citizens, not “owned
or controlled” as in the text of the statute, feeling the latter interpretation would defeat

57
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 event of
any of the following: (a) such airline is not able to prove upon request that the majority
ownership and effective control of such airline are vested in nationals or corporations of the
other Contracting Party or in that Party itself.
58
Para 3.1, ICAO Working Paper on the Air Carrier Ownership and Control Principle,
2013, ATConf/6-WP/84.
59
58 C.A.B. 118 (1971)
60
Ibid.
14
the purpose of the provision.61 Thus, in Daetwyler, the U.S. CAB set a precedent for
interpreting the statutes still followed today, while also providing guidance for what
constitutes “de facto” control.62
ii. “De Facto” Control Test- An Analysis of Effective Control

The CAB and U.S. Department of Transportation (“DOT”) as part of their fitness
review of any transaction will determine who has control of the applicant airline and if
effective control rests with a foreign entity. As in Daetwyler, the CAB and DOT
interpreted 49 U.S.C.§ 40102 (a)(15) to mean that 75 percent of the voting interest
must be “owned and controlled” by the applicant airline; not “owned or controlled” as
was argued by Mr. Daetwyler in the case, and as per the phraseology in the statute.
The U.S. Congress never defined “control” in the Federal Aviation Act of 1958
leaving that determination to the particular regulatory agency, thus providing
interpretative powers.
iii. Matter of Intera Arctic Services, Inc (1987).63

The DOT expanded Daetwyler to apply to all foreign interests, not just an individual
foreign interest, by stating that if persons other than U.S. citizens, individually or
collectively, can significantly influence the affairs of Intera, it is not a U.S. citizen.64
The DOT thus, further broadened the scope of definition of “control” to include total
shareholdings in an airline, not mere voting interest as stated in the statute, and to
consider cumulative foreign influence.65
This is particularly of relevance in the present dispute, as post the sale of 49 percent
stake of Swift Airways to Laputo Airlines; the latter has become the largest
shareholder of the former. It is very humbly stated that this Court may take
cognizance of this point, in the present dispute.

61 Ibid, at pp. 120-121.
62 Christopher Furlan, Foreign Ownership and Control Restrictions in United States Airlines:
Barriers to Mergers and Restructurings,

< http://dailyairlinefilings.com/public/furlan.pdf > accessed 7 Dec. 2016.
63
In the matter of Intera Air Services, Inc., DOT Order 87-8-43, Docket No. 44723 (August
1987)
64
Ibid at p. 7.
65
Christopher Furlan, Foreign Ownership and Control Restrictions in United States Airlines:
Barriers to Mergers and Restructurings,
< http://dailyairlinefilings.com/public/furlan.pdf > accessed 7 Dec. 2016.
15
iv. Matter of Citizenship of DHL Airways (2004).66

The most recent, and a rather interesting interpretation of foreign ownership and
control restrictions in the U.S., was that in the case of DHL Airways. The appointed
DOT Administrative Law Judge (“ALJ”) laid down the following test: whether the
predominant customer (Laputo Airlines, in the present dispute) is in a position to
control by threatening removal of business and revenues, and whether a rational
economic actor would perceive the threat as credible.67
With Swift Airways charter permitting decisions to be determined by a simple

majority vote with regard to most items considered by the board of directors (which
could be inclusive of decisions on removal of business and revenues) but requires a
67% super majority for certain major decisions such as mergers. 68 With Laputo
Airlines now having the right to appoint the majority of directors in the Board of Swift
Airways, the test laid down in the matter of DHL Airways above, has every possibility
of fruition in the future. Thus, the “de facto” control test stands fulfilled in the present
dispute, where effective control of Swift Airways stands possessed in the hands of
Laputo Airlines, a Non- Party to the bilateral ASA between the States of Lilliput and
Blefuscu.
Thus, because of the above-mentioned legitimate concerns, the State of Blefuscu is

justified in revoking the operating authority of Swift Airways, consistent with Art.
4(1) of the bilateral ASA.
D. BLEFUSCU IS JUSTIFIED IN REVOKING THE OPERATING AUTHORITY

OF SWIFT AIRWAYS AS IT DERIVES AN UNFAIR COMPETITIVE
ADVANTAGE FROM THE RECEIPT OF STATE SUBSIDIES, EVEN IF
THOSE SUBSIDIES DO NOT COME DIRECTLY FROM THE STATE OF
LILLIPUT.

66
In the matter of Citizenship of DHL Airways, Inc. n/k/a ASTAR Air Cargo, Inc., DOT
Order 2004-5-10, Docket No. OST-2002-13089 (May 2004).
67
Ibid at p. 24.
68
Clarifications, Para. 8.
16
1. Factual Analysis validates the claim of Swift Airways’ receipt of indirect ‘State
Subsidies’ from the Lilliputian government.
A factual analysis of the relevant facts pronounces that Swift Airways’ has received
State ‘support’ from the Lilliputian Government, in terms of financial contributions or
otherwise. It is rather, even prima facie a commercial transaction in which Laputo
Airlines purchased a 49 percent stake in Swift Airways, in compliance with the
municipal laws of the State of Lilliput, yet the role of the Lilliputian government in the
whole transaction cannot be ignored as it amounts to ‘state support’.
i. Governmental ‘support’ exists towards Swift Airways

Though privately owned Swift Airways was in severe financial distress at the time of
the coup and upon lobbying the Lilliputian government for a loan,69 the Lilliputian
government declined to oblige.70 The government instead brokered a sale of a stake in
Swift Airways to Laputo Airlines,71 the official carrier of the State of Laputo.72 The
Lilliputian government’s action in brokering the sale was solely limited to finding
interested buyers and promoting the negotiations. 73 The act of ‘promoting the
negotiations’, amounts to ‘government support’, under the phraseology ‘government
subsidy or support’ under Article 5 of the bilateral ASA.
ii. The sale of a 49 percent stake of Swift Airways to Laputo Airlines is not purely
a commercial transaction as the State of Lilliput ‘promoted the negotiations.’
Subsequently, to successfully comply with Lilliput’s municipal laws on foreign

ownership of airlines as well as numerous bilateral agreements to which the Lilliput is
a party, the sale of the stake was so structured, that Laputo Airlines would purchase 49
percent stake of Swift Airways.74 Laputo Airlines in turn paid the fair market value for
its shares in Swift Airways and is now its largest shareholder.75 The remaining 51

71 Ibid.
17
percent of shares are still owned by nationals of Lilliput, vesting the majority
ownership within Lilliput.76 In the entire deal, the Lilliputian government played a
pivotal role by ‘promoting the negotiations’.
2. The State of Lilliput’s ‘support’ in promoting the negotiations of the successful

deal can be classified as ‘indirect’ subsidy.
Though there has been no financial contribution by the Lilliputian government to
Swift Airways, unlike in the case of Adventure Airways, and the Blefuscu’s action of
revoking the operating authority of Swift Airways is legal and tenable in law.
i. Nomenclature of a ‘subsidy’
The term “subsidy” is not defined precisely in economic terms although the Oxford
English Dictionary defines the word as “a sum of money granted from the public
funds to help an industry or business keep the price of a commodity or service low.”77
As a legalistic service, under the SCM Agreement, a subsidy is recognized as a
financial contribution by a government, which confers a benefit. 78 A financial
contribution is either money or anything else of value provided to a manufacturer or
exporter (which could be construed as an international service originating in a
country) at a cost less than would have been charged in a commercial transaction.79
This could include indirect support from a government.80
While the exporter in the present dispute, could be construed to be ‘Laputo Airlines’,
which gets indirect access to Lilliput’s region of the world, including Blefuscu,
Lilliput’s indirect support in the transaction becomes clear, from the aforesaid
argument.

77
Ruwantissa Abeyratne, Competition and Investment in Air Transport- Legal and Economic
Issues (Springer International Publishing 2016) at 126.
78
Art. 1.1 of the SCM Agreement.
79
Ruwantissa Abeyratne, Competition and Investment in Air Transport- Legal and Economic
Issues (Springer International Publishing 2016) at 126.
80
Ibid.
18
ii. Legitimate exercise of Regulation 1:12 and revoking the operating authority
by due process of law
As has been previously proved in Argument (B) above, that Blefuscu’s Regulation
1:12 is a permissible exercise of regulatory authority under international law, the
CAAB exercised the measures for redress under clause (c) of Article 5(2) of the
Regulation 1:12 by due process of law.
Upon reading of clause (iv) of Article 2(1) of the Regulation, a subsidy shall be
deemed to exist if: (iv) a government…[.or entrusts or directs a private body to carry
out one or more of the type of functions illustrated under (i), (ii) and (iii) which would
normally be vested in the government and, in practice, in no real sense differs from
practices normally followed by governments; and (b) a benefit is conferred.
Clause (i) enunciates a practice of a government involving inter alia, “equity
infusion”. Thus, clause (iv) establishes that such a practice done by a private body
upon entrusting from the government, shall also amount to a subsidy. In the present
dispute, the Lilliputian government’s involvement in promoting the negotiations with
Laputo Airlines for the stake sale in Swift Airways, can be construed as ‘entrusting
such equity infusion by a private body’- Laputo Airlines, in this present dispute.
Thus, a joint reading of clauses (i) and (iv) of Art. 2(1) of the Regulation proves the
existence of indirect support of the State of Lilliput for indirect subsides.
Thus, Blefuscu’s actions in revoking the operating authority of Swift Airways is legal
and tenable in law, as it has been proved that Swift Airways had received ‘indirect
government support or subsidies’ from the State of Lilliput.
19
E. LILLIUT’S RETALIATORY ACTIONS AGAINST BLEFUSCU’S AIRLINES

ARE LEGALLY INAPPROPRIATE UNDER INTERNATIONAL LAW.
1. Lilliput’s action towards excluding all Blefuscudian carriers from operating to,
from, or within Lilliputian airspace may be a valid “counter-measure” under
international law, yet the move has a massive ‘procedural lapse’ as both parties
are signatories to the VCLT, 1969 and legal recourse holding validity, would
have been under the VCLT.
The State of Lilliput’s impugned action of excluding all Blefuscudian airline carriers
from operating to, from, or within Lilliputian airspace may be a valid
“countermeasure”, complying with the principles of international law as outlined by
this Court. The validity of counter-measures is subject to certain conditions set by the
judgments of the International Court of Justice 81 , international tribunals 82 and is
guided by Part III of the Draft Articles on State Responsibility.83 However, since both
parties are signatories to the VCLT, Lilliput should have taken recourse under the
VCLT, not the general law on countermeasures and hence Lilliput’s retaliatory actions
are legally inappropriate under international law.
i. General international law does not prohibit countermeasures.

The Arbitral Tribunal, in the Air Services Agreement case, considered the argument
that if countermeasures are prohibited, under international law. The Tribunal went
onto rule that it did not consider that either general international law or the provisions
of the Air Services Agreement between France and the United States allowed it to go
that far.84 The Tribunal also stated that in light of the present state of international

81
Gabčikovo-Nagymaros Project (Hungary/Slovakia), Judgment, I.C.J. Reports 1997, p.7;
Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States),
Merits, Judgment, I.C.J. Reports 1986, p.14
82
Arbitral Award of 9 December 1978 in the case concerning the Air Services Agreement of
27 March 1946 between the United States of America and France, United Nations, Reports of
International Arbitral Awards (RIAA), Vol. XVIII, pp. 417-493 (hereinafter “Air Services
Agreement Case”).
83 Arts. 49-53 of Responsibility of States for Internationally Wrongful Acts 2001, annex to
U.N.G.A. Res. 56/83 of 12 December 2001 deals counter-measures- its objects, limits,
proportionality, conditions as to validity and its termination.
84
Arbitral Award of 9 December 1978 in the case concerning the Air Services Agreement of
International Arbitral Awards (RIAA), Vol. XVIII, p. 444 (para. 89)
20
relations, it is not possible to lay down a rule prohibiting the use of countermeasures
during negotiations, especially where such countermeasures are accompanied by an
offer for a procedure affording the possibility of accelerating the solution of the
dispute.85 Thus, the countermeasure imposed by the State of Lilliput on Blefuscu’s
airlines is permitted under general international law, yet suffers from procedural
lapses.
ii. The counter-measure imposed is not in conformity with Part III of

Responsibility of States for Internationally Wrongful Acts, 2001 and previous
ICJ Pronouncements.
Article 49 describes the permissible object of counter-measures taken by an injured
State against the responsible State and places certain limits on their scope. The limited
object and exceptional nature of counter-measures are indicated by the use of the word
“only” in paragraph 1 of Art. 49.86 Countermeasures may only be taken by an injured
State in order to induce the responsible State to comply with its obligations under Part
Two, namely, to cease the internationally wrongful conduct, if it is continuing, and to
provide reparation to the injured State. A fundamental pre-requisite for any lawful
countermeasure is the existence of an internationally wrongful act, which injured the
State taking the countermeasure. The ICJ in the Gabčikovo-Nagymaros Project case
emphasized this point, where it observed that in order to be justifiable; a
countermeasure must meet certain conditions. In the first place it must be taken in
response to a previous international wrongful act of another State and must be directed
against that State.87
Thus, Blefuscu contends that Lilliput is in complete derogation with the ICJ’s
observation while imposing countermeasures of barring Blefuscudian airlines from
Lilliputian airspace, in response to the withdrawal of operating authority of the
designated airlines of the State of Lilliput. The reason being that Blefuscu’s action is

85
Ibid at p. 445 (para. 91)
86
Art. 49 (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
obligation under Part Two.
87
Gabčikovo-Nagymaros Project (Hungary/Slovakia), Judgment, I.C.J. Reports 1997, p.55,
para. 83;
21
in complete compliance with the provisions of the bilateral ASA as well as Regulation
1:12 as previously proved, in the preceding arguments and needs no further
elaboration. There has been no previous international wrongful act by Blefuscu,
which is the sine qua non in initiating countermeasures against it, by the State of
Blefuscu
iii. The countermeasure and the doctrine of ‘proportionality’

The Arbitral Tribunal, in the Air Services Agreement case stated it is generally agreed
that all countermeasures must, in the first instance, have some degree of equivalence
with the alleged breach; this is a well-known rule.88 It has been observed, generally,
that judging the “proportionality” of countermeasures is not an easy task and can at
best be accomplished by approximation.89 The Tribunal further went onto rule while it
is necessary carefully to assess the meaning of countermeasures in the framework of
proportionality; the aim of countermeasures is to restore equality between the Parties
and to encourage them to continue negotiations with mutual desire to reach an
acceptable solution.90
In the present matter, the countermeasure imposed by Lilliput may have fulfilled the
doctrine of ‘proportionality’ as argued by the Applicant, yet such countermeasure may
at best, as noted by the Arbitral Tribunal, be best accomplished by approximation by
this Court.
2. Relevance of the Air Services Agreement Arbitration case in the present dispute.
The Air Services Agreement Case illustrates one of the ways in which international
law may be enforced, viz. self-help. By a 1946 Bilateral Air Services Agreement
between France and the U.S., civil air flights commenced between the two countries.
However in 1978, Pan American Airlines, a designated U.S. carrier, announced its
resumption of a west coast- London- Paris service, but with a change of gauge
(transferring passengers from a larger to a smaller plane) in London. France objected
that this change of gauge was contrary to their 1946 Agreement, which prohibited
such gauge changes in either of their territories of the Contracting Parties, but was

88 Arbitral Award of 9 December 1978 in the case concerning the Air Services Agreement of
International Arbitral Awards (RIAA), Vol. XVIII, p. 443, para. 83.
89
Ibid.
90
Ibid, at p. 444, para. 90.
22
silent as to any such change in a third State. When, on May 3, 1978 such a flight was
operated despite the impasse, passengers were not allowed to be disembarked in Paris
upon arrival and France suspended Pan Am’s flights to and from, the territory of
France. On May 4, the U.S. proposed the matter be referred to arbitration, which
France agreed to on May 13, and a Compromis was signed in July. However,
meanwhile on May 9, the U.S. acted contrary to the 1946 Agreement, and initiated
steps which led to an May 31 order under Part 213 of its C.A.B. Economic
Regulations prohibiting flights by French designated carriers to the U.S. West coast so
long as the French Ban on Pan Am’s flights continued. However, following the
signing of the compromis, the U.S. ban was not implemented. The Tribunal decided a
second question- whether the U.S. was entitled to take the action that it took
immediately prior to the signing of the compromis.
i. The answer to the second question by the Arbitration Tribunal

As far as the action undertaken by the United States Government in the above case is
concerned, the Tribunal stated the situation is simple. Even if arbitration under Article
X of their 1946 Agreement is set in motion unilaterally, implementation may take
time, and during this period [i.e. before a compromis is concluded], countermeasures
are not excluded;91 a State resorting to such measures, however, must do everything in
its power to expedite the arbitration. This was exactly what the U.S. Government had
done and for these reasons, the Arbitral Tribunal decided unanimously, that the
answer to the second question is that, under the circumstances in question, the U.S.
Government had the right to undertake the action that it undertook under Part 213 of
the Economic Regulations of the C.A.B.92
Similarly, the ASA between Lilliput and Blefuscu envisaged bilateral consultations
and negotiations as a means of dispute settlement over interpretation or application of
the ASA, as a first place measure. 93 Such consultations under the ASA were
exchanged on two counts- once before imposing the countermeasure,94(which was

91 Arbitral Award of 9 December 1978 in the case concerning the Air Services Agreement of
International Arbitral Awards (RIAA), Vol. XVIII, p. 446, para. 98.
92
Ibid at p. 447.
93
Art. 14(1) of the bilateral ASA between Lilliput and Blefuscu.
94
23
unsuccessful in addressing Lilliput’s concerns) and again immediately after such

imposition.95 Thus, after failed consultations over a period of six months, and agreeing
on signing a compromis and bringing this dispute to the ICJ, the move was expedited
and during this intervening period of six months, it did not preclude the State of
Lilliput from initiating countermeasures, which might have been ‘proportional’ in
nature, yet was misplaced in law.
ii. The similarity of the actions to the present dispute, yet a crucial “divergence”
persists.
While the facts of the Air Services Agreement Case has been stated above, it is
irrefutable, that the facts bear a striking resemblance to the dispute in the present
matter between the States of Lilliput and Blefuscu. The requirement stated in the Air
Services Agreement Case that a countermeasure be in proportion to the prior illegal act
in terms of the damage it does is now generally accepted.
The facts of the case raises the question of the relationship between the general
customary international law on countermeasures and the customary international law
of treaties which permits the termination or suspension of a treaty in a case of material
breach.
Although both parties argued their cases partly by reference to the customary
international rules on material breach,96 the Tribunal neither referred to the law of
treaties on this point nor considered whether the breach was a material one. And this is
where the case diverges and this is where Lilliput’s retaliatory action is legally
‘inappropriate’.
The circumstance in the present dispute is materially altered as both the States of
Lilliput as well as Blefuscu are parties to the Vienna Convention of the Law of
Treaties, 1969, (VCLT)97 and the recourse available to Lilliput in contradistinction
was not initiating ‘countermeasures’ but taking recourse under Article 60 of the
VCLT.

95
96
Neither France nor the U.S. was a party to the Vienna Convention of the Law of Treaties
and thus, were not bound by Art. 60 as a treaty rule..
97
Compromis, Para. 1(c).
24
iii. Since both States of Lilliput and Blefuscu are parties to the VCLT, 1969;
Lilliput’s recourse lay under Art. 60 of the VCLT.
The State of Blefuscu strenuously contends that if the State of Lilliput had genuinely
felt aggrieved post Blefuscu’s actions in revoking the operating authority of Lilliput’s
designated airlines, while persisting in the belief that Blefuscu ‘might’ have breached
the bilateral ASA, Lilliput should have taken recourse under Art. 60 of the VCLT,
1969.98 Since it chose neither to suspend nor terminate the bilateral ASA, as recourse
under Art. 60,99 Lilliput’s action of imposing ‘countermeasures’ on Blefuscu’s airlines
instead of recourse under Art. 60 of the VCLT, signifies this retaliatory action legally
inappropriate under international law.

98
Termination or suspension of the operation of a treaty as a consequence of its breach.
99
Clarifications, Para. 1.
25
SUBMISSIONS
May it please the Court, for the foregoing reasons, the State of Lilliput respectfully
requests the Court to adjudge and declare that:
− Lilliput’s financial contributions to Adventure Airlines provide an unfair competitive
advantage in violation of Article 6 (Fair Competition) of the ASA.
− Blefuscu’s Regulation 1:12 is permissible exercise of regulatory authority under
international law because of the consequences of Lilliput’s illegal subsidies on the
market for flights from Lilliput to Blefuscu.
− Blefuscu’s actions in revoking operating authority of Lilliput’s two designated carriers
were consistent with Article 4 (Revocation and Suspension of Authorization) of the
ASA.
− Blefuscu’s actions in revoking the operating authority of Swift Airways are justified
as Swift Airways derives an unfair competitive advantage from the indirect receipt of
State subsidies.
− Lilliput’s retaliatory actions of imposing countermeasures against Blefuscudian
airlines are inappropriate under international law.
The Honorable Court is further requested to declare such guidelines, as it deems fit and
essential in the present case.

Team 21 Respondent Memorial PDF

Transféré par

Informations du document

Description originale:

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Team 21 Respondent Memorial PDF

Transféré par

Droits d'auteur :

Formats disponibles

THE INTERNATIONAL AIR LAW MOOT COURT COMPETITION 2017

CASE CONCERNING THE STATE SUBSIDIES TO AIRLINES

THE STATE OF LILLIPUT V. THE STATE OF BLEFUSCU

MEMORIAL SUBMITTED ON BEHALF OF THE STATE OF BLEFUSCU

TEAM NUMBER 21- RESPONDENT

LIST OF SOURCES ............................................................................................................... vi

STATEMENT OF RELEVANT FACTS ............................................................................ viii

QUESTIONS PRESENTED .................................................................................................... xii

SUMMARY OF ARGUMENTS ............................................................................................ xiii

JURISDICTION OF THE COURT ......................................................................................... xv

ADVANTAGE FROM THE RECEIPT OF STATE SUBSIDIES, EVEN IF THOSE

ALJ Administrative Law Judge

U.A.E. United Arab Emirates

1945) (UN Charter)

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

force 4 April 1947) 15 U.N.T.S. 295 (Chicago Convention)

27 January 1980) 1155 U.N.T.S. 331 (VCLT)

Responsibility of States for Internationally Wrongful Acts 2001, annex to U.N.G.A.

Res. 56/83 of 12 December 2001.

1. International Court of Justice

Nicaragua v. USA, (1986) ICJ Rep 14.

2. Permanent Court of International Justice

3. International Arbitral Tribunal

United Nations, Reports of International Arbitral Awards (RIAA), Vol. XVIII

D. ARTICLES AND BOOKS

STATEMENT OF RELEVANT FACTS

B. THE FACTS RELEVANT

• 49 per cent stake of Swift Airways was

2) Lilliput devastated by natural disasters and a failed coup attempt

3) Blefuscu’s Regulation 1:12 and Consequent Complications

[3.1. Passing of Blefuscu Regulation 1:12]

[3.2. Wikileaks’ Release of Mail Communiqué]

[3.3. Investigation of Lilliput’s designated airlines by CAAB]

[3.4. CAAB declares findings of its investigation]

[3.5. CAAB rescinds operating authority of Lilliputs’ designated airlines]

[3.6. Lilliput imposes counter-measures]

[3.7. Matter submitted to the ICJ, post failed negotiations]

The State of Blefuscu will argue the following contentions:

a. Have Lilliput’s contributions to Adventure Airlines provided an unfair

competitive advantage in violation of Article 6 (Fair Competition) of the ASA?

b. Whether Blefuscu’s Regulation 1:12 is a permissible exercise of regulatory

authority under international law, because of the consequences of Lilliput’s

illegal subsidies on the market for flights from Lilliput to Blefuscu?

c. Whether Blefuscu’s action, in revoking the operating authority of Lilliput’s

two designated airlines, was consistent with Article 4 (Revocation and

Suspension of Authorization) of the ASA?

d. Whether Blefuscu’s action in revoking the operating authority of Swift

Airways was legal, as Swift Airways derives an unfair competitive advantage

from the receipt of State subsidies ‘indirectly’?

e. Whether the retaliatory measures imposed on the Blefuscudian carriers by the

State of Lilliput legally appropriate under international law?

The bilateral AIR SERVICES AGREEMENT (“ASA”) executed between the

JURISDICTION OF THE COURT

Court of Justice. Art. 36 (1) of the Statute, which reads:

Germany v. Denmark, Federal Republic of Germany/ Netherlands), 1968, the Gabčíkovo-

ASA signed between the disputing States.

the ICJ given under Art. 14 (2) of the ASA.

A. THE STATE OF LILLIPUT’S FINANCIAL CONTRIBUTIONS TO

1. Financial contribution (subsidies) to Adventure Airlines by the State of Lilliput

ii. Wikileak’s dumping of official communiqué provides information of grant of subsidies

iii. Adventure Airways is violative of Art. 3 of Blefuscudian Regulation 1:12 as it derives

Markets are competitive in general, irrespective of the number of competitors in the