Aviation Insurance

The Argentine Supreme Court of Justice has handed down its ruling in the matter of "Argentine Association of Insurance Companies et al. v. Argentine Government" and confirmed the decision by the Second Division of the Federal Civil and Commercial Court of Appeals (the “Court of Appeals”) as well as that of the first instance judge (see "Commercial Aviation Insurance. Unconstitutionality of Emergency Decrees" in Marval, O’Farrell & Mairal’s Insurance News No. 12 of April 17, 2013).

In early September 2002, the Executive Branch declared a state of emergency with regard to commercial aviation and exempted national carriers of the obligation of taking their insurance out with Argentine insurance companies, as required by Law No. 12,988 (Decree No. 1654/2002). This decision was based on the crisis caused by the terrorist attacks that occurred on September 11, 2001 in the United States and the costs associated with the purchase of compulsory insurance required for commercial aviation.

The decision was later ratified and extended by the Executive through Decree No. 1012/2006, as it understood that a crisis continued to affect the commercial aviation market.

The Argentine Association of Insurance Companies, along with some of the leading insurance companies in the country, filed an action to obtain a declaration of unconstitutionality of section 2 of the decrees alleging that they infringe sections 2 and 3 of Law No. 12,988, section 192 of the Aviation Code and Law No. 20,091. Their objections were accepted by both the first instance judge and by the Court of Appeals.

The Argentine Government, however, filed an extraordinary appeal and the case was elevated to the Supreme Court.

The Court, with the joint vote of judges Ricardo Lorenzetti and Carlos Fayt, recalled the strict exceptionality required by Article 99, paragraph 3, of the Argentine Constitution for the attribution of legislative powers to the Executive, in line with the appellate court ruling.

The Court considered that a judge’s task is to evaluate whether the circumstances invoked by the emergency decree are truly exceptional, or if these are patently unreasonable or nonexistent, in which case the power exercised by the executive lacks the factual basis that the Constitution requires.

After analyzing the circumstances and arguments presented by the Argentine Government, the Court decided that there existed no "evidence which would allow the Tribunal to reach the conviction that a complex overall economic context in which the decree 1654/2002 was issued had affected the commercial aviation sector in a way that would require, for the purposes of safeguarding the general interests of society, a reordering and adjustment that could not be implemented by the ordinary channels that the Constitution provides for".

Consequently, in accordance with the Attorney General’s opinion, the Court upheld the original ruling.