Air Lituanica vs. Estonian Air

Air Lituanica said, it has won the arbitration case against the Estonian company Estonian Air. The Estonian company will have to pay LTL 3.3 million to the Lithuanian company.

The Arbitration Institute of the Stockholm Chamber of Commerce of Sweden (SCC arbitration) has passed a judgment in the dispute between Air Lituanica and Estonian Air regarding the unilateral termination of the commercial cooperation contract.

On December 4th last year the airline Air Lituanica initiated arbitration proceedings against the company Estonian Air by filing an action with the Stockholm Arbitration Institute. Estonian Air, after unilateral termination of commercial cooperation contract on 28 November 2013, remained indebted to Air Lituanica for the income collected for the already carried passengers and paid deposits. The decision to refer to the Stockholm Arbitration was taken after Estonian Air had failed to repay the accumulated debt to the company Air Lituanica immediately after the termination of the contract, as stated in the terms and conditions of the contract.

Estonian’s view

Estonian Air said, the arbitration panel confirmed that Estonian Air had the right to terminate its contracts with Lituania, awarded damages to Estonian Air of roughly half a million euros, and rejected Air Lituanica’s claim for damages.

After six months of cooperation last year, Estonian Air terminated its contracts with Air Lituanica because of poor payment behavior. After termination, the revenue in the amount over million euros came due for Estonian Air to pay to Air Lituanica. Estonian Air decided to hold that money until the end of the arbitration as:
-it did not trust Air Lituanica to pay for the damages it caused by the early termination, and
-it was not sure if Air Lituanica had sufficient financing to survive until the end of the arbitration.

“ The arbitration confirmed that Estonian Air was entitled to terminate the contracts because of Air Lituanica’s poor payment behaviour and awarded close to half a million euros in damages to Estonian Air,“ said Jan Palmér, the CEO of Estonian Air.“As a final settlement, Estonian Air will return the revenue frozen since termination after deducting the damages Lituanica owes to Estonian Air.”