Drones or automation, in general, is the most significant development, which the aviation industry will undergo in the coming decades. Reports suggest that by the year 2024, the drone industry will reach $ 43.2 billion, in-fact it is predicted that many of our daily life activities will be replaced by drones. Various food delivery companies are already contemplating food delivery using drones. Earlier this year, three food delivery start-ups were given the nod by the Government to test drones for deliveries. Similarly, various e-commerce companies are also looking at the possibility of using drones for delivery. Apart from transportation, drones also have massive potential for emergency services. Last year, the Maharashtra Government announced a partnership with a leading medical drone company for delivering critical care medicines/equipment. Similarly, the insurance industry is already deploying drones for better risk management and collection of data. In this regard, it becomes imperative for a country to have rules, which can sustain this boom that will change the very definition of aviation. Keeping up with this trend, in June 2020, the Ministry of Civil Aviation has published a draft version of the "Unmanned Aircraft System (UAS) Rules, 2020" (the "Draft Rules") for public consultation. The Draft Rules are in continuation of the regulations, which were issued in 2018.
If the 2018 regulations were simply an extension of the existing regulatory aviation framework, the Draft Rules have come a long way in establishing a parallel regulatory regime for drones, which is independent of the traditional aviation regulations. The first and foremost aspect of the Draft Rules are that they seeks to establish an Indian drone registry akin to the Indian aircraft registry, which the Directorate General of Civil Aviation ( the "DGCA") is required to maintain in relation to aircraft under rule 36 of the Aircraft Rules, 1937. This is a welcome step, which will help in maintaining a database of drones in the country, which will further the cause of policy development. Moreover, the Draft Rules seem to incorporate the doctrine of "extraterritorial application of laws", since as per Draft Rule 1(2)(a), the Draft Rules are applicable on "UAS registered in India, wherever they may be" clearly extending the ambit of the Draft Rules to Indian registered drones irrespective of their location. Thus, an Indian drone being operated overseas would technically continue to be subject to these Draft Rules. An exciting aspect of this Draft Rule, which will require regulatory clarification or judicial interpretation is, whether such standards will continue to apply on a registered Indian drone, which has been leased to a foreign entity and is being operated abroad (dry lease model)?
Another interesting aspect of the Draft Rules is that they are independent of the Aircraft Rules, 1937. It is pertinent to mention that the 2018 Regulations were promulgated as a Civil Aviation Requirement (CAR), which the DGCA is empowered to issue under Rule 133A of the Aircraft Rules, 1937, i.e. those Regulations were subservient to the Aircraft Rules, 1937. The Draft Rules have been promulgated under Sections 4, 5 and 8 of the Aircraft Act,1934, and Rule 1(4) of the Draft regulations clearly state that provisions of Aircraft Rules, 1937 shall not apply on UAS and matters connected therewith (unless specifically provided for the in the Draft Rules). This indeed is a bold regulatory step taken by the Government of India to treat drones as an independent industry and not merely an extension of conventional aviation.
It is praiseworthy that the Government has recognised the concept of drone leasing in the Draft Rules, but despite this bold step, the Draft Rules disappoint on one basic, yet important front. It's a well-established principle of law that a "lease" and "ownership" are two different and distinct concepts, and a lessee cannot be an owner in the eyes of the law. However the Draft Rules combine the two concepts, as per Draft Rule 2(25), an owner "means a person who owns or takes on lease an unmanned aircraft system". The failure of the regulations to recognise the legal difference between an "owner" and a "lessee" could entail severe consequences for the industry and has the potential to open floodgates of litigation.
The Draft Rules, although far-sighted, could be accused of taking a step back in the evolution of globalization by incorporating the very aviation specific, doctrine of substantial ownership and effective control ("SOEC"). SOEC is a doctrine very commonly used in aviation, SOEC mandated that substantial ownership and control of an airline must vest with nationals belonging to the same country as the airline. This is a prerequisite for the grant of traffic rights to or starting of an airline in most jurisdictions. For example, the CAR for grant of Non-Scheduled Operator's Permit and also the one for grant of Permit for Scheduled Air Transport Services have compliance provisions for SOEC. The history of SOEC predates to the era when the Convention of International Civil Aviation, 1944 (the "Chicago Convention") was drafted, i.e. the years just after the second world war, when most nations were suspicious of each other and aviation was more of a military tool than a mode of transportation.
Coming back to the Draft Rules, SOEC compliance has been incorporated as a strict requirement for the grant of authorisation for import or manufacture or trade or owning or operation of drones in India. Draft Rule 7 of the Draft Rules states that a company which wants to import/manufacture/trade/own/operate drones in India should have a) its principal place of business in India b) the Chairman and at least 2/3rd of its directors must be citizens of India.
Further, the proviso to Draft Rule 7, explicitly states that the SOEC of such a company should vest in Indian nationals. As mentioned above, from a bird's eye perspective, it seems to be archaic to incorporate this requirement in present times, even more, when there is a global demand towards diluting this requirement. Further, it does indeed seem odd that on the one hand the Government has complete intentions to treat drones independent and separate from aviation and on the other hand, one of the most antiquated aviation law doctrines have been transposed in the Draft Rules.
What's more interesting is that the SOEC requirement is only for an entity, which wants to import/manufacture/trade/own/operate drones in India. No such requirement is imposed on a body, which wants to establish and operate a "Drone port" in India (see Draft Rule 44). Though the Government has indeed left its foot in the door by permitting itself to impose or specify any other conditions as it may deem necessary.
There is no doubt that the Draft Rules are bold and have the potential to make India a drone hub, but the Draft Rules also contain various provisions and / or doctrines, which are now outdated and therefore may require a rethink. A policy cannot be pragmatic and unrealistic at the same time and therefore there is a severe need for the Government to reconsider various provisions in the Draft Rules. As such the public is urged to send in comments to give the Draft Rules a wholistic and well-rounded touch.
Views are personal only.
(Author is a practising Lawyer at Delhi High Court)