Q&A with Airbus’s Litigation Head Karl Hennessee: Hong Kong’s Future in International Arbitration and the Impact of COVID-19 on Dispute Resolution

Friven: 
Tell us a little about your background and how you ended up in your current role at Airbus.

Karl: 
I did my undergraduate degree in Germany and went to the London School of Economics and Political Science for postgraduate studies. I then completed my Juris Doctor degree at the SMU Dedman School of Law in Dallas, Texas. I chose SMU because I have always been interested in aviation, and it was one of the few special schools where you could specialize in aviation law.

After graduating from law school, I worked for the German government’s antitrust agency and DaimlerBenz before joining private practice in Germany. I later moved to a U.S. law firm, which at the time represented Airbus. I was hired by Airbus in 2002 and moved to Toulouse, where Airbus is headquartered. I was eventually promoted to become Airbus’s Head of Litigation.

I left Airbus in 2013 and had a brief stint as VP Public Law and Technology at an energy services company in Houston, Texas. Then in 2016, Airbus created a new group legal department, and I was hired back as Head of Litigation, Investigation and Regulatory Affairs.

Friven: 
You have been an old friend of Sidley’s. What has your experience with the firm been like?

Karl:
Indeed, Sidley and I go back a very long way. In 2003, when the dispute regarding aircraft subsidies was heating up, the then-head of political affairs of Airbus asked if I would help study the possibility of a World Trade Organization (WTO) dispute. I began working with Scott Andersen and Todd Friedbacher of Sidley on the WTO matter, which crystallized into a major dispute that is ongoing today. I have been really impressed with the dedicative mindset and energy of the Sidley team.

Over the years I have also worked with Sidley’s arbitration and regulatory teams on many occasions. Then approximately five or six years ago, Yvette Ostolaza, who coincidentally had been my associate mentor when I was a summer clerk in the U.S., moved to Sidley. She now co-leads Sidley’s Litigation practice, and we have re-established our working relationship. Yvette and her team have been assisting us in a major dispute recently, and their work has been fabulous.

Friven:
Congratulations on your recent election to the HKIAC Council and the Proceedings Committee, which is a key standing committee under the Council’s auspices. How has your experience been so far?

Karl:
I have been impressed with how flexible and open-minded HKAIC is as an institution. The Secretariat team is very efficient and responsive to the needs of the end users. Issues relating to the application of the HKIAC Rules are quickly identified, analyzed, and brought before the Proceedings Committee for deliberation and resolution. In my view, the Proceedings Committee is one of the anchors of the HKIAC’s flexibility, giving it an important strategic advantage over many other institutions. The Proceedings Committee comprises experienced practitioners drawn from a variety of legal traditions and jurisdictions, including yourself. The fact that we are from very different backgrounds has allowed us to bring our unique views and perspectives for the benefit of the organization and its practices as a whole.

Friven:
Indeed, it has been a pleasure working together, and we look forward to welcoming you to Hong Kong more often. How do you see Hong Kong’s future as a preferred arbitral seat, given the recent U.S.-China tensions?

Karl:
Given the importance of China as a market to businesses, I particularly value the close relationships and access that HKIAC has developed within China. The U.S.-China geopolitical rift is quite unfortunate, and I hope the issues will be resolved by constructive dialog.

I expect the political situation might see HKIAC’s role, and Hong Kong’s more generally, changed but not threatened per se. The key is maintaining its neutrality. When I teach in law schools I always tell my students that there is intrinsic value in selecting a truly neutral venue; one should not negotiate for a particular seat just because one sees a perceived advantage in selecting that seat.

Instability does create disputes, and we will see many of those disputes being resolved in Hong Kong and by the HKIAC because ultimately it is a great venue and institution with a good record of successfully administering international commercial arbitrations. We are also seeing HKIAC making good inroads into new markets, for example non-U.S.-related disputes in connection with the Belt-and-Road Initiative. I have every confidence that Hong Kong, so renowned for its entrepreneurial spirit, will continue to adapt and reinvent in the face of new challenges and opportunities.

Friven:
Apart from geopolitical tensions, we are of course facing an unprecedented crisis in the form of a pandemic. In your view, how has COVID-19 impacted businesses and the way they approach disputes?

Karl:
In the near term, COVID-19 has been and will continue to pose serious challenges for most businesses. This crisis is truly different from other crises.

I gave a keynote address last year at the “ADR in Asia Conference: Arbitrating for Settlement” during Hong Kong Arbitration Week on how to use arbitration as a dispute resolution mechanism to position yourself for a settlement. I have seen my fair share of disputes throughout my career, and I could usually tell if a dispute is going to settle. But settlement is simply much harder to achieve now.

Generally speaking, a settlement involves cash or some future business opportunity. These days, cash is at a premium, and future business investment has also often fallen casualty to a crisis of confidence. Business parties can seem less willing to take a chance on future opportunities, and some are instead willing to liquidate and unwind relationships. Existing disputes that would have settled pre-COVID now look increasingly unlikely to do so.

Friven:
How has COVID-19 affected you on a personal level?

Karl:
I had planned to be in Japan for the Summer Olympics, but that was no longer possible. I am also planning to visit Hong Kong for the Arbitration Week this October. Hopefully by then the pandemic situation will have subsided enough to allow that.