IBA Annual Conference 2019: Report on International aviation litigation – a study in comparative law

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Anthony J Cordato
Cordato Partners Lawyers, Sydney
ajc@businesslawyer.com.au

 

Wednesday 25 September 2019

 

 

Moderator

Benjamin Graham-Evans  Smith Gambrell & Russell, London, England; Membership Officer, Aviation Law Committee

Speakers

Andrew Harakas  Clyde & Co US, New York, USA

Maria Regina Lynch  Motta Fernandes Advogados, São Paulo, Brazil

Kostiantyn Likarchuk Kinstellar, Kiev, Ukraine

 

Benjamin introduced the topic and the panel.

Litigation arising from aviation disasters can be extremely challenging and may be made even more complex when the disaster is in the context of international transportation.

This international panel discussed:

• a comparison of the law of different countries on substantive issues of liability and damages (including choice-of-law matters);

• special procedures for handling hundreds of claims arising from a common disaster; and

• differences between litigation arising from domestic and international aviation disasters.

The members of the panel are experienced in airline liability, litigation disasters and disputes.

Topic: Introduction to the Montreal Convention, as applies to passenger injury and death

Andrew Harakas, Clyde & Co US, New York, USA

By 1999, the concept of limiting the carrier’s liability to passengers for death and injury under the Warsaw Convention of 1929 was untenable. The Montreal Convention of 1999 (the 'Convention’) lays down the following broad principles for bringing action:

• an air carrier is strictly liable for an accident which causes bodily injury or death (Article 17);

• the carrier bears the burden of proof to avoid liability by proving that they were not negligent or that it was the fault of a third party;

• the carrier is liable for full compensation if Article 17 is satisfied and the carrier does not prove that it was not at fault;

• the passenger has a choice of five places to commence their action, including their domicile; and

• actions must be brought within two years of the accident.

The Convention does not address many issues such as who can sue, what types of damages can be claimed (other than prohibiting punitive damages) and rights of recourse. These issues are left to the local law.

The interpretation of the Convention varies from country to country, for example:

• ‘bodily injury’ may include damages for mental anguish that flow from a bodily injury, which (in the United States) can be very significant and can amount to many millions of dollars;

• whether the courts can decline jurisdiction (and declare a case of forum non conveniens) varies: this may occur in the US, whereas in Europe the courts do not decline jurisdiction;

• the two-year limitation may be a strict condition precedent in some jurisdictions, for example in the US; equally, in other jurisdictions it can it be ‘tolled’ (paused); and

• in some jurisdictions, the Convention may pre-empt the local law.

Topic: The Montreal Convention in Brazil

Maria Regina Lynch, Motta Fernandes Advogados, São Paulo, Brazil

Brazil has ratified the Montreal Convention (the 'Convention’), but has imbued it with local rules.

In Brazil, a ‘bodily injury’ must be a serious bodily injury which is defined as where a person has to be hospitalised for two days within seven days after the accident.

In Brazil, the Convention is not applied to pre-empt local law. In the Air France Flight 447 disaster, the family of the newly married bride who died when the aircraft was lost, sued. The Superior Court of Justice applied the Brazilian Consumer Code (the 'Code’) based on the contract with the airline (not the Convention) to award damages, including moral damages to the parents and the grandparents of the victim. The Code pre-empted the Convention because it was constitutional.

Brazil had jurisdiction because the contract was entered into in Brazil.

In Brazil it is valid to settle cases with full releases.

Topic: The Montreal Convention in South Korea

Una Cho Kim & Chang, Seoul, South Korea. Una specialises in cross-border disputes, which includes international arbitration and airline crashes.

South Korea is a Montreal Convention country and has applied this convention domestically.

There is a clear trend to compensate consolation losses. Traditionally, damages for mental suffering were small, based on traffic accidents.

In 2016/17, the Supreme Court issued a guideline for air accidents, including three procedural steps:

• a cap for air crashes of US$200,000;

• consideration of whether there any aggravating factors such as fraud or a criminal offence; and

• consideration of whether individual cases have any aggravating or mitigating factors.

The range of damages is US$100,000—US$500,000.

 

Topic: The Montreal Convention in Ukraine

Kostiantyn Likarchuk, Kinstellar, Kiev, Ukraine. Kostiantyn heads the litigation practice group.

The MH17 crash has sparked a lot of interest in air law in the Ukraine.

Ukraine is a Montreal Convention country and has applied this convention domestically.

In a 2013 South Airline crash, the Court awarded damages for mental suffering to survivors, but the amounts were not high.

The ‘no negligence’ defence is relevant to MH17: Ukraine permitted flights in airspace in high altitude, which could lead to claims against the state of Ukraine.

Ukraine courts will review limitation periods if there is a compelling reason. 

Ukraine does not recognise settlements, in that it does not enforce releases. There are two ways around this: making the settlement a court judgment, or accepting that settlements are not enforceable within Ukraine, but are enforceable outside of Ukraine.

Panel discussion

Harakas: Was the airline in MH17 negligent by not diverting, particularly as other airlines had diverted their flight paths? The question has not been answered.

Plaintiffs only have to show 0.1 per cent negligence to obtain full compensatory damages.

In MH370, there is no evidence of what happened. As the airline bears the burden of proof, it will be liable for full compensation.

Commercial aircraft shoot-down incidents raise complicated issues of state and sovereignty. There is no prohibition on shooting down aircraft for security reasons. Nowadays, if state actors are involved, you would expect an ex gratia payment to be made.

Graham-Evans: With shoot downs, the evolution of the claim has been limited.

Harakas: Pan Am Lockerbie is a good example of where political pressure on Libya resulted in a payment of US$10m per passenger, although it took years for that to happen.

Likarchuk: MH17 is a difficult case because Russia denies involvement: we need to wait for the criminal case to be decided. The next question will be, where to sue? Suing in Ukraine is a possibility, but damages are low.

Harakas: It is interesting that the Korean Supreme Court is prepared to award a premium for compensation cases for aircraft disasters because they are mass disasters. In the US, studies have shown that juries award a 15–20 per cent premium for aircraft disasters, compared with motor vehicle cases.

Cho: With mass disasters there is huge impact, especially with six years of investigations, compared with a motor vehicle accident. The Supreme Court also took into account the fact that airlines are covered by insurance in setting its guidelines.

Lynch: The Brazilian Courts will award punitive damages.

Harakas talked of recent compensation cases in the US for non-economic damages, where jury verdicts of more than US$100m have been made.

Cho: That is a strong incentive for Koreans to sue in the US courts. In the Korean Air Lines Flight 015 crash, almost all of the plaintiffs sued in the US.

Harakas: The argument of why a person should become a millionaire when they were not previously a millionaire before does not hold water in the US. Also, it is difficult to disturb a jury verdict even when the judge considers an amount to be too high. If the judge reduces the verdict, the plaintiff can either accept the lower amount or can request a new jury trial.

Sierra: In terms of being able to sue in the US, there is always a link to a manufacturer of the airline parts or seller of the tickets.

Harakas: This is an acceptable jurisdictional hook to the US. It opens the door to settlements which are higher than those at home, despite the high legal fees.

Melling: Which states in the US are favourites for plaintiffs?

Harakas: Los Angeles and Chicago (the Illinois State Court is very pro plaintiff) are favourites and are known to deny motions for forum non conveniens.

In the US, a suit may be dismissed for non conveniens and not be reinstated later, even if the courts in the other country refuse to accept jurisdiction. If a plaintiff ends up with no jurisdiction in which to sue, they can sue their lawyer for malpractice, for having chosen to sue in the wrong jurisdiction.

Releases must be comprehensively worded, but how they will be interpreted (especially outside of the US) is difficult to anticipate.

 

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