Monday, July 29, 2013
Thursday, July 25, 2013
Wednesday, July 24, 2013
Following the Asiana 214 crash earlier this month, a number of people have asked how these incidents affect airlines financially. For those interested, Thomas John Walker, Marcus Glen Walker, Dolruedee Thiengtham and Kuntara Pukthuanthong have a forthcoming paper in the International Review of Law and Economics on that very subject, The Role of Aviation Laws and Legal Liability in Aviation Disasters: A Financial Market Perspective (currently available from SSRN here). From the abstract:
Legal liability claims against airlines and airplane manufacturers following an aviation disaster are determined through a myriad of international treaties, intercarrier agreements, and federal and state laws. Which law applies in a specific situation depends on various circumstances surrounding the accident. As a result, pecuniary and non-pecuniary damage awards for the families of the accident victims may vary substantially from case to case. Our study examines how aviation disasters affect the short and long-term performance of U.S. airlines and U.S. airplane manufacturers and explores the factors that drive the performance differences. While prior research has largely focused on brand name effects and rising insurance premiums as possible determinants of stock price losses, our results suggest that the regulatory environment that applies to a given aviation accident has a significant impact on how the market reacts to its announcement. Ceteris paribus, we find that accidents that are governed by state laws which place no limit on damage claims entail particularly large stock price declines. Accidents for which federal laws or international treaties restrict claimable damages, on the other hand, are associated with smaller stock price drops.
Tuesday, July 23, 2013
Wednesday, July 17, 2013
Monday, July 15, 2013
Friday, July 12, 2013
Here's a quick rundown of some of the most noteworthy aviation stories from week's end:
- Another Dreamliner caught fire, this time at Heathrow.
- US Airways shareholders have approved the proposed merger with American.
- The FAA has finalized the rule changes on pilot qualifications that were proposed and made available for public comment back in February.
- The EU has removed Philippine Airlines from its blacklist. Philippine authorities are still working to secure approval for the State's other carriers and to convince U.S. regulators to upgrade the country from Category 2 to Category 1 status.
Thursday, July 11, 2013
During a conversation about Asiana Flight 214 earlier this week the question was raised whether passengers would receive advance payments or have to wait for their claims to be settled or litigated. I believe the question to have been prompted by what I consider a misinterpretation of Article 28 of the Montreal Convention. In researching this issue I've come across multiple examples, including a few journal articles, in which Article 28 is described as requiring all carriers to provide advance payments to meet the immediate economic needs of persons in injurious or fatal aircraft accidents, with the amount of advance compensation to be determined by national law. This interpretation appears to be contradicted by the text of Article 28:
"In the case of aircraft accidents resulting in death or injury of passengers, the carrier shall, if required by its national law, make advance payments without delay to a natural person or persons who are entitled to claim compensation in order to meet the immediate economic needs of such persons. Such advance payments shall not constitute a recognition of liability and may be offset against any amounts subsequently paid as damages by the carrier." (emphasis added)
The clearest interpretation to me is that not only does each State determine the amount of advance payments required of its carriers, but whether those payments are required at all. This also comports with my understanding of why Article 28, which was not in the Warsaw Convention, was added in 1999. Two years prior, the European Community had adopted regulation 2027/97 which required community carriers to make advance payments sufficient to meet economic needs within 15 days of the identification of the person entitled to compensation. The regulation set a minimum payment in the event of death of at least 15,000 Special Drawing Rights (SDRs) which was later increased to 16,000 SDRs by regulation 889/2002. It is my understanding that Article 28 was intended to enable regulation 2027/97 to coexist with the Montreal Convention, rather than to impose its substance on all contracting States. I'm not currently aware of any States not subject to regulation 2027/97 that similarly require their carriers to make advance payments. If any readers know of other States with advance payment requirements, I'd encourage you to please list them in the comments.
Assuming my reading is correct, this makes Article 28 a somewhat unusual provision. It runs contrary to the Convention's primary purpose of creating a uniform liability regime for international carriers. Of course, courts around the globe have varied in their interpretations of a number of the Convention's articles so the notion of uniformity shouldn't be oversold. Nonetheless, Article 28 would be unique in affecting plaintiffs differently depending on the nationality of the carrier, rather than the jurisdiction in which the claim is heard. For example, with regard to Asiana Flight 214, if the Republic of Korea requires Asiana to provide advance payments to injured passengers (which, again, I don't believe to be the case) then Asiana will have to do so regardless of whether passengers bring suit in China, South Korea or the United States.
Wednesday, July 10, 2013
In Monday's post on Asiana 214 we were overly hasty in writing that all plaintiffs will have their choice of bringing claims in the U.S. or South Korea. Jurisdiction is partially dependent upon the ticketing situation of each passenger and its certainly possible that some of the plaintiffs will not be able to bring claims in U.S. courts.
The Wall Street Journal has a good rundown of the jurisdictional questions raised by the Asian Flight 214 crash. Actions for damages under the Montreal Convention must be brought according to the jurisdictional rules set out in Article 33 of the Convention. Generally speaking, claims can be brought in the State of domicile or principal place of business of the carrier (South Korea in this case), the State in which the ticket was purchased (if the airline has a place of business there), the passenger's final destination, or the State of the passenger's principal and permanent residence (if the carrier operates services there).
Without knowing the individual circumstances of each passenger, we can still say with certainty that any of the passengers can bring a claim in South Korea. The Chinese and American passengers will also likely be able to bring suit in their home States, assuming that's where they have their permanent residence. The more difficult question will be whether Chinese or South Korean passengers can bring claims in the United States. Those flying on one-way tickets to San Francisco will have jurisdiction to bring their claims in the U.S. under the final destination rule. However, non-U.S. residents flying on round-trip tickets may lack a jurisdictional basis to bring their claims in U.S. courts as their final destination would be considered Seoul or Shanghai. As the article points out, courts have not applied this rule consistently and this limitation only applies to claims against airlines under the Montreal Convention.
Tuesday, July 9, 2013
Monday, July 8, 2013
Obviously the big news over the weekend was Saturday's crash landing by Asiana Airlines flight 214. Here is a quick legal primer on Asiana's likely liability based on what is known so far:
- Any legal claims brought by passengers or their relatives against Asiana Airlines will be governed by the 1999 version of the Convention for the Unification of Certain Rules for International Carriage by Air, otherwise known as the Montreal Convention.
- This is because it was an international flight and all three of the States which could be considered origin or destination points (China, South Korea and the United States) are all parties to the 1999 Convention.
- Under Article 33 the Montreal Convention, plaintiffs will have their choice of bringing their claims in either South Korea or the United States. Additionally, any deceased or injured passengers who purchased their tickets in China or who are residents of China should be able to have their claims heard there as well.
- Unlike the regime under the Warsaw Convention, which predated Montreal, there is no hard cap on the amount of damages recoverable by the passengers.
- All passengers should be able to recover provable damages up to 113,100 Special Drawing Rights. Plaintiffs with larger damages should be able to recover up to the extent of their injuries unless Asiana can prove the accident did not result from its own pilots' negligence but was solely the fault of San Francisco International Airport.
- If the airport is at all responsible, Asiana will be able to bring a claim against the airport for at least partial indemnification for its liability to passengers.
- The Montreal Convention doesn't preclude the passengers' ability to bring claims against the airport or manufacturer should those prove the better legal strategy.
- While U.S. courts don't award damages under the Montreal Convention solely for emotional distress, in a case like this plaintiffs should have no trouble demonstrating physical injuries that will allow them to also recover for provable emotional damages.
Wednesday, July 3, 2013
After a long early summer hiatus, we will be returning to a regular blogging schedule beginning next week following the American Independence holiday. But we wanted to check in with a few thoughts on the fascinating events surrounding the rerouting of Bolivian President Evo Morales' return flight from Moscow. While there are conflicting news reports as to exactly what happened, it appears that President Morales' aircraft, while en route from Russia to Bolivia, was denied permission to enter French, Spanish, Italian and Portuguese airspace. The aircraft landed in Austria to refuel, where, according to some reports, it was searched by local authorities before finally being permitted to continue the flight home today. It is widely believed that the aforementioned governments denied Morales overflight authorization because of pressure from the United States government which believed Edward Snowden, wanted in connection with U.S. security leaks, may have been aboard the aircraft.
Leaving aside the many related issues that are outside the purview of this blog, the denial of overflight authorization to Morales' aircraft has garnered criticism from many Latin American leaders and raised questions of international law. We thought it would be helpful to provide a few brief points of reference with regard to the relevant international aviation law surrounding the situation.
First, overflights by State aircraft fall largely outside of the 1944 Convention on International Civil Aviation, the basis for most of what we discuss as "international aviation law." Article 3 of the Convention limits the Convention's application to civil, as opposed to State, aircraft. While State aircraft isn't fully defined, there is no question that aircraft transporting a sitting State president on official State business qualifies.
Article 3(c) prohibits State aircraft from flying over the territory of another State without prior authorization. While obtaining overflight authorization for diplomatic aircraft such as the one carrying Morales is often routine (a description of U.S. authorization procedures can be found here), States have a clear legal right to deny such authorization. We don't currently know enough about what Morales' original intended flight path was, and what, if any, authorizations were obtained prior to takeoff only to be later revoked. Given States' broad sovereign authority in this area, there doesn't appear to be any violations of international law, at least not as relates to aviation. Of course, such an unusual incident is certain to carry diplomatic and political consequences regardless of legality.