HOW TO CALCULATE THE LIMITATION OF LIABILITY IN CASES OF BAGGAGE LOSS UNDER THE MONTREAL CONVENTION 1999

In the Canadian case of Naeini v Air Canada [2019] O.J. No. 838 the Ontario Superior Court of Justice shed light on how to calculate the limitation of liability in cases of baggage loss under Art 22(2) of the Montreal Convention 1999 (MC). This is an important issue, as Art 22(2)MC provides that the airline’s liability in the case of loss, damage, destruction or delay (LDDD) of a baggage is currently limited to 1,288 SDRs (1,131 SDRs at the time of the loss) per passenger (rather than on a per baggage basis). Furthermore, the MC does not identify who is a passenger for the purposes of Art 22(2), leaving two (not necessarily conflicting) options available: the passenger whose name is in the baggage tag or the passenger who hands over the baggage to the airline and whose personal effects are packed therein.

A family of four was travelling from Bogota to Toronto via Miami with several pieces of baggage and with the baggage tags issued in the name of Mr Naeini, the father of the family. Four pieces of baggage were never delivered to them and all four members of the family brought a claim (one claim per person) for CAD$6,800 (plus tracing expenses and punitive damages for which the Court did not permit recovery). The claimed amount was within the total limit of the four passengers (4 passengers x 1,131SDRs/CAD$2,040=CAD$8,160), but well exceeded the allocation to Mr Naeini on whose name the tags were issued (1 passenger x 1,131SDRs/CAD$2,040).

The Superior Court of Ontario, on appeal, permitted recovery of the full amount, giving a literal interpretation of the term passenger in Art 22(2)MC:  it permits “a claim by each passenger who could demonstrate that his or her bag was handed to the carrier and was checked by the carrier, regardless of whose name was set out on the baggage tag pertaining to such bag”. It further agreed with the Deputy Judge that Air Canada treated the set of baggage as checked in by all four passengers on the basis that it did not charge Mr Naeini extra baggage fees.

Furthermore, the Court distinguished its earlier decision in the case of Holden v. ACE Aviation Holdings (2008), 296 D.L.R. (4th) 233 where Mrs Holden checked one baggage containing items of hers and her husband (who was travelling with her). The baggage was lost and the Holdens unsuccessfully argued that both qualified as passengers under Art 22(2)MC so that each could take advantage of the limit (that was set at 1,000SDRs at the time of the loss). In rejecting their claim, the Court held that the term passenger “denotes an individual who is a passenger and who has checked the piece of baggage that is lost”. This interpretation prevents the carrier from facing unquantified liability, while not compromising the position of the passenger as “he or she is at liberty to check his or her own bag and/or make the special declaration contemplated in the Article”.

The Court in Naeini distinguished the Holden decision on the basis that it applies to a different situation, namely where two or more passengers check in the same baggage. It also held that the ratio of Holden does not address the term “checking” baggage and its relation to the issuance of baggage tags. Responding, also, to the unquantified liability implication, the Court argued that the Naeini interpretation has the opposite result, as it “establishes a fixed maximum liability of a carrier on the basis of the number of passengers on any given flight”.

The decision of the Superior Court of Ontario is not surprising as it follows the judicial trend to opt for the consumer-protective interpretation of the Convention’s provisions in cases of ambiguity. At the same time, it puts into perspective the practice in multi-party bookings to issue tags in the name of one of the passengers which happens for reasons of convenience and to facilitate their tracing. There is nothing in the decision to cast doubt on the legitimacy of this practice under the MC, yet it prevents its use as a way of interpreting Art 22(2)MC.

INJURING YOUR THUMB ON BOARD AN AIRCRAFT: IS IT AN ACCIDENT UNDER THE MONTREAL CONVENTION 1999?

In the recent Australian case of Salih v Emirates (No. 2) [2019] NSWDC 715 the District Court of New South Wales applied the Montreal Convention 1999 (MC) to the thumb injury of a passenger that took place on board an aircraft. The claimant was on a flight from Dubai to Sydney (the flight was part of a return itinerary from Sydney to Istanbul via Dubai). During the flight, she opened the hatch door of the overhead compartment to retrieve infant formula for her baby, but the door fell quickly, and not with the usual slower hydraulic mechanism, near the base of her thumb causing her pain. As a result of the soft tissue injury at her thumb, she claimed that she experienced significant further injuries upon arrival that disrupted her daily professional and personal activities.

The main question for the District Court was whether the injury to the claimant’s thumb (bodily injury) was caused by an accident on board the aircraft under Art 17MC. Relying predominantly on the decision of the Supreme Court of Victoria in Di Falco v Emirates (No 2) [2019] VSC 654, the District Court  held that it was not and dismissed the claim of Mrs Salih.

In Di Falco, the claimant fainted on board an aircraft as a result of dehydration, fracturing her ankle. The Court held (following Olympic Airways v Husain 124 S Ct 1221 (2004)) that the inaction of the crew (failure to assist a distressed passenger) could constitute an accident under Art 17MC, Yet, in the case at hand the crew’s behaviour did not constitute an accident as the passenger’s requests for water “were not refused, merely deferred to later as a result of competing operational demands, a regular occurrence during flights”.

Applying Di Falco, the District Court in Salih held that to suffer an accident a claimant is required to “ identify an event or happening that is external to the passenger which may arise from an act or omission or from a combination of acts or omissions and …the event must be unexpected or unusual. A passenger’s own reaction to the usual, normal and expected operation of the aircraft or any part of it is not an accident”. Therefore, the issue at stake was whether the operation of the door was defective. The Court concluded that the door was operating normally as i) the claimant did not report it as defective at the time of the injury;  ii) her husband gave evidence that the door opened in the normal fashion when he later opened the door; and iii) the maintenance logs of the flight did not disclose any defects.

Since no abnormality in operations was identified, the District Court rightly held that there was no accident and dismissed the claim: “the thumb was injured by the door dropping in the usual, normal and expected way. That is not an accident within the Convention. What it is, is merely the occurrence of an injury itself”.

 

LIAW V UNITED AIRLINES: AN UNSUCCESSFUL ATTEMPT TO APPLY DOE V ETIHAD AIRWAYS IN A MONTREAL CONVENTION 1999 CASE

In the case of Liaw v United Airlines (ND Cal, 2019) the US District Court for the Northern District of California considered the application of the controversial case of Doe v Etihad Airways 870 F3d 406 (6th Cir, 2017) in a passenger claim governed by the Montreal Convention 1999 (MC).

Mr. Liaw was en route from Chicago to London when the aircraft made an emergency landing at Goose Bay due to a crack in the outer layer of the cockpit windshield. Mr Liaw, having sought medical advice ten months after the flight, brought a claim against United Airlines under Art 17MC. He argued that he sustained back injury and emotional distress as a result of an accident, namely the rapid descent of the aircraft during the emergency landing.  It is worth reporting that no injuries were reported at the time of landing and no other passenger brought a claim against United Airlines.

To recover for emotional distress, Mr Liaw relied on the case of Doe v Etihad Airways which held that mental injuries accompanying bodily injuries are recoverable under the MC.  This decision has questioned the prevailing interpretation of Art 17 which permits recovery for mental injuries only when they are directly caused by the bodily injury.

In the case of Doe, the passenger was pricked by a hypodermic needle that that was left by a previous passenger into the backseat pocket drawing blood from her finger. She claimed damages under Art 17MC for the physical injury (the prick in the finger) and for mental injuries caused by the potential exposure to several diseases, including HIV and hepatitis. Etihad, following a long line of case law, defended the claim on the basis that the mental injuries were caused by the nature of the accident (struck by an “orphan” needle), rather than the physical wound in the finger. The Court of Appeals rejected this argument permitting recovery for both the physical injury and the ensuing mental injuries. For the Court the wording of Art. 17 ( “The carrier is liable for damage sustained in case of death or bodily injury of a passenger) supports a conditional test; the  casual test was (wrongly for the Court of Appeals) introduced by case law to protect air carriers under the Warsaw Convention. With the MC emphasizing the protection of passengers, the Court decided to break-free from this long-established case law, permitting recovery “ for her mental anguish, regardless of whether that anguish was caused directly by her bodily injury or more generally by the accident that caused the bodily injury. That is because, either way, Doe’s mental anguish is damage sustained in case of–ie, in the event of a compensable bodily injury”.

Unlike Doe, Mr Liaw’s argument that the mental distress was recoverable as a result of the back injury was not successful.  The District Court dismissed the claim for two reasons. Firstly, there was no evidence that the flight’s decent rate was abnormal. As such, the Court held that the alleged bodily injury was not caused by an accident, namely an unusual and unexpected event that is external to the passenger. Secondly, the Court struck out the testimony of the claimant’s medical expert that the alleged back injury was caused by the decent as “speculative” or, as emphatically put, “Dr. Lewis’s bare-boned conclusion of causation essentially parrots attorney argument”.

Without evidence of a bodily injury caused by an accident, the District Court rightly refused to apply the Doe rationale. As a result, the quest to establish whether the interpretation of Doe is attracting supporters continues.

 

A “RISK CHARACTERISTIC TO AIR TRAVEL” AND ARTICLE 17 OF THE MONTREAL CONVENTION 1999: IS THE TALMUDIC DEBATE RESOLVED BY THE CJEU?

When a judgment begins with references to the importance of protecting the interests of air passengers, it is a foregone conclusion that it will not go the way of the air carrier. The case of GN v ZU, Case C-532/1819 December 2019 proved to be no different.

The case was referred to the Court of Justice of the European Union (CJEU) by the Austrian Supreme Court which was faced with the following set of facts: a minor who was travelling with her father from Mallorca to Vienna suffered second-degree scalding when a cup of coffee that was placed upon the tray table of her father tipped over either due to a defect of the table or a turbulence. There was no doubt that the injury was caused by an unusual and unexpected event that was external to the minor, satisfying the widely used definition of the term accident in Art 17 of the Montreal Convention 1999 (MC) as was construed in the American case of Air France v Saks 470 U.S. 392 (1985).

In doubt was whether the term accident is “limited to cases where a hazard typically associated with aviation materialize[s]”. If there is such a requirement, the injuries of the minor were not recoverable under the MC as the spilling of the coffee “has no connection to aviation activity and …[is] likely to occur in other circumstances”.  

Surprisingly, this conundrum was not authoritatively resolved until today. In the German-speaking world there is a preference for risks characteristic to air carriage to constitute accidents. An expression of such preference can be found in the judgment of the Austrian Higher Regional Court of Vienna in this case (which heard the appeal from the Regional Court of Korneuburg).

In the English-speaking world there is no principled approach with two passenger-to-passenger assault cases under the Warsaw Convention System (WCS) demonstrating the divergence of opinion between English and US courts. In both cases female passengers were sexually assaulted during their respective flights. In the case of Morris v KLM Royal Dutch Airlines [2001] EWCA Civ 790 (the issue was not raised in the House of Lords) Lord Phillips rejected any link between accident and the operation of the aircraft under Art. 17. He noted that such a requirement is foreign to the aforementioned definition of the term accident and it was imposed by subsequent to Saks passenger-to-passenger assault cases. As such, it does not stand to judicial scrutiny.

In the case of Wallace v Korean Air 214 F 3d 293 (2nd Cir, 2000) the majority of the Court of Appeals for the Second Circuit held that a weak link between the unusual and unexpected event and the operation of the aircraft should exist in order to have an accident. The Court found that the link was existent in this case as the female passenger “took her seat in economy class on the KAL flight, she was cramped into a confined space beside two men she did not know, one of whom turned out to be a sexual predator. The lights were turned down and the sexual predator was left unsupervised in the dark”.

In the case at hand, the CJEU sided with the analysis of Lord Philips and held that Art 17MC does not contain a requirement that the accident is the result of a “risk characteristic to aviation”. In a judgment that is ridden with policy arguments, the CJEU decided that it contradicts the proclaimed aim of the MC to protect passengers, does not fit into its system of strict and unlimited liability and is superfluous to the ordinary meaning of the term accident.

A significant element for the CJEU is that the carrier can only be exonerated from liability in the first tier or liability of the MC (up to 113,000SDRs/128,800SDRs as of 28 December 2019) in cases of contributory negligence. Imposing such a requirement would give the air carrier additional means to be exonerated, an addition that runs against the system of strict liability of the first tier. Inevitably, this would make recovery for passengers more difficult and breach the celebrated aim of the MC to safeguard their interests. In addition, it is foreign to the definition of accident as an “unforeseen, harmful and involuntary event”.

This decision should not come as a surprise. For the CJEU the requirement of “risk characteristic to air travel” provides an additional layer of protection to air carrier that does not fit into the system of liability of the MC. What is surprising, though, is that the court’s reasoning is rather weak; for example, the Court explains in three lines why the said requirement is foreign to the ordinary meaning of the term accident. It further provides no analysis of the Saks case which remains the main authority on what constitutes accident. Instead, it provides a policy-based decision which confirms that the CJEU has developed a keen interest in distancing the interpretation of the MC from its predecessor. In the Wallace case the Court described the whole debate as a Talmudic one and the CJEU resolved it in a passenger-friendly way.

THE NEW LIABILITY LIMITS OF THE MONTREAL CONVENTION 1999 TAKE EFFECT ON 28 DECEMBER 2019

The main criticism of the Warsaw Convention System (WCS) after the Second World War was the low liability limits in personal injury claims. An increase of the limits required an amendment of the WCS via diplomatic procedures which took considerable time as States had different views on how much a human life was worth. The outdated limits eventually led to the implementation of the Montreal Convention 1999 (MC) which has not replaced the WCS yet, but is applicable to most parts of the world (136 State Parties as of 28 December 2019).

To avoid a similar fate, Art 24MC provides that its limits of liability will be reviewed by the International Civil Aviation Organisation (ICAO) at 5-year intervals (“escalator clause”). They will be increased, if the inflation factor measured by the weighted average of the annual rates of increase or decrease in the Consumer Price Indices of the States whose currencies comprise the SDR (USA, Japan, EU, China and the UK), exceeds 10% since the previous revision. The increase becomes effective six months after ICAO notifies all State Parties of its intention, unless most of the States Parties disapprove it within three months of the notification. No such disapproval has ever occurred. There is also an extraordinary procedure that permits the revision to take place at any time provided that the inflation rate exceeds 30% since the previous revision and one-third of the State Parties express such desire. This procedure has not been used yet.

Since the MC came into force on 4 November 2003, ICAO has reviewed the limits in 2009, 2014 and 2019. The first review led to their increase since 30 December 2009, yet the second one did not trigger an increase as the inflation rate was below the 10% threshold.

The third review took place this year (2019) with ICAO willing to increase the limits as the inflation rate amounted to 13.9%. No disapprovals were registered within the 6-month period and the following new limits will take effect on 28 December 2019 (the table is provided by ICAO @  https://www.icao.int/secretariat/legal/Pages/2019_Revised_Limits_of_Liability_Under_the_Montreal_Convention_1999.aspx) :

 

Montreal

Convention

of 1999

Original limit (SDRs) Revised limit (SDRs)

as of 30 December 2009

Revised limit (SDRs)

as of 28 December 2019

       
Article 21

passenger claims for bodily injury or death

 100 000 113 100 128 821        
Article 22, paragraph 1

claims for delay

4 150 4 694 5 346        
Article 22, paragraph 2

claims for LDD of baggage

1 000 1 131 1 288        
Article 22, paragraph 3

claims for LDD of cargo

17 19 22        

 

Existing claims will not be affected by the 2019 limits but will be governed by the 2009 ones. The new limits will apply to incidents that take place on or after the 28th December 2019. The International Air Transport Association (IATA) has already amended Resolution 600B, which contains the standard air waybill conditions of contract, to apply the new limit of 22 SDRs per kg to all international carriage of goods (condition 4).  

SLIP-AND-FALL CASES UNDER THE MONTREAL CONVENTION 1999:  IS BARCLAY REVISITED?

Surprisingly, cases dealing with falls of passengers during air transportation governed by Art. 17 of the Warsaw Convention System or the Montreal Convention 1999 are few and far between. The leading case in England & Wales (and arguably internationally) is Barclay v British Airways plc [2008] EWCA Civ 1419 where the Court of Appeal held that there was no accident when a passenger slipped on a strip embedded in the floor of the aircraft covering the seating tracks. The strip was a permanent feature of the aircraft, complied with aeronautical regulations and was not malfunctioning. The injury was not caused by an accident as it was the result of the passenger’s own reaction to the normal operation of the aircraft rather than of an unusual and unexpected event that is external to the passenger.

Having said that, Courts have held that the presence of water on stairs used to embark an aircraft qualifies as an accident , because it is both unexpected or unusual and external to the passenger (Gezzi v British Airways plc 991 F 2d 603 (9th Cir, 1993)), as does a six-inch step down between the jetway and the door of the aircraft, because it is unexpected and unforeseen although it complies with the operating procedures of Heathrow Airport (Singhal v British Airways plc (Wandsworth County Court, 11 October 2008)).

Eleven years since Barclay the English High Court was called to decide a slip-and-fall case in Labbadia v Alitalia (Societa Aerea Italiana SpA) [2019] EWHC 2103 (Admin). The facts were rather straightforward. A 72-year old frequent flyer fell from the stairs while disembarking from the rear of the aircraft at Milan Linate Airport. The rear stairs did not have a canopy (unlike the front ones which were covered) accumulating ice and snow as Milan was experiencing poor weather conditions at the time of arrival. The passenger brought a claim against the carrier for bodily injury under Art 17 of the Montreal Convention 1999.

Initially, the claimant relied on Gezzi and argued that the presence of snow and ice at the stairs is the unusual and unexpected event that caused him the injury to his right dominant shoulder and right pelvis. The Court strongly disagreed holding that the presence of snow and ice is simply “a state of affairs”, not an event  per se, and there is “nothing unexpected or unusual about adverse weather conditions in Milan during the month of February”. In that respect, the Court sided with the line of cases that have “demonstrated a reluctance to accept that weather…can sensibly be characterised as an unusual or unexpected event”.

This was not the end of the story as the High Court investigated the condition of the rear stairs. The air carrier argued that they complied with aeronautical regulations and were not in a defective condition. As such, there was no external event causing the injury, much like the strip in the Barclay case. The Court agreed but held that the decision to use stairs without canopy during poor weather conditions constitutes the external, unusual and unexpected event that triggers the carrier’s liability under Art 17 of the Montreal Convention 1999. This decision, the Court continued, is not in compliance with the airport’s procedures which suggest that canopies shall be used in bad weather “where possible” or, alternatively, the stairs should be free from ice and snow. Satisfied that they were not clear from ice and snow at the time of disembarkation, the Court held that the air carrier is liable as the bodily injuries of the passenger were caused by the abnormal operation of the aircraft that was external to him .

The decision in Labbadia clarifies a few issues regarding cases of slips-and-falls under the Montreal Convention 1999. Firstly, it does not overrule Barclay which remains authority that injuries caused by the interaction of passengers with permanent (and properly functioning) features of the aircraft are not recoverable. There is nothing in Labbadia doubting the main premise of Barclay. Secondly, Labbadia makes clear that compliance with industry standards or airport practices will not exonerate the carrier, if the aircraft’s feature in question is not fit for purpose. Thirdly, Labbadia adds to the argument that the presence of snow, ice or water on the stairs is not by itself an unusual or unexpected event. In that respect, it questions the decisions which have found otherwise. It is  interesting to see what its impact will be in future slip-and-fall cases.

 

IS THE COMMERCIAL PARADOX OF THE MONTREAL CONVENTION 1999 IN THE CARRIAGE OF GOODS BY AIR FINALLY RESOLVED?

In Underwriters at Lloyds Subscribing to Cover Note B0753PC1308275000 v Expeditors Korea Ltd 882 F 3d 1033 (11th Cir, 2018) the US Court of Appeals for the 11th Circuit examined the scope of application of the Montreal Convention 1999 (MC) over the combined air and land carriage of cargo. This is the first US decision to look carefully into Art 18(3)MC. This provision has caused quite a stir in the air cargo world as it was clumsily re-drafted in the MC by deleting the airport requirement of the Warsaw Convention System (WCS).  

Under the WCS, the carrier is liable for the Loss, Damage or Destruction(LDD) of goods that occurs during carriage by air, which is defined as the “period during which the … goods are in charge of the carrier, whether in an aerodrome or on board an aircraft or, in the case of a landing outside an aerodrome, in any place whatsoever”. This provision created a clear rule in that it applied the WCS on an airport-to-airport basis, with the prevailing view interpreting the term “airport” to cover the airside area (airport limitation). English courts, being in the minority, adopted a wider meaning to include both airside and landside areas of an airport (RollsRoyce plc v Heavylift-Volga DNEPR Ltd [2000] 1 Lloyd’s Rep. 653).

This clear rule was disturbed in the MC which deleted the phrase“whether in an aerodrome or on board the aircraft or,in the case of a landing outside an aerodrome, in any place whatsoever”. As such, carriage by air is defined as “the period during which the cargo is in the charge of the carrier”.Inevitably, this change opens up the possibility of applying the MC to LDDs that take place outside airports.

This change of wording should not have caused such turmoil as the MC(same as the WCS) expressly prohibits its application to land carriage: “[t]he period of the carriage by air does not extend to any carriage by land, by sea or by inland waterway performed outside an airport” (carriage by land restriction).  Only the following two exceptions are permitted: 1. The MC applies in cases of unlocalised LDDs provided an AWB covers both the air and land segments and the land segment takes place for the delivery, loading or transshipment of the goods (presumption of loss) ; and 2.The MC applies to land carriage if the carrier substitutes air carriage by road carriage without the consent of the consignor (unlikely scenario as courts, including the Expeditors one, have ruled that the standard AWB provides such authority). 

The following two reasons lie behind the continued controversy over the multimodal application of the MC:

  1. A strong minority of US courts have applied the air law conventions to land US carriage which follows international air carriage and is covered by the same AWB. With the Carmack Amendment not applicable in such cases, US courts have justified this application on reasons of commercial certainty (one contract-one law). They either do so by misapplying the “presumption of loss” or applying (without much analysis) the MC or WCS to the land carriage by means of contractual incorporation;  
  2. The MC does not provide for a clear-cut solution when an LDD occurs in a warehouse of the carrier (or its agents)outside the airport. Under the WCS, this LDD is not subject to its provisions as the warehouse is situated outside the airport. However, the “airport limitation”has been deleted in the MC and the “carriage by land restriction” is not applicable as the LDD occurs while the goods are stored in a warehouse rather than moved by land.

Resolving these two issues was the focal point of the recent decision of the US Court of Appeals for the 11th Circuit in Expeditors (the Court also dealt with the term “package or packages concerned” as used in the AWB but this discussion is outside the scope of this note). The facts were no more extraordinary than the average air cargo case.The defendants, Expeditors, arranged for the carriage of a silicon coating machine from Incheon, South Korea to Orlando, US. The machine belonged to TriQuint and the claimants are TriQuint’s subrogated insurers. Exercising their route liberty under the AWB, the defendants flew the machine in 10 crates from Incheon to Miami, Florida. When the crates arrived in Miami, they were transported by land by several of the defendant’s agents as follows:

  1. from the airside area of Miami airport to a warehouse situated in the airport’s vicinity but outside its physical boundary(off-airport warehouse);
  2. from the airport warehouse to a warehouse in Miami, further away from the airport (Miami warehouse);
  3. from the Miami warehouse to an Orlando warehouse (first Orlando warehouse) ;
  4. from the first Orlando warehouse to a second Orlando warehouse (second Orlando warehouse); and  
  5. from the second Orlando warehouse to the consignee’s delivery agent (with the last segment to the consignee performed by its delivery agent);

The damage to one of the crates, containing the robotic arm of the machine, took place either in the Miami warehouse (segment No. 2) or during the land carriage from Miami to the first Orlando warehouse(segment No.3).

The US District Court for the Southern District of Florida, in a short and unsophisticated judgment, applied the MC to the damage in question. The decision was based on the misapplication of the“presumption of loss” provision of the MC; a rather concerning trend among US courts. For the District Court the land carriage in question is part of the MC as it is performed by the air carrier (or its agents) in order to deliver the crates to the consignee and an AWB covers both the air and land segments. Following this logic, the MC applies every time an air carrier undertakes land carriage “outside an airport…if such carriage takes place in the performance of a contract for carriage by air”. Damage is presumed to have happened during this period, unless the claimant proves that it occurred outside the scope of the AWB, namely by a road carrier that is not acting for the air carrier. Such solution has the potential to apply the MC on a door-to-door basis and it is not surprising that has strong supporters in the industry. Yet, it is a blatant disregard of the text of the“presumption of loss” provision and the philosophy of the MC as a unimodal Convention. Furthermore, the District Court failed to discuss the possibility that the damage took place in the Miami warehouse, assuming that the MC applies therein.

The Courts of Appeals for the 11thCircuit, following close examination of the MC, was right to dismiss the finding of the District Court.

To deal with the land carriage from Miami to Orlando, Circuit Judge Jill Pryor focused on the “carriage by land restriction” rather than the “presumption of loss”. She examined whether this segment qualifies as carriage by land under the MC and answered in the affirmative. The damage occurred during the “multi-hour journey” from Miami to Orlando which is “part and parcel of the last step of the cargo’s journey,which was plainly carriage by land”. As she emphatically stated “if an intercity, multi-hour journey over land does not qualify as carriage by land,the term essentially would be meaningless”. As such, the presumption that the loss occurred in the air carriage is rebutted and the MC is not applicable. Still,the Court accepted that the MC can apply outside the strict boundaries of an airport.But, it rightly cautioned against its extensive application either by misapplying the “presumption of loss” provision or using the (controversial) argument of contractual incorporation.

What proved more difficult is dealing with the damage in the Miami warehouse. What would have been a straightforward answer under the WCS has been complicated by the new wording of what constitutes carriage by air in the MC.Under a literal interpretation the MC is applicable to this damage as the crates were in storage in the carrier’s charge and were not carried by land. This is what the Austrian Supreme Court in its decision of 19 January 2011 and the German Federal Court of Justice in its decision of 24 February 2011, when coming across similar cases, decided. Although this interpretation was rejected by the US Court of Appeals, it is based on the text of the MC. Its main deficiency is operational in that it creates, what I described elsewhere, as a commercial paradox: the application of the MC is suspended while the goods are carried by land and reestablished upon them reaching the warehouse. It respects the text of the MC but is certainly not elegant.

Circuit Judge Jill Pryor did not agree that the MC creates such a paradox. She rejected the approach of the Austrian and German courts as they do not reflect the modern realities of air cargo transportation which may require storage between two (lengthy) land carriages. Suspending the application of the MC does not make operational sense and the better (operational) solution would be to incorporate the period of storage into the carriage by land. In what was a policy-driven opinion, the Court filled the obvious textual gap of the MC by treating warehousing as a secondary operation, since the law applicable to it depends on the nature of the carriage segments before and after it. While the continental European Courts have it given it autonomy, the Court of Appeals wants to see it absorbed by one of the two modes of transport. Convenient as a solution this is, the Court offered no reasonable explanation about the reasons that led to the textual gap of the MC. It is surprising that neither the cargo insurers nor the carrier advocated for such solution which raises questions whether it reflects the modern realities of air transportation.

Furthermore, the Court categorically declined to import in the MC the“airport delimitation” of the WCS. There is little doubt that this is the right decision as the new wording of the MC demonstrates an intention to move away from it. Instead, the Court endorsed the dissenting opinion in Victoria Sales Corp. v. Emery Freight Inc 917 F.2d 705 (2d Cir. 1990) which advocated for a functional interpretation of the term airport under the WCS. Although not accepted in the US at the time, it found fertile ground in England following the Heavylift-Volga DNEPR case. For the US Court of Appeals these two cases “are especially persuasive” in identifying the scope of the term “carriage by air” in the MC.

This judicial statement sheds light on the law applicable to LDDs of goods while carried from the airside area of the airport to the off-airport warehouse or while stored inside the off-airport warehouse (segment No. 1). Most probably, the MC will apply to such LDDs as the goods are within the functional area of the airport. Especially with respect to the short road carriage, the Court seems to suggest that it would be absorbed by the air carriage as it is a land segment of minimum importance.

What remains a difficult decision is the law applicable to the land movement between the off-airport warehouse and the one in Miami. Such a situation tests the limits of application of the Expeditors decision which refused to adopt a bright line test. One cannot argue that this segment is closely linked to the last segment between Miami and Orlando, but it is also distanced from the prior air segment. It could be characterised as preparatory to the last land segment in which case it makes more sense to exclude the application of the MC over it.

The US Court of Appeals in Expeditors has issued a rare decision on carriage of goods by air and road which refocuses the relevant discussion in the US, long diverted from the text and philosophy of the air law conventions. Subject to the disagreement about the application of the MC to goods that are in stored by the air carrier during transit, the decision is welcoming news for the air cargo industry. Still, the refusal of the Court of Appeals to establish a bright line test is to be regretted. It would have given to the air cargo industry the certainty missing from the text of the MC. This could have been easily achieved by using the functional limit of an airport as the overarching limit of application of the MC. The Court endorsed it but did not elevate it to the level of principle as it refused to establish a clear cut-off point of application. It is to be hoped that other Circuits will now follow and maybe develop its ratio decidendi.

New Book on Air Cargo Insurance published by Professor M Clarke and Dr G Leloudas

The most recent addition in the list of publications of IISTL members is the book entitled “Air Cargo Insurance” by Associate Professor George Leloudas and Professor Malcolm Clarke.

This exciting new book is the only one on the market that deals exclusively with air cargo insurance, and will therefore, be a vital addition to the collection of any practitioner, professional or academic working in the field. The book analyses the model policies and standard terms and conditions of air cargo insurance used in the London markets. The authors also provide readers with an invaluable perspective on cases in other jurisdictions, and the book discusses freight forwarders’ relations with airlines and addresses the possibility of recovery from third parties.

Clarke & Leloudas - Air Cargo Insurance