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.

 

A Further Clarification on Cyber Risk Cover by the Lloyd’s Market Association

cyber-risk

Although cyber risks insurance in the London market is fast growing, more clarity is needed as various types of clauses drafted by different insurers are in use creating an enormous degree of confusion for assureds as to the scope of the cover on offer. With the objective of providing added clarity, from 1 January 2020, Lloyd’s underwriters will be required to clarify whether first-party property damage policies affirm or exclude cyber cover.

This is certainly a positive development and with the aim to assisting in this process, the Lloyd’s Market Association (LMA) has recently published a number of new clauses for the property and marine markets that can be used with traditional lines of business, e.g. hull & machinery policies, war risks insurance policies for vessels and other offshore structure. It should be noted that clauses published by LMA are designed to act as “models” and are distributed for the guidance of its members, who are free to agree to different conditions or amend as they see fit.

The new clauses published by the LMA comprise a cyber endorsement (LMA5400) and exclusion clause for Property D&F (LMA5401) and a cyber endorsement (LMA5403) and exclusion clause for Marine (LMA5402). All clauses explicitly supersede or replace conflicting policy wording related to cyber loss and data.

Both the property endorsement and exclusion clauses exclude coverage for any cyber loss, as well as any costs related to the use or replacement of data. The endorsement does, however, affirm coverage for physical loss or damage to property caused by fire or explosion that results directly from a cyber incident, as well as coverage for physical damage related to data processing media owned by a policyholder.

The marine clauses, meanwhile, rule out coverage for any loss or expense related to the “failure, error or malfunction of any computer, computer system, computer software programme, code, or process or any other electronic system.” Similarly, they exclude coverage for “the use or operation, as a means for inflicting harm, of any computer, computer system, computer software programme, malicious code, computer virus or process or any other electronic system.” However, marine cyber endorsement clause makes it clear that if the clause is used with policies covering risks of war, civil war, revolution, rebellion, insurrection, or civil strife arising  therefrom, or any hostile act by or against a belligerent power, or terrorism or any person acting from a political motive, the cover will be available for losses arising from the use of any computer, computer system or computer software programme or any other electronic system in the launch and/or guidance system and/or firing mechanism of any weapon or missile.

It should be noted that liability and treaty reinsurance policies will also be required to clarify whether they affirm or exclude cyber cover and these requirements will come into effect in two phases during 2020 and 2021.

The Future of Commercial Law (Cryptoassets and Smart Contracts) under Consideration

 

The UK Jurisdiction Taskforce (UKJT), one of the six taskforces of the LawTech Delivery Panel, published its findings on 18 November 2019 on the issues of legal uncertainty regarding the status of cryptoassests and smart contracts under English law in a document entitled “Legal Statement on Cryptoassets and Smart Contracts”.

On the status of cryptoassets, the UKJT concluded that such assets, as a matter of English legal principle, to be treated as a “property”. In reaching this conclusion, the UKJT stressed that crypto assets meet the following characteristics of “property”:

  • They are definable and certain;
  • They are exclusive and capable of being controlled;
  • They are capable of being owned and transferred (through the use of the private key);
  • They have some degree of permanence and stability.

Considering the current legal rules and principles and scope of various statutes, the UKJT expressed the following views on cryptoassets:

i) They are not documents of title (so that they do not enable the person holding them to deal with the property described as if they were the owner);

ii) They are not negotiable (so a good faith purchaser cannot acquire good title);

iii) They are limited in terms of what security can be granted over them (as such they cannot be the object of “pledge” or “lien”);

iv) They are not “goods” for the purposes of the Sale of Goods Act 1979; and

v) However, they are “property” for the purposes of the Insolvency Act 1986.

The UKJT indicated that the intervention from legislators would be necessary to solve two aspects of cryptoassets. It has been stressed that problems are likely to arise if no governing law has been chosen. In that scenario, new law, ideally at international level, is required to answer this question. It is also clear that without new law, a distributed ledger cannot be an official register of title like the Land Register.

On the legal position of smart contracts, the findings of the UKJT are more straightforward. Accordingly, smart contracts are capable of satisfying the English law requirements on contract formation. A court would interpret a smart contract in the same way as any other contract. On the issue of whether one can have a contract with anonymous or pseudonymous parties (given that users within a smart contract chain tend to transact in relative anonymity), it has been stressed that there is no requirement to know a party’s true identity. Also, it is the view of the UKTJ that a statutory signature requirement is highly likely capable of being met by means of a private key. Lastly, it has been stressed that statutory “in writing” requirement is likely to be met in the case of source code and, to the extent it is in readable format, object code.

The legal position of crypto assets has already been judicially aired in a number of cases (Liam David Robertson v. Persons Unknown [2019] not yet reported and B2C2 v. Quoine Pty (2019) SGHC(I)03 (Singapore International Court)). There are also reports that over $1.5 billion worth of cryptocurrency was stolen last year by hackers. It is obvious that courts in near future will be occupied dealing with matters concerning cryptoassets. Although it is not binding authority, there is no doubt that the Legal Statement will very useful when such issues are brought before the English/Welsh courts. The author believes that common law’s ability to adapt to different situations will be a key asset in resolving most of the legal issues emerging. However, it is also clear from the Legal Statement that there is an urgent need to consider developing appropriate legislation and regulation to deal with some of the issues that will emerge in particular: choice of law issues and the legal status of a distributed ledger. So, the ball is now in court of the Law Commission!

The potential for smart contracts in global financial markets is huge. Once they take off, one can see an increased use of them in shipping, aviation and energy sectors as they have the capability to provide immutable data! This can, of course, enhance certainty by reducing the scope of potential disputes between various parties to such contracts.

In summary, the way we do business is changing as a result of technology and this will undoubtedly test the ability of English common law to deliver against the expectations of global businessmen. There is an urgent need to engage in a serious debate to determine how we can address the complex range of legal issues thrown up by the massive accumulation of big data, on-chain smart contracts and other aspects of artificial intelligence.

Weight of undamaged pallets and Montreal Convention package limitation.

 

On 11 October 2018 (I ZR 18/18) the German Federal Court of Justice (BGH) ruled on the calculation of the Montreal Convention package limitation of 19 SDRs per kilo under art. 22(3). Article 22(4)(1) stipulates that compensation may not exceed the amount payable in the event of loss of the devalued part of a consignment. The claim was in respect of a consignment consisted of 1,000kg of goods and 250kg of pallets. The BGH ruled that in considering the weight relevant to the package limitation no account should be taken of the weight of the pallets which were undamaged. Only the net weight of the damaged goods was to be taken into account and so the claimant’s maximum damages claim would be 19,000 SDRs (1,000kg by 19 SDRs) and not 23,750 SDRs as claimed.

BIMCO withdrawal clause. No withdrawal for underpayment of previous hire instalment.  

 

Quiana Navigation SA v Pacific Gulf Shipping (Singapore) PTE Ltd “Caravos Liberty” [2019] EWHC 3171 (Comm) involved  a time charter under which the charterers made an underpayment of the fourth instalment of hire but owners did not exercise their right to withdraw under the BIMCO withdrawal clause incorporated into the time charter. However, the shortfall remained and at the time of the sixth instalment, which was paid in full, the owners decided to withdraw the vessel on account of the remaining shortfall in hire under the fourth instalment. The key words in the BIMCO Clause are “If the hire is not received by the Owners by midnight on the due date, the Owners may immediately following such non-payment suspend the performance of any or all of their obligations under this Charter Party (and if they so suspend, inform the Charterers accordingly) until such time as the payment due is received by the Owners.” In the context of the right to withdraw, what constitutes ‘the hire’? The tribunal found that it referred to the hire for that particular instalment and did not encompass previous underpayments. Cockerill J upheld that decision. The question “What is the hire?” question could only sensibly be answered and one single date produced if the charterers’ approach were preferred.  Cockerill J stated [42]:

“[i]t is artificial to ignore the temporal dimension inherent in the reference to a “due date” in (a); and equally artificial to say that the sum outstanding from the fourth instalment was due “on” 10 August. Owners’ argument also, either (as Charterers would put it) impermissibly elides the very real distinction between the continuing entitlement to recover hire as a debt and on the other the independent contractual entitlement to withdraw or at least attempts to draw focus from the existence of other remedies.”

Accordingly, owners’ withdrawal was unjustified and amounted to a repudiation of the charter.

Demurrage due to delays in discharge due to damaged condition of cargo.

Alianca Navegacao E Logistica LTDA v Ameropa SA (The Santa Isabella) [2019] EWHC 3152 (Comm)

A vessel carried a cargo of white corn/maize from Mexico to South African Ports under a Synacomex form charter incorporating the Hague Rules.  On arrival the cargo was found to have suffered extensive damage and that led to a delay in discharge resulting in demurrage becoming due. Voyage charterers claimed that they were not liable for demurrage due to delays resulting from fault of the disponent owners. They alleged that the damage to the Cargo, and the delays at Durban and Richards Bay, were caused by (a) the Vessel taking the Cape Horn route rather than the Panama Canal route from Topolobampo to Durban, (b) failure by the Vessel to ventilate the Cargo in accordance with a sound system, (c) failure by the Vessel to disinfest areas of the Vessel outside of the cargo holds following loading at Topolobampo and/or (d) the Vessel proceeding to Durban at less than her warranted speed.

Andrew Henshaw QC (sitting as a Judge of the High Court) found that the owners’ obligation was to proceed on the usual and reasonable route to the discharge port and that where there were more than one such routes they were entitled to choose one rather than the other and that choice did not require owners to calculate the effect of taking that route on the cargo being carried. Both the Cape Horn route and the Panama Canal routes were usual routes to Durban and the owners committed no deviation, nor breach of art. III(2) of the Hague Rules, in taking the former. In determining which route to take the judge stated[91]:

“cargo considerations may be relevant in the elementary sense that a much longer voyage is likely to be detrimental to a perishable cargo. However, the case law does not in my view require shipowners to undertake the far more refined analysis urged by Ameropa, which would involve (in the present case) considering in detail how predictable climactic conditions on the Cape Horn and Panama Canal routes would impact on the need to ventilate the cargo and the vessel’s ability to do so.

However, the owners were found to have been in breach of art III(2) of the Hague Rules in failing properly to ventilate the cargo on the voyage and this had resulted in the delays experienced at Durban and Richards Bay. It was common ground that as owners were not bailees the legal burden of proof in showing breach of art III(2) fell on charterers. Charterers argued that the arrival of the cargo in a damaged condition  gave rise to an inference of breach. The judge rejected this, stating [52]:

“As a matter of common sense, the arrival in a seriously damaged condition of a cargo loaded in apparent good order and condition calls for an explanation, and a want of care on the part of the shipowner is a possible inference. In the present case, Alianca’s explanation is that the length and/or route of the Voyage made damage inevitable. On that basis, I am inclined to the view that it is for Ameropa to show, on the balance of probabilities, that the damage suffered in fact arose from a breach of contract by Alianca.”

Ameropa succeeded in showing that the damage did arise from a breach of contract by disponent owners.

The owners were also in breach of their obligation to proceed at the warranted speed but it was not possible to identify any particular element of damage or loss caused by that breach.

FAL Convention. Electronic documentation for ports replacing paper.

On 1 January 2017 the Facilitation Convention was amended to provide for exchange of FAL data electronically from 8 April 2019. The amendments provide for a transition period of 12 months during which paper and electronic documentation co-exist for FAL documents.

The amendments provide that consideration should also be given to such a Single Window serving as the mechanism through which the public authorities communicate decisions and other information covered by this Convention in connection with the arrival, stay and departure of ships, persons and cargo.

The documents in question are:

General Declaration

Cargo Declaration

Ship’s Stores Declaration

Crew’s Effects Declaration

Crew List

Passenger List

Dangerous Goods Manifest

The document required under the Universal Postal Convention for mail

Maritime Declaration of Health

Security-related information as required under SOLAS regulation XI-2/9.2.2

Advance electronic cargo information for customs risk assessment purposes

Advanced Notification Form for Waste Delivery to Port Reception Facilities, when

communicated to the Organization.

 

The amendments only affect FAL documents and not the certificates of liability insurance under the CLC, the Nairobi Wreck Removal Convention, the Bunker Oil Pollution Convention. These must be carried on board vessels as paper certificates.

 

Cambridge International Law Journal

I am indebted to the Cambridge International Law Journal for publishing my article ‘A Right to Bear Cyber Arms?‘ on its blog http://cilj.co.uk/2019/11/19/a-right-to-bear-cyber-arms/

Image by Pete Linforth from Pixabay

The article addresses the reintroduction of the Active Cyber Defense Certainty Act (ACDC) to the 116th U.S. Congress in June 2019 and concludes with the call for a common platform to be agreed on the more aggressive defensive cyber actions (hacking back/Offensive Cyber/legal right to bear cyber arms) that SMEs should and should not be permitted to conduct in defence of trade secrets.

Asymmetric jurisdiction clauses — financiers can indeed breathe freely

Most people think of an exclusive jurisdiction clause as a clause requiring all disputes to be heard in one forum, whoever raises them. But this is over-simplified. A jurisdiction clause may also be asymmetrically exclusive, allowing one party to sue in any court it can sweet-talk into taking the case but limiting the other to suing in a single jurisdiction. Financiers love these clauses, which protect them from litigation in uncongenial courts while at the same time preserving maximum freedom to pursue the borrower wherever he has assets or the courts have creditor-friendly judges.

There is no doubt that these clauses are enforceable as a matter of English law, but do they count as exclusive jurisdiction clauses? The point matters because of Art.31 of Brussels I Recast. This says that where two courts in the EU are hearing the same dispute, the second seised must give way, unless there is an exclusive jurisdiction clause in its favour (Art.31.2). Will an asymmetric clause do to invoke the exception? A resounding Yes came from Jacobs J yesterday in Etihad Airways PJSC v Flother [2019] EWHC 3107 (Comm).

Etihad had in happier times agreed to prop up the ailing airline Berlinair to the tune of several hundred million dollars, though in the event without success (it collapsed definitively in 2017). The agreement contained an asymmetrical jurisdiction clause requiring Berlinair to sue only in England but allowing Etihad to sue anywhere.

Berlinair’s German liquidator sued Etihad in Germany for allegedly failing to come up with the promised rescue monies. Etihad in turn sued the liquidator in London for what was effectively a declaration of non-liability; the liquidator sought to stay the action on the basis that the German courts were first seised; Etihad retorted that their action was protected by Art.31.2.

Having decided that the liquidator’s proceedings were covered by the exclusive jurisdiction clause and had been brought contrary to it, Jacobs J had no doubt, in common with Cranston J in Commerzbank AG v Liquimar Tankers Management Inc [2017] EWHC 161 (Comm) , that they were indeed protected by Art.31.2. Any other solution, he said, would lead to anomalous results and greatly limit the effect of the reforms to the original Brussels I introduced by the revised Art.31. And, in the view of this blog, he was right to decide the way he did. In any case, it gives the law a useful degree of certainty: from now on, only a decision of the CJEU or a peculiarly contrary one by the Court of Appeal is likely to be able to upset the accepted position.