An International Introduction to Aviation

01 March 2007

The challenges that aviation lawyers must always expect should not obscure the industry’s impressive resilience and the appearance of several positive trends. Notably, continued high fuel costs and new fears of aviation-focused terrorism could not deter passengers from returning to the skies at near record levels. By the end of 2006, world airline traffic grew by approximately 5 per cent, with comparable growth expected over the next two years. From a legal point of view, salient individual events of 2006 seem chiefly important as markers of certain trends in the liability, regulatory, and transactional areas. 

LIABILITY 

Concerns about liability are inescapable for industry lawyers. Indeed, the regulatory environment that defines the industry makes it impossible to consider, much less adopt, any meaningful decision without also evaluating its consistency with the global web of aviation risks, laws and regulations. The resulting self-discipline, coupled with the vigilance exhibited by, among others, engineers, pilots, and crew, has resulted in a safety record that the envy of the transportation sector. 

The chief threat to this impressive safety record in 2006 came from the continuation of a disturbing trend in which legal authorities have employed criminal sanctions to punish persons alleged to have been at fault in an aviation accident. Interestingly, whereas federal and state prosecutors in the United States continue to vigorously pursue white-collar convictions in the business sector, the criminalisation trend in the aviation sector has taken place outside North America. Indeed, US and Canadian federal authorities have actually intervened on occasion to prevent local prosecutions. By contrast, in France, this past year saw the trial of six persons in connection with the 1992 Inter Air crash in Strasbourg. After 14 years of various investigations and many weeks of trial, the court ultimately acquitted all six individuals, who had faced considerable sentences if convicted. The prosecution, unhappy with the verdict, promptly appealed. French investigators additionally continue to weigh criminal charges against certain executives and engineers in connection with the July 2000 Concorde crash. Switzerland has also seen a flurry of criminal activity in relation to aviation accidents, including negligent homicide charges against eight air traffic controllers resulting from the 2002 Überlingen collision and an ongoing investigation for negligent manslaughter relating to the November 2001 Crossair crash near Zurich. 

Notable too were the events following the mid-air collision over Brazil between a Gol Airlines B-737, which crashed in the Amazon, and Embraer Legacy 600, which landed safely. At first Brazilian investigators refused to let the Embraer’s two American pilots leave the country and ultimately announced that they could be subject to criminal charges that carry a maximum fouryear term of imprisonment. The pilots were eventually allowed to return to the United States in exchange for their agreement to return to Brazil if requested to do so by investigators. It is not yet clear whether the two will face formal charges in Brazil, though the recent announcement that the investigation had been broadened to include air traffic control authorities suggests that this avenue has not been abandoned. 

In 2006, experts in safety management had become gravely concerned that a tipping point was being reached, where the trend toward retribution was compromising safety investigation. This concern has found expression as diverse as statements by the NTSB Bar Association and opinion columns in the International Herald Tribune (Don Phillips, ‘If blame is assigned what would be gained?’, Internationall Herald Tribune, August 17, 2006). ICAO most succinctly formulated the problem in 2003: 

“The immediate effect of bringing criminal charges into aviation occurrences is that it would stifle the free flow of information, by creating an environment of fear and incrimination among the parties involved. Since flow of information has been a cornerstone of the safety record of international civil aviation, it is not far-fetched to think about this type of action as a potential threat to aviation safety that would likely increase the risks faced by the travelling public. It is vital that concerted industry action takes place to counteract this trend that, if unchecked, could undermine in a very short period of time, years of progress in aviation safety” (see ICAO Working Paper AN-Conf/11-WP/33, The Protection of Sources of Safety Information, Eleventh Air Navigation Conference, 22 Sept – 3 Oct 2003). 

In an effort to staunch the criminalisation trend and safeguard the free flow of safety information, the Flight Safety Foundation and six other top-level safety and operations organisations endorsed the ICAO approach in a joint resolution in October/November 2006, urging that judicial authorities give consideration to the broader effect on safety when they consider criminal charges and instead focus aviation accident investigation on “the probable cause of and contributing factors in the accident”. However, the resolution is not binding and, though it serves as a sobering reminder of the risks associated with criminalisation of accidents, will not alleviate some of the local pressures that lead to individual prosecutions. Also notable is the watershed policy announcement by Japan Airlines, following an uncomfortable period in the spotlight for safety lapses. JAL will, henceforth, put future safety ahead of retribution by exempting pilots and maintenance workers from punishment even if their errors result in an accident. 

In civil litigation developments, two trends are worthy of mention, though the plethora of individually interesting legal cases make a comprehensive review of the developments of 2006 impossible in this space. 

First, DVT cases continued to block attempts to fit DVT within the Warsaw/ Montreal Conventions on the grounds that DVT is not an ‘accident’. See, eg Blotteaux v Qantas Ltd, 171 Fed. Appx. 566 (Ninth Circuit 2006), Caman v Continental Airlines, 2006 WL 2136623 (9th Circuit 2006). The Caman decision was particularly interesting in this regard because it explicitly criticised the trial court’s reliance on Air France v Saks, 470 US 392 (1985), the seminal Warsaw case defining an article 17 accident as “an unusual or unexpected event external to the passenger”). The plaintiff in Caman had tried to cast his case as similar to Saks in relying on an event caused despite an airline’s lack of knowledge about a passenger’s undisclosed medical condition. Instead, the 9th Circuit Caman opinion held that Olympic Airways v Husain, 124 S. Ct. 1221 (2004) set the standard: a carrier must fail to act after it has information about a passenger’s condition, which then causes an injury. 

Secondly, legal developments of 2006 showed a trend toward courts limiting application of their own domestic law or declining to sit in judgment over claims related to accidents or allegedly causal events that occurred elsewhere. Forum Non Conveniens is, of course, a standby, as in Da Rocha v Bell Helicopter Textron, 2006 WL 2619880 (S.D. Fla. 8 September, 2006) (holding that the plaintiffs’ claim that a bilateral treaty guaranteeing Brazilian citizens equal access to US courts did not apply to trump the considerations that militated in favour of litigation in Brazil). It was also true in relation to choice of law issues, as in In re Air Crash at Belle Harbor, 2006 WL 1288298 (SDNY 9 May 2006) where the Court found that, despite plaintiffs’ attempts to have New York law to the issue of punitive damages, the application of depecage and the policy behind punitive damages being “conduct regulating” rather than compensatory, meant that French law may be applied to passenger punitive damage claims. Finally, in a quite fascinating set of decisions (Kenya Airways, No. Y 04-18.644, 645 and 646 and Gulf Air No. F 03-18.141, July 2006), the French Cour de Cassation (Supreme Court) reversed its previous jurisprudence on article 42 section 2 of French Civil Procedure Code (giving a plaintiff the option of a single venue in the case of multiple defendants). This option seemed to allow a French court to exercise ancillary jurisdiction over a foreign airline notwithstanding article 28 of the Warsaw Convention, which lists venues in which a victim may bring a case. The Cour de Cassation overturned the decisions of the Court of Appeal and departed from its own prior case-law in deciding that: “by declaring that it had jurisdiction over the carrier, whereas article 28 of the [Warsaw] Convention states a compulsory jurisdiction rule, the Court of Appeal violated [this] text”. 

REGULATORY 

The resurgence in 2001 of global terrorism directed at civil aviation continued to profoundly shape the regulatory environment. Most notably, already strict security measures were ratcheted up after the plot to destroy aircraft over the Atlantic Ocean using liquid explosives became public. The initial disclosure of the plot brought aviation to a halt across the UK and parts of Europe. Airline service was restored, but not without costly new security restrictions. The plot’s revelation by authorities underscores the need for continued vigilance regarding security measures, not to mention cooperation between industry and governmental authorities. 

A decision of the European Court of Justice illustrated that there are important legal limits on the ability of industry to cooperate with government as it combats terrorism. European Parliament v Council of the European Union, C-317/04; European Parliament v Commission of the European Communities, C-318-04. On 30 May 2006, the Court invalidated the passenger name record (PNR) agreement entered into by the EU and US in 2004 which had allowed for the transfer of PNR from airlines flying into the US to the Bureau of Customs and Border Protection. The European Court of Justice Stayed its opinion until 30 September 2006, and the EU and US reached a provisional PNR agreement on 6 October 2006. Nevertheless, the Court’s opinion shows that multilateral cooperation will have to account for multiple layers of decision makers and laws. 

In another theme that continued in the regulatory arena in 2006, the EU and US again failed to conclude an open skies agreement. The politically charged negotiations hit several impediments, though none proved as severe as whether the US would lift restrictions on foreign ownership of its domestic airlines. Indeed, although the parties had agreed in November 2005 that they would finalise an open skies agreement in 2006, continued domestic opposition to amending the foreign ownership restrictions from labour unions and a resurgent US Democratic Party proved insurmountable. Further doubt was cast on the ability of the US and EU to reach a final agreement when the US Secretary of Transportation withdrew a regulatory proposal for increased international investment in US airlines. Despite these setbacks, the parties have only this month renewed negotiations and reopened the possibility of reaching an agreement in 2007. 

TRANSACTIONAL 

As in 2005, surging demand for civil aircraft continued in 2006, providing the industry with reason for optimism. 

Bankruptcy and consolidation also continued to feature prominently in the transactional environment. On the bankruptcy front, airlines witnessed something of a positive trend with a major US carrier exiting court supervision and no major carrier entering bankruptcy. It remains to be seen whether this represents the return of market equilibrium. 

The industry also retained its focus on airline consolidation. Some deals, like the takeover by Cathay Pacific of DragonAir had been expected. Others, like the hostile takeover bid for Delta by US Airways were more surprising and fuelled the surge of wild speculation regarding potential combinations that never materialised. Meanwhile, US Airways dropped its bid, largely due to resistance from the Delta board and wariness about obtaining approval from US regulators, although announcements of impressive profits by Air France KLM further encouraged speculation that 2007 will see more attempts to capture this kind of value. 

The views expressed in this article are those of the author and do not necessarily reflect those of Airbus.

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