Montreal Convention – Suppl

Elmar Giemulla

Article 22 – Limits of Liability in Relation to Delay, Baggage and Cargo

1. In the case of damage caused by delay as specified in Article 19 in the carriage of persons, the liability of the carrier for each passenger is limited to 4,694 Special Drawing Rights. 2. In the carriage of baggage, the liability of the carrier in the case of destruction, loss, damage or delay is limited to 1,131 Special Drawing Rights for each passenger unless the passenger has made, at the time when the checked baggage was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless it proves that the sum is greater than the passenger’s actual interest in delivery at destination. 3. In the carriage of cargo, the liability of the carrier in the case of destruction, loss, damage or delay is limited to a sum of 19 Special Drawing Rights per kilogramme, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless it proves that the sum is greater than the consignor’s actual interest in delivery at destination. 4. In the case of destruction, loss, damage or delay of part of the cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier’s liability is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the destruction, loss, damage or delay of a part of the cargo, or of an object contained therein, affects the value of other packages covered by the same air waybill, or the same receipt or, if they were not issued, by the same record preserved by the other means referred to in paragraph 2 of Article 4, the total weight of such package or packages shall also be taken into consideration in determining the limit of liability. 5. The foregoing provisions of paragraphs 1 and 2 of this Article shall not apply if it is proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result; provided that, in the case of such act or omission of a servant or agent, it is also proved that such servant or agent was acting within the scope of its employment. 6. The limits prescribed in Article 21 and in this Article shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 1 Article 22 part of the court costs and of the other expenses of the litigation incurred by the plaintiff, including interest. The foregoing provision shall not apply if the amount of the damages awarded, excluding court costs and other expenses of the litigation, does not exceed the sum which the carrier has offered in writing to the plaintiff within a period of six months from the date of the occurrence causing the damage, or before the commencement of the action, if that is later.

Table of Contents

Para. I. General Remarks 1–3 II. Limitation of Liability for Damage caused by Delay or in Relation to Baggage ...... 4–44 A. Liability Threshold for Damage caused by Passenger Delays under Article 22 Paragraph 1 MC ...... 5 B. Liability Thresholds for Damage in Relation to Baggage under Article 22 Paragraph 2 MC ...... 6–7A C. The Non-Applicability of the Liability Thresholds under Article 22 Paragraph 5 MC ...... 8–44 1. The Liability System ...... 9–11 2. The Conditions ...... 12–37 a) The Tortfeasors ...... 13–14 aa) The Carrier ...... 13 bb) The Servants or Agents of the Carrier ...... 14 b) The Objective Criteria ...... 15–16 c) The Subjective Criteria ...... 17–37 aa) Intent to Cause Damage ...... 21 bb) Recklessly and with Knowledge that Damage would Probably Result ...... 22–37 (1) Recklessness (as regards conduct) ...... 24–25 (2) Knowledge (of the Probability of the Resulting Damage) ...... 26–37 (a) International Jurisprudence ...... 27–35 (aa) The Objective Test ...... 28–29 (bb) The Subjective Test ...... 30–35 (cc) The Mixed View ...... 35A (b) German Case Law ...... 36–37 3. The Burden of Proof ...... 38–43A a) The Burden of Proof required to prove Fault on the Part of the Carrier ...... 39–42 b) The Burden of Proof where Damage is caused by the Servants or Agents of the Carrier ...... 43–43A 4. The Legal Consequences ...... 44

2 – Article 22 Montreal Convention – Suppl. 7 (October 2010) Article 22

III. The Liability Thresholds for Damage relating to Cargo under Article 22 Paragraphs 3 and 4 MC ...... 45–65 A. General Remarks about the Liability Thresholds under Article 22 Paragraph 3 MC ...... 46–48 B. The Liability Threshold under Article 22 Paragraph 4 MC in the Case of the Destruction, Loss, Damage or Delay of Part of the Cargo or of any Object contained therein ...... 49–56 C. Avoidance of Liability Threshold ...... 57–65 1. The Liability Threshold May Not Be Avoided Despite a High Degree of Fault ...... 57–59 2. Avoidance of the Liability Threshold by Means of a Special Declaration ...... 60–65 IV. The Additional Reimbursement of Court Costs under Article 22 Paragraph 6 MC ...... 66–68 V. Revision of Limits ...... 69

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 3 Article 22

I. GENERAL REMARKS

1. The rules concerning liability for personal injury under the Warsaw Conven- tion have been extensively revised by the Montreal Convention, but those regarding other categories of damage relating to delays, baggage and cargo remain largely untouched. Liability for personal injury is generally unlimited as explained by note 1 of the commentary to Article 21. In addition the carrier may no longer defend claims filed under Article 17 MC which do not exceed 113,100 Special Drawing Rights (SDR). However, despite some minor changes the liability thresholds for other categories of damage remain the same as under the Warsaw Convention.

2. The principle that competing interests should be balanced is interpreted dif- ferently by the Montreal Convention but remains a fundamental feature of both Conventions and is manifested by liability thresholds which favour the carrier and evidential rules which prejudice it. This approach improves the prospect of successful claims by injured parties who would otherwise find it hard if not impossible to prove their cases. It follows that where the injured party does not need to rely upon favourable evidential rules to prove its case against the carrier there is no longer any necessity to even the scales by restricting the carrier’s liability. Whereas Article 22 MC restricts the carrier’s liability based on presumed fault for damage caused by delays under paragraph 1 or in relation to baggage under paragraph 2, it imposes unlimited liability on the carrier if the injured party does not need to rely on the presumption of fault because it can prove gross fault under paragraph 5.1

3. The position under the Montreal Convention is different than that which previously existed under the Warsaw Convention since a carrier proved to be at fault under Article 22 paragraph 5 MC is only liable without limit for damage caused by delays under Article 22 paragraph 1 MC or in relation to baggage under Article 22 paragraph 2 MC but not in relation to cargo under Article 22 paragraph 3 MC. The carrier’s liability for cargo does not exceed 19 SDR per kilo under Article 22 paragraph 3 MC notwithstanding that it is guilty of gross fault unless the consignor made a special declaration when it delivered the cargo for carriage. In this respect the Montreal Convention reproduces the text of Montreal Protocol No. 4 which came into force on 14 June 1998 but was never ratified by Germany. By ratifying the Montreal Convention the German government has now agreed that the carrier is never liable without limit for cargo damage.2

1. For further details of the injured party’s burden of proof, see note 38 et seq. 2. See LG Frankfurt, TranspR 2002, 447; for further details see note 45 et seq.

4 – Article 22 Montreal Convention – Suppl. 7 (October 2010) Article 22

II. LIMITATION OF LIABILITY FOR DAMAGE CAUSED BY DELAY OR IN RELATION TO BAGGAGE

4. Article 22 MC balances competing interests where damage is caused by delay or in relation to baggage by restricting the carrier’s liability where fault is presumed on its part. However, if the injured party can prove gross fault on the part of the carrier it no longer needs to rely upon advantageous evidential rules and so the carrier should be liable without limit. The carrier is presumed to be at fault for damage under Arts 17, 18 and 19 MC, but Article 22 paragraph 5 MC permits the injured party to sue for an unlimited sum if it can prove gross fault on the part of the carrier for damage caused by delay or in relation to baggage as opposed to cargo.3 In other words liability is limited where fault is presumed but unlimited where fault is proved.

A. LIABILITY THRESHOLD FOR DAMAGE CAUSED BY PASSENGER DELAYS UNDER ARTICLE 22 PARAGRAPH 1MC

5. The carrier is only liable under Article 19 MC for damage caused by delay which does not exceed 4,694 SDR per passenger.4 The figure of 4,150 SDR (as per the initial text of the 1999 MC) previously appeared in Montreal Protocol No. 3 which was never ratified by Germany and is considerably less than the corresponding figure of 250,000 francs which appears in Article 22 paragraph 1 Sentence 1 WC/HP.5

B. LIABILITY THRESHOLDS FOR DAMAGE IN RELATION TO BAGGAGE UNDER ARTICLE 22 PARAGRAPH 2MC

6. Article 17 paragraph 4 MC states that the term ‘baggage’ as used by the Convention refers to checked and unchecked baggage unless otherwise specified. Under Article 17 paragraph 2 MC the carrier may avoid liability for unchecked baggage by proving that the damage was not caused by its own fault or that of its servants or agents whereas it can only defend claims for checked baggage by proving an inherent defect, quality or vice. Once liability has been established the threshold prescribed by Article 22 paragraph 2 MC applies to both checked and unchecked baggage.

7. The carrier’s liability for damage in relation to both checked and unchecked baggage is restricted to 1,131 SDR per passenger under Article 22 paragraph 3 MC unless the passenger makes a special declaration of interest in delivery at destination when submitting the baggage for carriage and pays a supplementary sum if so

3. For details see note 38. 4. For further details see the commentary to Article 19, note 4 et seq. 5. For further information see also Geigel/Mu¨hlbauer, Der Haftpflichtprozess, chapter 29 note 75; likewise Reuschle, Article 22 MC note 7.

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 5 Article 22 required by the carrier.6 If a valid special declaration of interest has been made the carrier is only liable for the sum declared unless it proves that this is greater than the passenger’s actual interest in delivery at destination whereupon its liability is limited to the said actual interest under Article 22 paragraph 2 sentence 2 MC.7

7A. In its first judgment on the application of the MC in the European Union, the Third Chamber of the European Court of Justice stated, inter alia, ‘that in order to determine the ordinary meaning to be given to the term ‘‘damage’’ in accordance with the rule of interpretation referred to at paragraph 23 above,7a it should be recalled that there is a concept of damage which does not originate in an international agreement and is common to all the international law sub-systems.’ Thus, Article 31(2) of the Articles on Responsibility of States for Internationally Wrongful Acts, drawn up by the International Law Commission of the United Nations, and of which the General Assembly of that organization took note in its Resolution 56/83 of 12 December 2001, provides that ‘[i]njury includes any damage, whether material or moral ...’. Accordingly, ‘the various limitations of compensation referred to in Chapter III of the Montreal Convention, including that set in Article 22(2) of that convention, must be applied to the total damage caused’. Consequently, the Court came to the conclusion that the ‘term ‘‘damage’’, which underpins Article 22(2) of the Convention for the Unification of Certain Rules for International Carriage by Air, concluded in Montreal on 28 May 1999, that sets the limit of an air carrier’s liability for the damage resulting, inter alia, from the loss of baggage, must be interpreted as including both material and non-material damage.’7b

C. THE NON-APPLICABILITY OF THE LIABILITY THRESHOLDS UNDER ARTICLE 22 PARAGRAPH 5MC

8. Article 22 paragraph 5 MC states that the liability thresholds prescribed by Article 22 paragraphs 1 and 2 MC shall not apply where the injured party proves that the damage ‘resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result’. The injured party must prove that the carrier’s agents or servants were acting within the scope of their employment if it alleges that they were responsible for the damage.

1. The Liability System

9. As discussed in the commentaries to previous articles the carrier’s liability under Articles 17, 18 and 19 MC is for presumed fault. In other words a presumption is made that the carrier’s actions were intentional or at the very least negligent.8

6. See also BT-Drucks.15/2285, p. 44. 7. For further details regarding special declarations see the comments regarding their use in relation to freight, note 61 et seq. 7a. Article 31 of the Convention on the Law of Treaties, signed in Vienna on 23 May 1969. 7b. ECR 2010, p. ...et al. 8. For further details see Article 18, note 1 et seq. and Article 20 note 5.

6 – Article 22 Montreal Convention – Suppl. 7 (October 2010) Article 22

Therefore, the injured party does not have to prove its case since the burden of proof is reversed, but the quid pro quo is that it may only sue the carrier for the maximum compensation recoverable under Article 21 and Article 22 MC.

10. In certain circumstances the Montreal Convention enables the carrier to defend claims by rebutting the presumption of fault and allows the injured party to sue for an unlimited sum by proving fault. For example the carrier may defend checked baggage claims under Article 17 paragraph 2 sentence 2 MC and claims for delay under Article 19 sentence 2 MC. In the first example the carrier must prove that the damage resulted from the ‘inherent defect, quality or vice of the baggage’ and in the second that ‘it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures’. The carrier is not presumed at fault for damage to unchecked baggage or personal items and the passenger must therefore prove fault on the part of the carrier or its servants or agents in order to claim compensation for such damage (see Article 17 paragraph 2 sentence 3 MC). The injured party may avoid the liability thresholds prescribed by Article 22 paragraphs 1 and 2 MC if it can prove that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly with the knowledge that damage would probably result.9

[Next page is Article 22 – 7.]

9. For a discussion of the burden of proof see note 38 et seq.

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 6.1 Article 22

6.2 – Article 22 Montreal Convention – Suppl. 7 (October 2010) Article 22

11. The above mentioned definition of fault contains terms alien to German law which were introduced into the Warsaw System by the amendments made to Article 25 WC by the Hague Protocol. The 1929 Warsaw Convention referred to ‘wilful misconduct’ or default ‘equivalent to wilful misconduct’. The Hague definition of fault has been retained by Article 22 paragraph 5 MC. 2. The Conditions

12. Article 22 paragraph 5 MC only permits the injured party to sue for an unlimited sum if the carrier or its servants or agents, acting within the scope of their employment, caused the damage.10 The injured party must therefore prove (i) fault as defined by Article 22 paragraph 5 MC and (ii) that the tortfeasor was discharging its obligations to the carrier when it caused the damage and was not merely engaged in some personal frolic of its own (see also note 11 above and note 17 et seq. below).

12A. This must not ultimately be done with the filing of a lawsuit but can be done later. In Hutchinson v. British Airways,10a the court denied British Airways’ motion to dismiss the complaint for failure to state a claim because plaintiffs’ complaint plausibly suggested that their claims qualified for Article 22(5)’s exemption from Article 22(2)’s liability limitation. In this class action suit, twelve named plaintiffs alleged that British Airways’ baggage handling system was operated ‘recklessly and with knowledge that damage would probably result’. In order for Article 22(5)’s exemption from the liability limitation to apply, plaintiffs needed to produce evidence not only that British Airways’ conduct was an extreme departure from the standard of ordinary care, but also that British Airways was subjectively aware of an unjustifiable likelihood that its conduct would result in damage. Before discovery took place, the court was unable to determine whether plaintiffs would be able to prove this and, consequently, the court could not, at that stage, conclude whether Article 22(5) would apply in this case. a) The Tortfeasors aa) The Carrier

13. The carrier is the person who undertakes on its own behalf to transport passengers, baggage or cargo by air under a contract of carriage.11 The definition of ‘carrier’ under Article 39 MC maintains the distinction between actual and contracting carriers introduced by Article 1 of the Guadalajara Convention which forms an integral part of the Warsaw System.12

10. See note 44 for further details of the legal consequences. 10a. 2009 WL 959542 (E.D.N.Y. 6 Apr. 2009). 11. See BGHZ 52, 194; NJW 1969, 2008/2011; ZLW 1970, 199; BGH VersR 1974, 766; BGHZ 74, 162; NJW 1979, 2474; BGHZ 80, 280/284; NJW 1981, 1664; OLG Frankfurt VersR 1976, 628; OLG Stuttgart VersR 1980, 183; Riese, p. 406; Abraham, p. 25 et seq.; Ruhwedel, p. 35; for further details see Article 1 note 37 et seq. 12. See the commentary to Article 40 for details regarding the respective liabilities of contracting and actual carriers.

Montreal Convention – Suppl. 5 (November 2009) Article 22 – 7 Article 22 bb) The Servants or Agents of the Carrier

14. Any employee or independent contractor hired by the carrier for the purpose of performing the carriage is the carrier’s servant or agent while they act within the scope of their employment.13 The servants or agents of the carrier do not engage in a personal frolic but act within the scope of their employment where there is a direct, inextricable link between the nature and purpose of the task which they are assigned and the subsequent misconduct.14 An employee acts within the scope of his employment if he neglects general duties such as the observance of safety procedures and a failure to follow instructions does not necessarily imply some personal frolic.15 See the judgment of the New York Supreme Court in Rymanowski v. PanAm16 for a discussion of whether an airline employee acts within the scope of his employment when stealing passenger’s baggage. b) The Objective Criteria

15. The injured party may only object to the liability thresholds prescribed by Article 22 paragraphs 1 and 2 MC by making an application under Article 22 paragraph 5 MC if it has sustained damage which is actionable under Article 17 paragraph 2 MC and Article 19 MC. Article 22 paragraph 5 MC states that the damage must result from an act or omission on the part of the carrier, its servants or agents and is an objective requirement since it merely requires proof of such an act or omission. By contrast the corresponding provision under Article 25 WC imposes a subjective requirement since the damage must be caused by the carrier’s misconduct or any default on its part considered equivalent to misconduct which means that actionable damage is defined according to whether it is caused by fault. The difference is theoretical since fault must also be proved under Article 25 paragraph 5 MC.

16. The act or omission of the carrier’s servants or agents must occur during the scope of their employment. Damage caused by conduct falling short of contractual standards but broadly connected with normal obligations satisfies this requirement whereas damage caused by conduct which is merely incidental to general duties is insufficient.17 c) The Subjective Criteria

17. The authors of the Hague Protocol amended Article 25 of the original version of the Warsaw Convention by inserting the same text which now appears in Article 22 paragraph 5 of the Montreal Convention. Their aim was to provide a clear dividing line between limited and unlimited liability and to eliminate the

13. For further details regarding the definition of ‘servants or agents’ see Article 21 note 35. 14. BGH NJW 1971, 31; Johnson and others v. Allied Eastern States Maintenance Corporation – District of Columbia Court of Appeals: ‘in furtherance of the contract of carriage’, 19 Avi 17, 847; AL 1986, 130. 15. BGHZ 49, 19. 16. ZNY Supreme Court, App. Div., 1979 US AvR 503. 17. See also Guldimann, Article 25 WC, note 3.

8 – Article 22 Montreal Convention – Suppl. 5 (November 2009) Article 22 difficulties caused by the various interpretations attributed to the original text.18 The only principle agreed by all the Warsaw delegates, but which no longer applies to cargo, was that the carrier should not be protected by limited liability for deliberate damage since in these circumstances the plaintiff should be able to claim unlimited compensation. The authors of the original Warsaw Convention attempted to com- municate this principle by adopting the common law expression of ‘wilful misconduct’ to describe the type of behaviour on the part of the carrier which should result in unlimited liability. ‘Wilful misconduct’ is not an exact equivalent of the civil law expression ‘dol’ since the latter is restricted to intentional conduct whereas the former includes recklessness.19 The record shows that the delegates clearly preferred the broader meaning implied by ‘wilful misconduct’.20 However, the authentic text adopted the narrower expression ‘dol’ and left it to the court ‘seized of the case’ to define exactly what it meant. The English text failed to achieve its purpose since common law jurisdictions interpreted ‘wilful misconduct’ so broadly that mere negligence was classified as ‘default equivalent to wilful misconduct’.21 By contrast civil law jurisdictions only imposed unlimited liability where the carrier was guilty of gross negligence since the term ‘dol’ implies a high degree of negligence equivalent to ‘intent’. However, civil law jurisdictions made no distinction between voluntary and involuntary conduct.

18. Since the various versions of the Warsaw Convention created considerable confusion the authors of the Hague Protocol started from scratch and completely rewrote Article 25. It was made clear that civil law jurisdictions should only impose unlimited liability where the carrier is at least guilty of voluntary gross negligence while an attempt was made to curtail the common law tendency to regard mere negligence as a ground for imposing unlimited liability by eliminating the phrase ‘default equivalent to wilful misconduct’. This attempt was not particularly successful since the United States refused to ratify the Hague Protocol and many common law jurisdictions followed American precedents and continued to impose unlimited liability in circumstances where the carrier was merely negligent. The Hague amendments have been reproduced by Article 22 paragraph 5 MC save that the carrier may no longer be liable without limit for damage to cargo.

19. The discrepancy under the original Warsaw Convention between the degrees of fault required in common law and civil law jurisdictions has now been eliminated. The Hague delegates authors chose to avoid references to ‘dol’ or ‘wilful misconduct’ since they are not exact equivalents and have different meanings in different jurisdictions and preferred instead to use ordinary language to define the degree of fault which would render the carrier liable without limit.22

18. See commentary on Warsaw Convention, Article 25 WC, note 3. 19. For further details see note 11. 20. See Process-Verbaux, Confe´rence Internationale de Droit Prive´ Ae´rien, 4th – 12th Oct. 1929, Warsaw. 21. See commentary on Warsaw Convention, Article 25 WC, note 16 et seq. 22. See inter alia Annex B to the ‘Resolution concerning to the revision of the Warsaw Convention’ passed by the ICAO Legal Committee, 9th session, Rio de Janeiro 1953, Minutes, Doc. 7450-LC/136.

Montreal Convention – Suppl. 5 (November 2009) Article 22 – 9 Article 22

20. The reference by the original text to default ‘equivalent to wilful misconduct ...in accordance with the law of the Court seized of the case’ was dropped along with the term ‘wilful misconduct’. The revised Article 25 WC/HP whose text was largely retained by Article 22 paragraph 5 MC should be interpreted in view of its history and purpose.23 The Hague delegates avoided the earlier error of leaving the interpretation of key terms to the discretion of national courts.24 aa) Intent to Cause Damage

21. The amended version of Article 25 WC refers to ‘intent to cause damage’ instead of ‘wilful misconduct’ or ‘dol’. The German text replaces the technical legal term ‘Vorsatz’ with ‘Absicht’ which is rarely found in the law of tort although it does appear in the context of bankruptcy proceedings and in other areas of the law such as crime. ‘Absicht’ does not have any technical meaning in German civil law.25 It should be interpreted by reference to the authentic text of the Hague Protocol and the intentions of its authors. The only authentic version of the 1929 Convention is the French text whereas the Hague Protocol has three authentic versions in French, English and Spanish and the Montreal Convention has six authentic versions in French, English, Spanish, Russian, Arabic and Chinese. The English version states that the damage must result from an act or omission ‘done with intent to cause damage’ which means that the damage must have been an intended consequence of the act or omission by the carrier, its servants or agents. The civil law equivalent is ‘knowledge and volition’ which implies a high degree of wilful misconduct equivalent to the French ‘dol’ or German ‘Vorsatz’. English jurists refer to ‘intentional misconduct’.26 ‘Intent to cause damage’ therefore implies knowledge on the part of the tortfeasor that the act or omission will cause the damage and a hope or desire that the damage will occur. bb) Recklessly and with Knowledge that Damage would Probably Result

22. Recklessness is another state of mind normally encompassed by the common law definition of ‘wilful misconduct’. English jurists refer to ‘reckless misconduct’.27 The term ‘wilful misconduct’ which was dropped by the Hague Protocol has effectively been replaced by a definition of fault which means much the same thing although the option of proving ‘default ...equivalent to wilful misconduct’ has been dropped since it allowed common law jurisdictions to render the carrier liable without limit for mere negligence.

23. See BGH, NJW 1976, 1583; BGHZ 74, 162/168; TranspR 1980, 130/131; for further information regarding the rules of interpretation applicable to international treaties see note 59 et seq. of the Introduction. 24. Cf. Cristini Mario Inga v. Air France and Air India – Tribunale di Roma, Diritto e Pratica dell’ Av. Civile 1979, 188; AL 1987, 154. 25. Although Guldimann, Article 25 WC note 4, argues that it is an aggravated version of the more formal ‘Vorsatz’. 26. Shawcross and Beaumont, VII – 131. 27. See for example Shawcross and Beaumont, VII – 130.

10 – Article 22 Montreal Convention – Suppl. 5 (November 2009) Article 22

In civil law jurisdictions ‘dol’ was formerly interpreted as including both voluntary and involuntary gross negligence whereas the amended text clearly excludes involuntary negligence.28 Consequently the carrier is now liable without limit on far fewer occasions. Intent is neatly defined by a single word but the state of mind described by the phrase ‘recklessly and with knowledge that damage would probably result’ is less precise. A person acts with intent if he desires his conduct and its consequences but not if he desires his conduct without desiring its consequences. In the latter case the carrier is still liable without limit if it behaves recklessly in the knowledge that damage will probably occur.

23. This two-tier definition of fault consisting of (i) recklessness and (ii) knowledge that damage will probably result has excited controversy. Initially some jurists argued that it is not two-tiered but merely describes a degree of fault somewhere between voluntary gross negligence and contingent intent.29 In the first case the tortfeasor understands that the damage may ensue but hopes that it does not while in the second the tortfeasor does not desire the damage but has scant regard for the possibility that it may ensue and so tacitly consents to it. However, the two- tier definition of fault under Article 25 WC/HP neither requires the tortfeasor to desire the damage nor tacitly consent to it and furthermore it does not equate to gross negligence since the known risk must be probable instead of reasonably foreseeable.

(1) Recklessness (as Regards Conduct) 24. Although there is some debate as to the precise nature of the individual elements it is generally accepted that the fault prescribed under Article 25 WC/HP consists of two elements being (i) recklessness and (ii) knowledge that damage will probably result. There is widespread agreement as to what constitutes ‘recklessness’ although the use of ‘te´me´rairement’ by the French version is unsatisfactory since it does not convey the idea of rash and deliberate risk taking. Since the French version no longer constitutes the sole authentic text it is arguable that the Swiss courts have adopted an excessively narrow approach by regarding it as the sole source.30 The term recklessness implies a crass disregard on the part of the carrier or its servants or agents for the general safety and security of the persons or property entrusted to their care whereas ‘te´me´rairement’ implies an imprudent failure to discharge particular duties in specific circumstances.31 A person does not necessarily act recklessly by failing to take additional safety precautions. The Stuttgart Regional Appeals Court32 ruled that a security guard did

28. See note 26. 29. OLG Frankfurt, ZLW 1981, 85/90; VersR 1981, 164. 30. See for example the comments made by the Swiss Federal Court, BGE 108 II 235 E. 4 and further references and the Zu¨rich Commercial Court, ZLW 1988, 104; see also BGH, NJW 1982, 1218; MDR 1982, 570; VersR 1982, 369; ZLW 1982, 162; TranspR 1982, 100; OLG Frankfurt, ZLW 1981, 81/87; the Swiss Federal Court, BGE 98 II, 242 und 246; the Zu¨rich Commercial Court, ibid.; Guldimann, Article 25 WC note 5; Ruhwedel, p. 107; Schoner, ZLW 1978, 259. 31. See BGH, ibid. 32. TranspR 1995, 74; ZLW 1996, 103.

Montreal Convention – Suppl. 5 (November 2009) Article 22 – 11 Article 22 not act recklessly by packing freight in a container and leaving it in a warehouse while participating in a lightening strike since the loading platform and all entrances and exits were locked and picketed throughout. By contrast the Hamburg Regional Court33 held that a carrier who left freight exposed to the elements was reckless since it was probable that the freight would be damaged if it rained. The carrier is not at fault under Article 25 WC/HP because it transports freight by road instead of by air.34 The same applies to Article 22 paragraph 5 MC but the rule has lost its significance since the carrier is no longer liable without limit for cargo damage.

25. The term ‘recklessly’ which appears in the English text has been described as a devil-may-care attitude accompanied by a blatant disregard for damage.35 In the American publication ‘The Restatement of Laws’ (Second, Torts § 500) the expression ‘Reckless Disregard of Safety’ is defined as follows: ‘The actor’s conduct is in reckless disregard of the safety of another if he does an act or intentionally fails to do an act which it is his duty to the other to do knowing or having reason to know of facts which would lead a reasonable man to realize, not only that his conduct creates an unreasonable risk of physical harm to another, but also that such risk is substantially greater than that which is necessary to make his conduct negligent.’ The USA did not ratify the Hague Protocol but US case law is relevant since the fault defined by Article 25 WC/HP merely restates ‘wilful misconduct’ in ordinary language. The USA effectively adopted Article 25 WC/HP by ratifying the Montreal Convention since it is largely reproduced in Article 22 paragraph 5 MC. Consequently US case law is now directly relevant. The decisions which define recklessness and were made under Article 25 WC/ HP also apply to Article 22 paragraph 5 MC.36

(2) Knowledge (of the Probability of the Resulting Damage) 26. Lawyers and jurists disagree about the precise nature of the knowledge attrib- utable to the tortfeasor under the second stage of the two tier definition.

(a) International Jurisprudence 27. Some argue that the tortfeasor must actually possess the required knowledge whereas others claim that it may be imputed to him. According to the second view the tortfeasor possesses the same knowledge as a reasonable man in identical circumstances. The Hague delegates clearly favoured the subjective approach since the majority voted for a draft whereby the tortfeasor ‘acted recklessly and knew that damage would probably result’ and rejected a draft whereby the tortfeasor ‘acted

33. TranspR 1995, 76; ZLW 1996, 107. 34. OLG Du¨sseldorf, ZLW 1994, 236. 35. Shawcross and Beaumont, VII – 132. 36. International Mining Corporation and others v. Aerovias Nacionales de Colombia – NY Court of Appeals, 15 Avi 17, 511; Cohen v. Varig - NY Supreme Court, Appellate Division, 15 Avi 17, 122; de Lataillade v. Royal Air Maroc – Cour d’Appel de Paris, RFDA 1978, 336; Ladame v. Pradeau – Cour d’Appel de Limoges, RFDA 1978, 473; Insurance Company of North America v. KLM – Hoge Raad (NL) S en S 1978, 62, see also the discussion by Diederiks-Verschoor, AL 1978, 123.

12 – Article 22 Montreal Convention – Suppl. 5 (November 2009) Article 22 recklessly and knew or should have known that damage would probably result’37 (accentuation added).

(aa) The Objective Test 28. Nevertheless the objective test has been widely adopted by the French courts.38

29. The Canadian courts have also favoured the objective test in the past39 as have the Greek40 and South Korean courts.41 The following articles are instructive: Bin Cheng, AASL 1977, 55/99; Martin, Law Society’s Gazette 1983, 1485; Abeyratne, ZLW 1995, 396/406.

(bb) The Subjective Test 30. The subjective test is preferred by the Belgian courts42 and has been applied by the Supreme Court of Gabon.43

31. The English courts have also adopted the subjective approach.44

32. Some French case law has applied the subjective test.45

33. The Swiss courts have also favoured a subjective interpretation.46

34. The Italian courts have similarly adopted the subjective test.47

37. See Mankiewiecz, ZLW 1977, 175 et seq.; Bin Cheng, AASL 1977, 82 et seq.; see also Giesen, ZVglRWiss 1983, 31/57. 38. See Emery v. Sabena - Cour de Cassation, RFDA 1968, 184; Air France v. Moinot, Veuve Saulnier- Ciolkowski – RFDA 1976, 105; Air Centre v. Veuve Morand and others – RFDA 1977, 415; Bossard v. Air France – RFDA 1979, 202; Le Lannedoc v. Societe Hernu-Peron – Cour d’Appel de Paris, RFDA 1976, 109; Entope v. KAL – Cour de Cassation, RFDA 1981, 225; ETR 1982, 181 -; Sabena v. SRL Medical Plus – ETL 1996, 143 -; Helvetia v. Air France – Cour d’Appel de Lyon, RFDA 1983, 228. 39. See Swiss Bank Corp. v. Swissair and Air Canada – Federal Court of Canada, ETR 1983, 826; for recent situation – see note 35A. 40. RFDA 1977, 144. 41. Dong-Hoom Kim v. Korean Airlines – Seoul Civil District Court, No. 85 Ca – Hap. 4258. 42. Tondriau v. Air India–Cour de Cassation, RFDA 1977, 193; AL 1978, 128. 43. Air Service and Sonagar v. Wiffering and CNSS – RFDA 1979, 456, see also Dame van Duyvendik v. Air Service and others – RFDA 1981, 363. 44. Goldman v. Thai Airways – Queen’s Bench Division, 1 WLR 1186; see also Giesen, ZVglRWiss 1983, 31/58 and Kilbride,AL1992, 237. 45. Lamberth v. Gurion – Cour de Cassation, RGAE 1966, 377; Diop v. Air France – RGAE 1969, 61; Air France v. Moinot, Veuve Saulnier-Ciolkowski – Tribunal de Grande Instance de Paris, RFDA 1971, 186; 1976, 105; Morand et Marsaud v. Socie´te´ Air-Centre – Cour de Riom, RFDA 1976, 138; AL 1976, 109/114. 46. Schweizerisches Bundesgericht, BGE 98 II 240 et seq. E. 4, particularly p. 242; Bu¨hrmann v. Alitalia – Bezirksgericht Bu¨lach, U/CG 930032 DC/es and also expressly for bodily injury Jenny Claudio v. Avianca – 20 Avi 18, 320; ZLW 1988, 96/101; AL 1988, 145. 47. See Tribunale di Milano, IDA 1974, 42 and Corte di Appello di Milano, IDA 1974, 246, both in the cases of Mandrioli v. Companie Belge d’Assurances Aviation and Belgian International Air Ser- vice; Staffieri and Panario – Tribunale di Busto Arsizio, IDA 1978, 195.

Montreal Convention – Suppl. 5 (November 2009) Article 22 – 13 Article 22

35. The same is true of the Argentine courts.48 For further citations regarding the issue of whether the test is subjective or objective see the examples compiled by Schoner49, Giesen50 and Mankiewicz.51

(cc) The Mixed View 35A. ‘The trend in Canada is moving increasingly towards applying the subjective standard, rather than the objective one. In Canada, the Courts have taken a mixed view towards applying both the objective and subjective tests in determining the purport and interpretation of Article 25 in air cargo and baggage cases.’51a In Connaught Laboratories Ltd v. British Airways51b after analyzing the conduct of British Airways, and in particular its failure to make any investigation of the circumstances giving rise to the loss until the claimant commenced formal legal proceedings, the court held that it was appropriate in such circumstances to draw an adverse inference against British Airways and find it had acted recklessly. The trial judge stated: ‘In my opinion, it is appropriate in these circumstances to draw an adverse inference from the failure of British Airways to call any evidence as to why the cargo came to be stored in the manner it was. This was information solely within the power of British Airways to obtain, and it has not put forward any acceptable reason to explain its absence. The protection afforded to air carriers under Article 25 of the convention is considerable. In the face of prompt notice of a claim in respect of this cargo, and bearing in mind the provisions of Article 25, it is not acceptable for British Airways to have done nothing to obtain the information relevant to Article 25 and then take the position that the plaintiff has failed to meet the Article 25 test’.51c The court noted that although the British Airways policy – ‘to commence an investigation only upon being satisfied that an aggrieved customer is serious about proceeding with an action’ – might be a practical one, claimant should not be held to suffer as a result of the carrier’s policy.51d Insofar the Canadian Courts: ‘took some sting out of the subjectivity requirement by effectively allowing an inference of knowledge to exist where the plaintiff established a prima facie case by circumstantial evidence, but the carrier failed to come forward with

48. See for example Antoniazzi and Chappe v. Lufthansa, Buenos Aires–Ca´mara nacional federal civil y comercial, AL 1988, 308. 49. ZLW 1978, 259 et seq.; 1980, 353 et seq. 50. ZVglRWiss 1983, 31. 51. Page 157 et seq. 51a. Compensation for Damage caused by Aircraft to Third Parties arising from Acts of Unlawful Interference or from General Risks, International Conference on Air Law (Montreal, 20 April to 2 May 2009), DCCD Doc. No. 25, . 51b. Connaught Laboratories Ltd v. British Airways – Ontario Court of Appeals (2005) 77 OR (3d) 34. 51c. Connaught Laboratories Ltd v. British Airways – Ontario Super. Court of Justice (2002) 61 OR (3d) 225 and 217 D.L.R. (4th), 194. 51d. See Pawluch & Kluge, Ontario Appeal Court Rules in Connaught v. British Airways, .

14 – Article 22 Montreal Convention – Suppl. 5 (November 2009) Article 22

rebuttal evidence solely within its power to obtain. ... It seems entirely reasonable to do so, given that the evidence as to the circumstances under which the goods were lost or damaged is solely in the hands of the carrier’.51e

(b) German Case Law 36. The German Federal Court of Justice ruled: ‘The second part of the two tier test regarding the tortfeasor’s state of mind is knowledge on his part that his reckless conduct will probably cause damage. Knowledge of this sort may only be assumed if the nature of the reckless conduct and the circumstances in which it occurs justify such a conclusion. It should be remembered ...that not all reckless behaviour implies such knowledge – i. e. knowledge of the probability that damage will result; indeed such knowledge is, for example, more likely to exist where the risk is to life and limb ...rather than to property’.52

37. This view has been correctly challenged by subsequent case law since the possibility of damage does not become a probability until it is more likely to happen than not whereupon the odds exceed 50 per cent.53 It follows that the view adopted by the German Federal Court is incorrect since it does not define probability according to the likelihood of an event, but according to the nature of the risk. Besides the Frankfurt Regional Appeal Court54 has chosen to disregard the Federal Court of Justice by refusing to define probability according to the likelihood of death or bodily injury since knowledge that passengers are probably going to be killed or injured is incompatible with the natural instinct of air crew to protect people in their care. The better view is that each case should be decided on its facts and a judgment should be based on the external circumstances which accompany the conduct and are triggered by it. German procedural law applies in German courts under Article 33 paragraph 4 MC.55 See note 38 et seq. for an analysis of the practical differences between the subjective and objective tests.

3. The Burden of Proof

38. The original Warsaw Convention left it ‘to the law of the court seized of the case’ to decide whether the damage was caused by default of the carrier ‘equivalent to wilful misconduct’ and although neither the Hague Protocol nor the Montreal Convention follow this example by leaving the substantive definition of fault to national law, both Article 33 paragraph 4 MC and Article 28 paragraph 2 WC/HP

51e. P.S. Dempsey & M. Milde, International Air Carrier Liability: The Montreal Convention of 1999 (Montreal: McGill University, Institute of Air & Space Law, 2005), 195. 52. BGHZ 74, 163/168; NJW 1979, 2474; MDR 1979, 728; VersR 1979, 641; WPM 1979, 863; LM No. 17 WA; likewise OLG Du¨sseldorf, judgment of 13 May 1982 – 18 U 280/81 – with further references and OLG Ko¨ln, ZLW 1997, 534 with notes by Giemulla. 53. See OLG Frankfurt, ZLW 1981, 85/89 and the reference to Guldimann, Article 25 WC note 6. 54. Ibid. 55. BGHZ 74, 162/169 re. Article 28 paragraph 2 WC.

Montreal Convention – Suppl. 5 (November 2009) Article 22 – 15 Article 22 state that the issue should be determined according to the procedural rules of the court trying the case. The general rule in both common law and civil law jurisdictions is that the party must prove facts which it alleges in its favour.56 It follows that the injured party must prove its case under Article 22 paragraph 5 MC in order to sue the carrier for an unlimited sum and must therefore prove (i) fault on the part of the carrier and (ii) that blameworthy servants or agents were acting within the scope of their employment.57 As a general rule an application filed under Article 22 paragraph 5 MC will be dismissed without supporting evidence unless national procedural rules presume a prima facie case in favour of the applicant.58 a) The Burden of Proof required to prove Fault on the Part of the Carrier

39. Article 22 paragraph 5 MC requires the injured party to prove that the damage resulted from an act or omission of the carrier or of its servants or agents done with intent to cause damage or ‘recklessly in the knowledge that damage would probably result’.59 The two-tier requirement of (i) recklessness and (ii) knowledge creates particular evidential difficulties.60 The trial court can often infer recklessness from objective facts but it is more difficult to prove that the tortfeasor knew that damage would probably result from his reckless conduct. Evidence of a state of mind can only be provided by objective and provable facts and should not be implied by reckless conduct since a man can behave in a reckless manner without a precise knowledge of the consequences. Nonetheless the subjective knowledge required by the second tier of the definition is often inferred from evidence of recklessness which should only be relevant under the first tier. Consequently the necessity of proving a subjective state of mind has been bypassed and as the Frankfurt Regional Appeals Court61 has rightly observed the intention of the Hague delegates to restrict instances of unlimited liability to voluntary conduct is in danger of being thwarted. The legal requirement to prove subjective fault should not be replaced by a presumption of fault based on objective evidence of reckless conduct. It is like saying that mens rea can be presumed from the actus reus without a separate enquiry into the tortfeasor’s subjective attitude towards his own conduct and the events which caused the damage.62 Knowledge that damage is probable cannot be presumed from reckless conduct any more than mens rea can be presumed because the actus reus is particularly risky by objective standards.63 These considerations apply to both Article 25 WC/ HP and Article 22 paragraph 5 MC.

56. Fridar v. PanAm and Lufthansa – NY Civ CC 1978, 15 Avi 17, 559 – re. common law. 57. See also Agrippina v. SAS and Societa` Esercizio Aeroportuali – Court of appeals Milano, II Diritto Aereo. 58. See also Guldimann, Article 25 WC note 11. 59. OLG Mu¨nchen, TranspR 1995, 118 and 300; VersR 1996, 84/85 re. Article 25 WC/HP. 60. See above note 22 et seq. 61. ZLW 1981, 85/90. 62. See also BGHZ 10, 14/16 et seq.; BGH, VersR 1967, 909. 63. Likewise OLG Saarbru¨cken, VersR 1984, 880 et seq. and OLG Frankfurt, ibid. and references to Guldi- mann, Article 25 WC,note11;see also Schoner, ZLW 1978, 259/264 with further references.

16 – Article 22 Montreal Convention – Suppl. 5 (November 2009) Article 22

40. The German Federal Court of Justice64 ruled that knowledge that damage is probable may be presumed from the nature of the reckless conduct and the circumstances in which it occurs. According to this view not every instance of reckless conduct implies such knowledge since each case is considered according to the external circumstances which accompany the conduct and which are triggered by it. The plaintiff must prove (i) reckless conduct and (ii) further evidence of the circumstances in which the damage occurs. If the circumstances do not imply the required degree of knowledge the plaintiff will not succeed under Article 22 paragraph 5 MC and the carrier will enjoy limited liability. Schoner65 argues that the first and second tiers of the two-tier definition of fault are virtually identical according to this interpretation. He is right insofar as knowledge is imputed to the carrier by its failure to observe objective standards of conduct. The carrier clearly knows of some risk if it knows that standards have fallen below acceptable levels since knowledge that conduct is reckless implies knowledge of the possible consequences.

41. Accordingly, the tortfeasor’s subjective state of mind is only relevant where the objective circumstances surrounding the reckless conduct imply a risk which is less than probable. Ruhwedel66 correctly argues that if this approach is adopted the injured party will rarely have to provide evidence of the tortfeasor’s actual state of mind since the very concept of recklessness implies a high degree of risk. Nonetheless the injured party must still establish that the conduct was reckless since any relaxation of the evidential rules would frustrate the intention of the Hague delegates to reduce the incidence of unlimited liability.67 Two judgments of the Cologne Regional Appeals Court dated 26 June 1995 are particularly instructive.68 Both these judgments rightly require the injured party to prove its entire case but also state that the carrier must file evidence where it can reasonably do so if the injured party is unable to gain information about necessary facts outside the scope of its knowledge. If the carrier does not file such evidence the issue is decided in favour of the injured party and so the burden of proof is effectively reversed. These two judgments are unconvincing since they interfere with the fine balance of interests which forms the bedrock of both the Warsaw and Montreal Conventions and go beyond the principles of vicarious liability suggested by the Hague Protocol (which now appear in Article 22 paragraph 5 MC) by introducing a presumption that the carrier is responsible for the conduct of third parties unless it can prove otherwise. The carrier is only vicariously liable for servants or agents whom it selects, organizes, supervises and instructs and who are therefore under its control. A

64. BGHZ 74, 162/168 et seq. /171. 65. ZLW 1978, 259/263. 66. Note 412 et seq. 67. See also Schweizerisches Bundesgericht, ZLW 1988, 96/100. 68. 22 U 265/94, TranspR 1996, 25; VersR 1996, 1567 and 22 U 266/94, ZLW 1997, 534 with notes by Giemulla; for further detail see Guldimann-Festschrift, p. 115 et seq.; see also Brasil Star – the Appeals Court, Amsterdam, Schip & Schade 2000, 14.

Montreal Convention – Suppl. 5 (November 2009) Article 22 – 17 Article 22 rebuttable presumption should not be raised against the carrier because of conduct by persons whom it does not control and yet this is the consequence of the reversal of the burden of proof. The carrier has no more control than its customers over the security standards and general levels of care in foreign countries and it clearly offends against the fine balance of interests prescribed by the Warsaw and Montreal Conventions to require it to produce evidence of the conduct of persons over whom it has no control on pain of being presumed liable for their conduct. Instead the claimant must prove that damage caused by a third party was caused by a servant or agent of the carrier while acting within the scope of its employment.69

42. The German Federal Court of Justice70 dismissed these arguments by ruling that the carrier’s obligation to file evidence where the plaintiff is incapable of doing so does not reverse the burden of proof since the carrier is only required to rebut a charge of vicarious liability once prima facie evidence of organisational failure has been submitted by the plaintiff. b) The Burden of Proof where Damage is caused by the Servants or Agents of the Carrier

43. In cases where damage is caused by the servants or agents of the carrier, the injured party may only sue for an unlimited amount if it can prove (i) the required degree of fault on the part of the tortfeasor and (ii) that the tortfeasor was acting within the scope of his employment. The German Federal Court71 has ruled that an act or omission is within the scope of the tortfeasor’s employment if it occurs during the performance of his ‘obligations’.72

43A. The Paraguayan Civil and Commercial Court of Appeals, Chamber III held that in case a plaintiff did not prove nor intended to prove the number, identity, functions and working schedule of the defendant’s employees in charge of a manip- ulation and custody/embarking and disembarking of registered baggage from the check-in at origin to its delivery to the passenger at destination the liability of the carrier may be limited within the terms of the Article 22 WC (and Article 22 MC accordingly). The Court emphasized that the lack of evidences was decisive because the Court was not unaware of the fact that the illicit act might have been committed by an airline’s employee acting without the limits of his employment.72a

4. The Legal Consequences

44. The liability thresholds for delay under Article 22 paragraph 1 MC and in relation to baggage under Article 22 paragraph 2 MC do not apply if the requirements

69. For further details of this conundrum, see Giemulla, Guldimann-Festschrift, p. 115 et seq. 70. ZLW 2001, 254/262. 71. BGHZ 74, 162/164 et seq. 72. For further information regarding this term see Note 14; similarly Rymanowski v. PanAm – State of NY, App. Div., US AvR 1979, 503. 72a. Albo S.R.L. v. Lı´neas Ae´reas Paraguayas (L.A.P.) – Paraguayan Civil and Commercial Court of Appeals, Chamber III, judgment of 6 Oct. 1987.

18 – Article 22 Montreal Convention – Suppl. 5 (November 2009) Article 22 of Article 22 paragraph 5 MC are satisfied although the carrier’s liability for damage in relation to cargo remains unaffected under Article 22 paragraph 3 MC. It is uncertain whether the liability limit for baggage for which a special declaration has been made under Article 22 paragraph 2 MC may be further increased beyond its actual value under Article 22 paragraph 5 MC. The liability limit fixed by special declaration under Article 22 WC/HP may be increased beyond the declared actual interest under Article 25 WC/HP since the latter applies to ‘the limits of liability specified in Article 22’.73 It can not be assumed that the same rule applies to Article 22 MC in the absence of any similar reference. Article 22 paragraph 5 MC should be read in conjunction with Article 29 MC which states that an action for damages may only be brought subject to ‘such limits of liability as are set out in this Convention’.74 If the liability thresholds prescribed by Article 22 paragraphs 1 and 2 MC do not apply because a successful application is filed under Article 22 paragraph 5 MC then obviously the plaintiff is not prevented by Article 29 MC from suing for whatever unlimited sum is recoverable under national law.75

III. THE LIABILITY THRESHOLDS FOR DAMAGE RELATING TO CARGO UNDER ARTICLE 22 PARAGRAPHS 3 AND 4 MC

45. The carrier’s liability for damage relating to cargo is limited to 19 Special Drawing Rights per kilo under Article 22 paragraph 3 MC unless the consignor has made a declaration of special interest in delivery at destination at the time the package was handed over to the carrier and has paid a supplementary sum. If a special declaration is made the carrier is liable for the sum declared unless it can prove that it is greater than the consignor’s actual interest in delivery at destination.

A. GENERAL REMARKS ABOUT THE LIABILITY THRESHOLDS UNDER ARTICLE 22 PARAGRAPH 3MC

46. The liability threshold of 19 SDR per kilo of freight under Article 22 paragraph 3 MC applies to tangible damage and notional damage caused by delay. The carrier’s maximum liability is calculated according to the weight of the entire consignment subject to the provisions of Article 22 paragraph 4 MC. The liability thresholds for freight under Article 22 paragraph 3 and passenger delays under Article 22 paragraph 1 are considerably lower than the corresponding thresholds formerly applicable under the Warsaw Convention as amended by the Hague Protocol.

73. See also Guldimann, Article 25 WC, note 10 with references to Drion, p. 321; Insurance Company of North America v. KLM – express stated by Hoge Raad, NL, S en S 1978, 62; TranspR 1980, 21; Court of Appeal, Civil Division, GB A11ER 3 (1995), 424. 74. For a discussion of this provision, see Article 29 note 1. 75. See also OLG Frankfurt, ZLW 1981, 85/88 re. Article 24 WC.

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 19 Article 22

47. BT-Drucks.76 states that the liability threshold of 17 Special Drawing Rights per kilo76a has not increased significantly since it was first introduced by Montreal Protocol Nos. 1 – 3 in 1975. Seventeen Special Drawing Rights had a monetary value of euros (EUR) 20.91 on 30 June 2003 which is substantially less than the EUR 27.56 per kilo (Deutsche Mark (DEM) 53.50) previously payable under the Regulation 4 for the Conversion of Poincare´ Francs. The use of liability thresholds based on the value of gold has operated to the disadvantage of the injured party save where inflation has significantly eroded the value of money. However, the liability thresholds prescribed by the Montreal Convention still compare favourably with similar provisions contained in other international transport treaties, particularly Article 30, § 2 of the International Convention concerning the Carriage of Goods by Rail.77 Moreover, the consignor who transports freight by air may increase the carrier’s liability by making a special declaration under Article 22 paragraph 3 MC.

48. The freight liability threshold defines maximum compensation according to weight. It does not impose a uniform tariff and therefore the plaintiff is not entitled to an automatic payout but must prove its loss in respect of any sum below the threshold.78 The relevant weight is normally ascertained from the carriage documents, particularly the waybill. Article 11 paragraph 2 MC states that the particulars contained in the air waybill or cargo receipt ‘relating to the weight ...of the cargo’ are presumed to be correct in the absence of contrary evidence. Therefore, the carrier bears the burden of proving that the actual weight of the cargo is less than the weight recorded in the waybill. This is consistent with the general rule that each party must prove the facts which they allege in their favour since the carrier’s maximum liability will be reduced if the court accepts that the waybill has overstated the weight of the cargo.79 The Montreal Convention has dispensed with the rule under Article 9 WC/HP which states that the carrier is unable to claim the protection of the liability thresholds prescribed by Article 22 paragraph 2 WC/HP if it fails to issue a waybill contain- ing the information required by Article 8 WC/HP. The carrier is still required to issue a waybill or cargo receipt under Article 5 MC specifying, amongst other things, the weight of the cargo, but no sanction may be applied if it fails to do so. It could be argued that the carrier might avoid liability if no carriage document exists which specifies the weight of the cargo but the waybill does not provide conclusive evidence of weight since it merely raises a presumption rebuttable by contrary evidence.80 The weight of the cargo may be established by other documents besides the waybill or cargo receipt, such as business correspondence, but in these circumstances the consignor (or consignee) must prove the weight of the cargo since it will profit from this information.

76. 15/2285, p. 44. 76a. As per the initial text of the 1999 Convention. 77. CIM – Schedule B to the Convention concerning International Carriage by Rail [COTIF] dated 9 May 1980, in the amended version introduced by the Protocol of 3rd June 1999. 78. Guldimann, Article 22 WC, note. 1.5; Schoner, ZLW 1980, 348. 79. See also KLM v. Zahra Kachour – Cour de Cassation Lebanon, RFDA 1972, 190; likewise LG Frankfurt am Main, ZLW 1996, 447/449. 80. See the commentary to Article 11 MC, note 26.

20 – Article 22 Montreal Convention – Suppl. 7 (October 2010) Article 22

B. THE LIABILITY THRESHOLD UNDER ARTICLE 22 PARAGRAPH 4MC IN THE CASE OF THE DESTRUCTION,LOSS,DAMAGE OR DELAY OF PART OF THE CARGO OR OF ANY OBJECT CONTAINED THEREIN

49. The carrier’s maximum liability under Article 22 paragraph 3 MC for the partial destruction, loss, damage or delay of the cargo, or any object contained therein, is calculated under Article 22 paragraph 4 MC according to the total weight of the package or packages concerned. The weight of other packages is only taken into consideration if their value is affected by the said destruction, loss, damage or delay and they are covered by the same waybill, cargo receipt or other record compiled under Article 4 paragraph 2 MC. The only significant difference between this provision and Article 22 paragraph 2 Letter b WC/HP is that it makes an additional reference to the other documents of carriage introduced by the Montreal Convention.81

50. The insertion of Article 22 paragraph 2 letter b WC/HP dealt with a problem identified under the original version of the Warsaw Convention: the question of how liability is to be calculated if only part of the checked baggage or cargo, or any object contained therein, is destroyed, lost, damaged or delayed. The Hague Protocol, and now the Montreal Convention, states that only the total weight of the individual packages concerned is to be taken into account in determining the carrier’s liability save where the value of the other packages transported under the same document of carriage is adversely affected whereupon their total weight is also taken into consideration when calculating the compensation payable.82

51. Article 22 paragraph 4 MC has become practically important because of the meanwhile popular transportation of cargo in containers. In adjusting the loss it is however difficult to determine whether the item concerned is a single piece or the complete gasket. Considering that Articles 18 and 22 MC are provisions being made to compensate real damage of property the following argumentation has to be taken into account: if the air carrier had to compensate for the value of the whole gasket he possibly had to pay the costs for a damage that had not at all occurred. It does not seem justified to pay compensation for the total weight of a container if the content is damaged partially only.

52. The combined package of single items intends to serve an easy transport (i. e. to ensure a simple forwarding of single items being components of a combined freight) and to protect these single items additionally. The reason behind the single package is precisely not to add an additional value to these items which would be destroyed by damaging the complete gasket.83

81. See BT-Drucks. 15/2285, p. 44 et seq. 82. See also LG Frankfurt am Main, TranspR 1991, 241 with dissenting notes by Moeser; ZLW 1996, 447/449. 83. See also Nieuw Rotterdam v. Seaboard World Airlines – Arrondissementrechtbank te Haarlem, ETR 1983, 236; different opinion Ka¨mpf, ASDA-Bulletin 1978, 8 et seq.

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 21 Article 22

53. Cargo does not normally lose its entire value where damaged parts can regain their integrity by being replaced or repaired within a reasonable time. The key consideration is whether the cargo retains its commercial value.84

54. The distinction between an entire consignment and part thereof may have been introduced by the Hague Protocol and subsequently adopted by Article 22 paragraph 4 MC but it was nonetheless considered by the US courts when interpreting the original text of the Warsaw Convention. According to US case law it isn’t the weight of the container but that of individual packages for which separate waybills have been issued which is relevant when calculating compensation for damage to cargo.85 The carrier is therefore only liable for a single damaged component if a consignment of computer hardware is otherwise unspoilt.86 However, in Kalok Corp v. Circle Freight International87 the US District Court ruled that the carrier must pay compensation based on the entire weight of a cargo of disc drives notwithstanding that only a part of the consignment was damaged since the entire batch required screening before it could be sold at market value.

55. American case law is analogous to Article 2 of ‘The Hague – Visby Rules’ concerning the maritime transportation of cargo.88

56. The liability limit which is calculated according to the weight of the cargo is the total sum recoverable and the injured party can not multiply it by suing several defendants any more than it can increase the liability limit for death or bodily injury under Article 21 MC by a similar ploy.89

C. AVOIDANCE OF LIABILITY THRESHOLD

1. The Liability Threshold May Not Be Avoided Despite a High Degree of Fault

57. The injured party may not avoid the liability threshold for freight damage under Article 22 paragraph 3 MC by establishing gross fault on the part of the carrier. It follows that the carrier or its servants or agents may intentionally damage freight or act recklessly towards it in the knowledge that damage will probably result without being liable for damage in excess of the prescribed liability limit.

84. BGH, VersR 1997, 1298 re. WC/HP. 85. Likewise LG Frankfurt am Main, ZLW 1996, 447/449; see also Ruhwedel, note 621. 86. Deere v. Lufthansa – US Court of Appeals, 7th Cir., 21 Avi 17, 513; see also B.R.L Coverage Corp. v. Air Canada–US District Court, EDNY, 22 Avi 17, 576; AL 1991, 204; The Hartford Fire Ins. Co. v. Trans World Airlines – US District Court CD Cal., 20 Avi 18, 254; AL 1988, 147; Williams Dental Co., Inc. v. Air Express International – US District Court, SDNY, 24 Avi 17, 567; Arkwright Mutual Insurance Company v. KLM – US District Court, SDNY, 1995 U.S. District LEXIS 11726. 87. NDCal 1993, 24 Avi 17, 768. 88. For further details see Seaboard World Airlines v. Nieuw Rotterdam – Haarlem District Court, AL 1983, 169. 89. Swiss Bank Corp. v. First National City Bank – US District Court, SDNY, 15 Avi 17, 631.

22 – Article 22 Montreal Convention – Suppl. 7 (October 2010) Article 22

58. BT-Drucks.90 justifies this approach in the following terms: ‘The purpose of maintaining a liability threshold, even where damage is intentionally or recklessly caused, is to avoid litigating the issue of gross fault which will in turn accelerate the claims procedure, reduce insurance premiums and keep freight costs down’. The counter argument is that the carrier has a license to be less careful with other people’s property since the consignor must now bear the entire risk of damage beyond the liability threshold and must make a special declaration or take out an additional policy of insurance to cover this risk. Some jurists argue that Article 22 paragraph 3 MC is unconstitutional since it excludes liability for deliberate damage to property (see § 276 paragraph 3 BGB).91 According to this argument the state must pass laws which protect the use and exploitation of property while seeking a just balance with other legitimate interests so that if a person vandalizes property the law must grant the owner a corresponding right to sue for compensation. Since Article 22 paragraph 3 MC does not grant a right to sue for deliberate damage beyond a certain limit it violates the German constitutional guarantee of property rights. The counter argument is that property owners do not have an absolute right to sue for intentional damage since § 278 sentence 2 of the German Civil Code exempts employers from liability for deliberate damage committed by their servants or agents. Furthermore, liability thresholds form part of a uniform scheme of international rules governing liability for air carriage which is intended to balance the typical interests of consignors and carriers in a fair and transparent manner. The best guarantee of private property is to negotiate a system of rules which properly balance the overall interests of the carrier and consignor and which takes account of the particular conditions applicable to international transport. The rules concerning freight damage prescribed by the Montreal Convention provide the consignor with two advantages which are intended to offset the disadvantage of being unable to sue the carrier for the full extent of cargo damage.92 Firstly the carrier is presumed liable for the destruction, loss or damage of cargo under Article 18 paragraph 1 MC unless it can plead exoneration under Article 20 MC or one of the narrow defences under Article 18 paragraph 2 MC and is therefore in a more onerous position than under general contract law. Secondly the consignor may make a special declaration under Article 22 paragraph 3 MC when delivering cargo for carriage if it wishes to increase the liability threshold of 19 SDR per kilo and so ensure that it receives compensation for damage equal to its actual interest in delivery at destination. The consignor may also insure the freight against normal commercial risks or negotiate for an increase or removal of the liability threshold since the carrier may waive limited liability under Article 25 MC. The rules regarding freight damage, which were initially introduced by Montreal Protocol No. 4, were ratified by 52 sovereign states between 1998 and the 20 October 2003 including Australia, Japan, Canada, Switzerland, the USA as well as numerous Member States of the European Community such as the United Kingdom, the Netherlands and Italy. The European Community and other Member

90. 15/2285, page 45. 91. See also Ruhwedel, TranspR 2001, 189, 196; Schiller, SchwJZ 2000, 184, 186. 92. Ruhwedel, TranspR 2001, 189, 196 et seq.; Schiller, SchwJZ 2000, 184, 186.

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 23 Article 22

States including Greece, which had previously deposited its deed of ratification, also ratified the Convention on 5 April 2001. Article 22 paragraph 3 MC does not breach fundamental law since it forms part of an established and widely accepted uniform system of international rules for air carriage. There are immense advantages to be gained from such a system which have to be balanced against the disadvantage of being unable to sue for intentional damage to cargo in excess of the liability threshold. For example German consignors have a better guarantee of compensation than would otherwise be available in many jurisdictions.93

59. Reuschle94 has considered whether Article 18 and Article 22 paragraph 3 MC violate the German constitutional guarantee of property rights by unlawfully grant- ing immunity to the carrier and its servants and agents for intentional damage to property and by permitting the carrier to unilaterally vary its contractual obligations by altering the mode of transport. He concludes that these provisions are not unconstitutional since the consignor may protect its interests by a special declaration under Article 22 paragraph 3 half sentence 2.

2. Avoidance of the Liability Threshold by Means of a Special Declaration

60. The liability threshold for freight under Article 22 paragraph 3 MC (and checked baggage under Article 22 paragraph 2 MC) does not apply if the consignor makes a declaration of special interest when delivering the cargo to the carrier for transportation provided the declaration states the value which the consignor attri- butes to delivery at destination and a supplementary sum has been paid if required.95 In Chowdhury v. Singapore Airlines, the US District Court ruled that the consignor must prove that it has made a valid declaration of special interest.96 The carrier is liable to pay compensation for freight (or checked baggage) equal to the value of the sum declared even though this exceeds the normal liability threshold unless it can prove that the said sum is greater than the consignor’s actual interest in delivery at destination. The carrier is not permitted under German law to seek discovery for the purpose of obtaining documents which might establish that the consignor’s actual interest is less than its declared interest (i.e. no fishing97).

61. Compensation for damage to freight (or checked baggage) may not exceed the value declared by the consignor in the waybill even if this is less than the liability

93. See Ruhwedel, TranspR 2001, 189, 197. 94. Article 22 MC note 44 et seq. 95. Air Afrique v. Tidiane Koita – Cour d’Appel de Dakar, RFDA 1987, 277; Rank v. Jardine Air Cargo – US District Court, ND Ill., 20 Avi 18, 325; Kabalan and others v. Swissair – Supreme Court of Liberia, AL 1989, 96; Pan American World Airways v. Pangan and others – Phillipine Supreme Court, Third Division, AL 1989, 96; McPherson v. Quantas – US District Court, DNJ, 23 Avi 17, 557. In the case of Piscicultura Burrini v. Alitalia (AL 1991, 299) the Court of Milan ruled that a special declaration does not form part of the contract of carriage but constitutes a separate agreement which is not governed by the Warsaw Convention. 96. US District Court, EDNY, 23 Avi 18, 208. 97. See LG Ko¨ln, TranspR 1980, 26 with notes by Wessels.

24 – Article 22 Montreal Convention – Suppl. 7 (October 2010) Article 22 threshold under Article 22 paragraph 3 MC although in B.R.I Coverage v. Air Canada98 the US District Court ruled that a special declaration under Article 22 paragraph 2a sentence 2 WC/HP (which corresponds to Article 22 paragraphs 2 and 3 MC) is invalid unless it exceeds the liability threshold.

62. No form is prescribed for a declaration of special interest under Article 22 paragraph 2 or 3 MC or Article 22 paragraph 2 WC/HP although the nature of the declaration may be identified by the use of the words ‘specially declared’. The declaration plays an important role in maintaining the balance of interests between the consignor and carrier and therefore it should be clear from the waybill that its purpose is to increase the carrier’s liability threshold. The US District Court ruled in Uniden v. Federal Express99 that a special declaration of interest is only valid if entered in the designated space provided by the waybill and so is invalid if it appears elsewhere.100 A statement of value which is made solely for customs purposes is not a declaration of special interest under Article 22 MC although information derived from special interest declarations is often used to compile public records.101 An oral declaration of special interest is invalid102 as is a declaration which is unlikely to be seen by the carrier because it appears in an odd place on the waybill.103

63. Article 22 paragraph 2 and 3 MC clearly imply that the declaration of special interest should be in writing.104 It should be remembered that the sole authentic version of the 1929 Warsaw Convention is in French (see Article 36 WC) and that the intention was to achieve ‘the Unification of Certain Rules Relating to International Carriage by Air’. The use of the adjective ‘speciale’ implies that the declaration must be in writing since it wouldn’t be special if it could be uttered in passing. Moreover, the flight ticket, baggage check and air waybill prescribed by Arts 3, 4 and 5 WC must also be in writing. On the other hand it is sometimes argued that the authors would have expressly stated that the declaration should be in writing if that had been their intention since Article 26 paragraph 3WC expressly requires complaints about damage to be in writing. However, it is obvious that the declaration should be in writing since its purpose is to increase the carrier’s liability threshold. It therefore represents an additional risk for which extra insurance may be required and a supplementary sum demanded. Therefore, in the interests of legal certainty the declaration must be in writing.105 Although these observations are made in relation to the Warsaw Convention, the same considerations apply to the Montreal Convention.

98. EDNY, 22 Avi 17, 576; AL 1991, 203. 99. US District Court, MDPenn, 20 Avi 17, 433; AL 1987, 158 No. 46. 100. See also Turkish Supreme Court, 11th Law Department, judgment dated 19 Jan. 1995, 1995/182. 101. See also Guldimann re. Article 22 WC, note 14; and Tribunal de Commerce de Bruxelles, AL 1978, 127. 102. Plaza Recycling v. British Airways – NY Supreme Court, No. 4353/83, LAL July 15, 1986; OLG Ko¨ln, TranspR 1990, 199. 103. See Westminster Bank v. Imperial Airways – King’s Bench Division, XLLR 1936, 242; Mayers v. KLM – NY Supreme Court, USAvR 1951, 428. 104. See OLG Ko¨ln, ZLW 1990, 219; NJW-RR 1990, 527; AL 1991, 41; TranspR 1990, 199/200. 105. See also Ruhwedel, p. 150; re. whether the carrier may waive the declaration of special interest; see Brautlacht, TranspR 1991, 342.

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 25 Article 22

64. The liability thresholds prescribed by Article 22 paragraphs 2 and 3 MC may only be increased by a declaration of special interest if the consignor has paid the supplementary sum (if any) demanded by the carrier.

65. The use of the present perfect (‘has paid’) does not imply that the plaintiff must have paid the supplementary sum before the damage occurs but that the sum must have been paid before the claim is filed. The plaintiff is not obliged to pay a supplementary sum which was not requested by the carrier before the event which causes the damage. Otherwise the carrier could demand a second supplementary sum equivalent to the increased compensation for which it is liable which would clearly be absurd. Guldimann106 correctly observes that the supplementary sum is a premium which the carrier may use to increase its insurance cover for the additional risk. A consignor who makes a special declaration may not claim for damage in excess of the liability threshold if the carrier demands a supplementary sum which is not paid before the event which causes the damage.107

IV. THE ADDITIONAL REIMBURSEMENT OF COURT COSTS UNDER ARTICLE 22 PARAGRAPH 6 MC

66. Article 22 paragraph 6 MC states when an award of court costs and other litigation expenses including interest may be claimed in addition to the maximum compensation under Article 22 paragraphs 1, 2, 3 MC. The text virtually repeats Article 22 paragraph 4 WC/HP with the exception that sentence 1 expressly refers to interest as a litigation expense which may be claimed in addition to the liability threshold.108

67. Article 22 paragraph 6 sentence 2 MC states when the plaintiff is not entitled to recover court costs or other expenses of litigation, including interest, under sentence 1 and in doing so repeats the rule stated by Article 22 paragraph 4 sentence 2 WC/HP.

68. In Muoneke v. Compagnie Nationale Air France,109 the court held that the Montreal Convention does not bar the recovery of attorney’s fees or costs in excess of the liability caps in Articles 21 and 22, so the court remanded the action to State court for the sole purpose of calculating costs to be awarded to plaintiff.

106. Article 25 WC, note 17. 107. See also Mayers v. KLM – NY Supreme Court, USAvR 1951, 428. 108. BT-Drucks. 15/2285, p. 45. 109. 2009 WL 1311519 (C.A.5 (Tex.)).

26 – Article 22 Montreal Convention – Suppl. 7 (October 2010) Article 22

V. REVISION OF LIMITS

69. Article 24 of the Montreal Convention provides that the limits of liability are to be reviewed by the International Civil Aviation Organization (ICAO) at five-year intervals by reference to an inflation factor corresponding to the accumulated rate of inflation since the date of entry into force of the Convention. In accordance with Article 24, the ICAO undertook such a review in 2009. On 30 June 2009 the States Parties to the Convention were notified that, in accordance with the tacit approval mechanism spelled out in Article 24 paragraph 2 MC, the revisions shall become effective for all States Parties six months following the notification, unless within three months after the notification a majority of States Parties registered their disapproval with ICAO (see Annex II-1a). As of 30 September 2009, the Montreal Convention had 92 Parties. By 30 September 2009, 14 notices of disapproval regarding the revision of the limits of liability were received by ICAO from States Parties, one of which qualifying its scope of disapproval. It was therefore established that the condition of majority set out was not met (see Annex III-1b). Therefore, the revised limits of liability became effective as of 30 December 2009 for all States Parties to the Montreal Convention, including those which have notified ICAO of their disapproval, in accordance with Article 24 paragraph 2. As a result of this first review of limits of liability the rounded revised limits are:

– SDR 4,694 (instead of SDR 4,150 as per the initial Convention) for each passenger in relation to damage caused by delay in the carriage of persons (Article 22 paragraph 1), – SDR 1,131 (instead of SDR 1,000 as per the initial Convention) for each passenger in case of destruction, loss, damage or delay with respect to baggage (Article 22 paragraph 2) and – SDR 19 (instead of SDR 17 as per the initial Convention) per kilogram in the case of destruction, loss, damage or delay in relation to the carriage of cargo (Article 22 paragraph 3).

Montreal Convention – Suppl. 7 (October 2010) Article 22 – 27