By Guan Feng King & Wood Mallesons’ Dispute Resolution Group, Shanghai Office

I.    Introduction

Dispute resolution proceedings involving aviation accidents are far more complicated than general dispute resolution proceedings because complicated relationships between numerous parties should be considered. Due to their complex nature, the successful resolution of disputes involving aviation accidents requires meticulous long-term efforts. Using a recent Air France crash as a guide, this article will discuss the nature of dispute resolution proceedings in aviation accidents from the perspective of subjects that may be held liable for the accident.

I.    Background of Air France Crash

On May 31 2009, Air France flight AF447 was on a scheduled international flight from Galeão International Airport in Rio de Janeiro, Brazil to Charles de Gaulle Airport in Paris, France. The aircraft lost contact with the air traffic control center during the flight. Since June 6, 2009, the French and Brazilian navies have slowly recovered the bodies of victims and wreckage from the crash. Authorities have confirmed that 12 crew members and 216 passengers from more than 10 countries, including 9 Chinese citizens, all died in this crash. Shortly after the accident, an investigation team led by Air France’s Accident Investigation Bureau initiated an investigation. Meanwhile, Air France and its insurer started collecting information about the victims and their families, making advance payments, and initiating settlement negotiations. By the end of the first half of 2011, Air France had reached settlement agreements with most families of the victims. As part of these settlement agreements, families of the victims agreed to waive all rights, actions and remedies against Air France or any other person or entity that may be held liable for the accident. The investigation of the Air France crash, body identification and the return of personal belongings have not yet been completed. In addition, there are still many disputes arising out of Air France crash that have not yet been resolved.

As a high-profile and complex international aviation accident, the Air France Crash fully reflects the complexity of dispute resolution in aviation accidents. For brevity and clarity, this article will discuss the dispute resolution of aviation accidents from the perspective of subjects who may be held liable for the aviation accident such as the airlines (“Potentially Liable Parties in Aviation Accidents”).

II.    Legal Risks Faced by Potentially Liable Parties in Aviation Accidents

In summary, Potentially Liable Parties in Aviation Accidents will face two kinds of legal risks: (1) administrative legal risks, which mainly refer to administrative punishments or orders from competent authorities; and (2) risks of civil liability, which mainly refer to physical injury or product liability claims raised by the families of victims against liable subjects, or recovery actions by airline companies, who have assumed compensation liability in advance, against the other liable parties of the aviation accident.

As can be seen from the dispute resolution of the Air France crash, government authorities and airlines act cautiously during the crash investigation. Cautious action means that determinations of liability and judgments for compensation for the aforementioned administrative and civil lawsuits are not rushed and not urgent risks to the liable subjects. However, the sluggish pace at which these proceedings advance is difficult for the families of the victims, who often urgently need compensation. Therefore, some of the urgent risks facing parties seeking compensation in aviation accidents are discussed in the following paragraphs:

A. Families of the victims seek higher compensation through various legal actions because liability limitation provisions in the relevant laws rarely meet their expectations.

The compensation standard of international air carriers was first set forth in the Warsaw Convention[1]. Under the provisions of the Warsaw Convention, the liability of international carriers was limited to around 8,300 USD. The Hague Protocol[2] doubled this limit to around 16,600 USD. The 1999 Montreal Convention[3] adopted the use of SDR (Special Drawing Rights) to compensate victims of international carrier accidents. The SDR is created by the International Monetary Fund and the convention provides for a limitation on liability in general cases of 100,000 SDR.

The above compensation standards are only applicable to international aviation accidents. In domestic aviation accidents, compensation standards are mainly provided by local laws and the limitations on compensation in less-developed countries is usually lower than the standards of the conventions described above. Consequently, to obtain higher compensation in lawsuits, lawyers direct families of victims to involve aircraft manufacturers and components suppliers as parties to the lawsuit between the families and the airlines. For example, in the Air France crash, which is an international aviation accident, the families of the victims are seeking to take legal action in the United States by involving American aircraft manufacturers and component suppliers to the lawsuit. By involving these parties, the plaintiffs may be able to circumvent the lower limited liability provisions of less-developed countries. Even if the case never goes to trial, the threat of a higher compensation award in the United States will put the plaintiffs in an advantageous position in settlement negotiations.

B. Due to concerns about the statute of limitations, families of victims usually claim rights to or even file a lawsuit against Potentially Liable Parties in Aviation Accidents as soon as possible instead of waiting for the results of an investigation into the cause of the accident.

Investigation and identification of the causes of an aviation accident is a complex and time-consuming process. For example, it has been more than two years since the Air France Crash, but the final investigation results have not yet come out. However, every country has a statute of limitations for civil actions. If a claimant files a lawsuit after the expiry of the corresponding statute of limitations, the defendant is usually entitled to have the lawsuit dismissed. For instance, Chinese law provides that the statute of limitations for product liability claims is two years. If a claimant files a product liability claim after the limitation expires, the defendant will be able to have the action dismissed by the court. As such, families of victims cannot wait for the result of an investigation before filing suit. Instead, to preserve their right to obtain a judgment, families of victims usually follow the advice of lawyers and initiate a claim or bring a lawsuit against liable subjects as quickly as possible.

C. The participation of professional lawyers in aviation accident disputes advances the civil claim.

Lawyers representing families of victims of international aviation accidents target not only airlines but also other potential liable subjects such as aircraft manufacturers. Furthermore, to further the interests of their clients, experienced lawyers find a nexus between the accident and courts located in several countries and choose the most advantageous jurisdiction in which to bring or threaten to bring a lawsuit. By choosing the most advantageous jurisdiction, subjects with potential liability such as aircraft manufacturers are inclined to reach a settlement to avoid higher compensation and to preserve their reputation, even if the investigation into the accident’s cause is still pending.

III.    Notes for Potentially Liable Parties in Aviation Accidents

Due to various legal strategies available to families of victims of aviation accidents, subjects with potential liability in these accidents should not only carry out their legal obligations, but should also take notice of the following points during the course of dispute resolution:

A. Confirm the identity, nationality, income situation and other information of the victims as soon as possible, and assess potential compensation range based on such information;

B. Arrange internal information collection as soon as possible, including contracts of sale of the aircraft or components, documents relating to performance of contract, and correspondence with any relevant parties after the accident;

C. Carry out internal investigation on the cause of the accident to figure out the potential liability as soon as possible. Parties facing potential liability should keep low-key and avoid arousing suspicion when following the official investigation in order to ensure the neutrality of the conclusion on the cause of the accident issued by the competent authority and make sure that the important evidence would not be challenged in the relevant legal proceedings;

D. Verify whether the aircraft at issue is covered by product liability insurance or other insurance policy, and whether the main component suppliers have purchased the relevant insurance. If there are relevant insurance policies, the insurance companies should be notified as soon as possible. When handling the claims, keep in close touch with insurance companies and other liable subjects, and negotiate on the issue of compensation;

E. Generally, it’s better to settle with the families of victims as soon as possible. Early settlement is advantageous as the possible range of compensation may be extended by families through other legal actions. At the same time, the liable subjects should show compassion and a humanitarian spirit by actively fulfilling obligations of assistance to the families of victims and completing remedial measures in a timely manner;

F. Keep necessary contact with third party authorities (such as the government or the embassy) to seek better solutions if possible;

G. Actively manage the relationship with the media and the public, appropriately express concerns with the cause of the accident, aircraft quality and safety issues to reduce negative effects of the aviation accident on the social image of the enterprise. Meanwhile, pay attention to external statements in case of any misunderstanding or exaggeration.

H. Treat claims letters, litigation documents from other countries and mail from domestic law firms cautiously. Where the victim’s information is unknown, do not randomly sign for receipt of any international courier packages of unknown origin or couriered documents from domestic law firms; especially do not respond to any legal documents. The response to these files should be decided by an experienced team after careful discussion;

I. Entrust a qualified and reliable local law firm from where the accident occurred. No matter in which country the final actions take place, the investigation of facts and evidence collection of local lawyers are indispensable. Furthermore, a local lawyer has advantages in language and culture when dealing with the claims of the victims’ families;

J. Prepare for the long-term accident investigation, multinational lawsuits as well as settlement negotiation.

(This article was originally written in Chinese, the English version is a translation.)

[1] Convention for the Unification of Certain Rules Relating to International Carriage by Air, formulated on October 12, 1929 in Warsaw, Poland, effective for China since Oct 1958.

[2] Protocol Amending the 1929 Convention for the Unification of Certain Rules Relating to International Carriage by Air, China approved this protocol in 1975.

[3] Signed by the participating states of International Conference on Aviation Law convened in Montreal in May 1999, replaced the Warsaw Convention after coming into effect, and entered into force on July 31, 2005 in China.