Petition for Writ of Certiorari — General Administration of Civil Aviation of the Peoples Republic of China v. Barkanic

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IN THE css

Supreme Court of the United States

OCTOBER TERM, 1987

GENERAL ADMINISTRATION OF CIVIL AVIATION OF THE PEO-

PLES REPUBLIC OF CHINA, a/k/a CIVIL AVIATION ADMIN-

ISTRATION OF THE PEOPLES REPUBLIC OF CHINA OR

CAAC. =

Petitioner,

—against—

LOUISE AGNES BARKANIC, Individually and as Personal Rep-

resentative of the Estate of PETER PATRICK BARKANIC,

Deceased,

GLADYS PATRICIA FOX, Individually and as Personal Repre-

sentative of the Estate of DONALD BRANFORD FOX,

Deceased,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

JOHN K. WEIR, ESQ.*

LOUIS R. MARTINEZ, ESQ.

HAIGHT, GARDNER, POOR & HAVENS

195 Broadway

New York, New York 10007

(212) 341-7000

Attorneys for Petitioner

The Department of International

Affairs of the General Administration

of Civil Aviation of the

People’s Republic of China

* Counsel of Record

——— OO

QUESTIONS PRESENTED

I. Where a foreign sovereign has entered into a bilateral air

treaty with the United States and defines therein the scope of

its relinquishment of sovereign immunity, may a United States

court nevertheless exercise subject matter jurisdiction beyond

the scope of the treaty?

Il. May a United States court properly exercise subject

matter jurisdiction over a foreign government-owned air car-

rier under the first clause of section 1605(a)(2) of the Foreign

Sovereign Immunities Act (“in which the action is based upon

commercial activity carried on in the United States by the

foreign sovereign”), in a wrongful death suit arising out of a

foreign air disaster, where the accident occurred on a purely

internal flight within the foreign sovereign’s territory, and the

parties did not enter into a valid contract in the United States

to provide for the air transportation?

TABLE OF CONTENTS

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TREATY AND STATUTE INVOLVED...............

STATE METS CP Fame Ce ka ke cad kawseabes ed ox eks

REASONS FOR GRANTING THE WRIT ...........

II.

iil.

THE DECISION OF THE SECOND CIRCUIT

RAISES AN IMPORTANT QUESTION FOR

THIS COURT’S REVIEW BECAUSE IT FAILS

TO GIVE EFFECT TO AN INTERNATIONAL

TREATY BETWEEN THE UNITED STATES

AND THE PEOPLE’S REPUBLIC OF CHINA.

THE DECISION OF THE SECOND CIRCUIT

IMPERMISSIBLY EXPANDS THE JURISDIC-

TION OF UNITED STATES COURTS OVER

FOREIGN GOVERNMENT-OWNED AIR CAR-

RIERS AND, BY IMPLICATION, OVER ALL

FOREIGN SOVEREIGNS WHO CONDUCT

BUSINESS IN THE UNITED STATES.........

THE SECOND CIRCUIT ERRED IN ITS IN-

TERPRETATION OF THE GENERAL SALES

AGENCY AGREEMENT BETWEEN CAAC

AND PAN AMERICAN AND IGNORED ELE-

MENTAL PRINCIPLES OF CONTRACT AND

oe a Re re re er ee

PAGE

ill

PAGE

ee eis head kes ¥Gi ce eae s sae enes 23

APPENDIX

Opinions and Judgments Below

Court of Appeals Opinion of June 29, 1987..... la

District Court Opinion of October 17, 1986..... 8a

Treaty Involved

Agreement between the United States and the

People’s Republic of China Relating to Civil Air

EG ee ee 22a

Other Documents:

Agreement between Pan American World Airways, Inc.

and The Department of International Affairs of the

General Administration of Civil Aviation of China

Relating to Mutual Representation, November 18,

RO a ree es Py ae nay ren STAY ene i 4, 21

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

No.

GENERAL ADMINISTRATION OF CIVIL AVIATION OF THE

PEOPLES REPUBLIC OF CHINA, a/k/a CIVIL AVIATION

ADMINISTRATION OF THE PEOPLES REPUBLIC OF

CHINA OR CAAC. rr

Petitioner,

Vo.

LOUISE AGNES BARKANIC, Individually and as Personal Rep-

resentative of the Estate of PETER PATRICK BARKANIC,

Deceased, and

GLADYS PATRICIA FOX, Individually and as Personal Repre-

sentative of the Estate of DONALD BRANFORD FOx,

Deceased,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Second Circuit is officially reported at 822 F.2d 11 and it is

reprinted at page la of the Appendix to this Petition. The

opinion and order of the District Court from which appeal was

taken are not officially reported, are unofficially reported at 20

Av. Cas. (CCH) § 17,402 (E.D.N.Y. 1986), and appear at page

8a of the Appendix.

JURISDICTION

The judgment of the United States Court of Appeals for the

Second Circuit was entered on June 29, 1987. No petition for

rehearing was filed. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

TREATY AND STATUTE INVOLVED

This case involves a bilateral international treaty entitled

“Agreement Between the Government of the United States of

America and the Government of the People’s Republic of

China Relating to Civil Air Transport,” September 17, 1980,

T.1.A.S. No. 10326, Av. L. Rep (CCH) 4 26,321, reprinted at

page 22a of the Appendix. The case also involves the Foreign

Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1441(d), 1602-

1611 (1976). Specifically at issue is the first clause of section

1605(a)(2) of the Act which provides:

A foreign state shall not be immune from the jurisdiction

of the courts of the United States or of the States in any

case—

* * x

(2) in which the action is based upon commercial activity

carried on in the United States by the foreign state;

28 U.S.C. § 1605(a)(2).

STATEMENT OF THE CASE

In this action, Respondents seek to recever $3 million for

wrongful death damages on behalf of the estates of Peter

Patrick Barkanic and Donald Branford Fox, passengers on a

Russian-manufactured Antonov 24 aircraft which crashed at

Jinan, People’s Republic of China, on January 18, 1985, while

being operated by Petitioner, the Department of International

Affairs of the General Administration of Civil Aviation of the

People’s Republic of China (hereinafter referred to as

“CAAC”) as Flight 5109 between Nanjing and Beijing, exclu-

sively within the People’s Republic of China.

CAAC is a department under the State Council of the

People’s Republic of China, a branch of the Government with

the responsibility of carrying on domestic and international

transportation by air. It has its domicile and principal place of

business in the People’s Republic of China. CAAC conducts

airline operations to and from the United States pursuant to a

bilateral air treaty executed between the governments of the

People’s Republic of China and the United States promoting

international civil air transportation. See, Agreement Between

the Government of the United States and the Government of

the People’s Republic of China Relating to Civil Air Trans-

port, September 17, 1980 T.I.A.S. No. 10326, Av. L. Rep.

(CCH) § 26,321, reprinted at page 22a of Appendix. In accord-

ance with the terms of that treaty, CAAC received a Foreign

Air Carrier Permit from the Civil Aeronautics Board’ to carry

out the agreed services set forth in Annex I of the bilateral air

treaty. Permit to Foreign Air Carrier, November 26, 1980,

issued by Civil Aeronautics Board Order 81-1-13, Docket

38775, November 26, 1980.

At the time of the accident, both passengers were travelling

for business purposes aboard CAAC’s aircraft pursuant to

tickets issued and confirmed in China. Appendix at 9a, 63a,

64a. However, prior to departing Washington, D.C., Mr.

Barkanic had obtained two ticket coupons requesting domestic

transportation within China, from a private travel agent with

whom his employer maintained a reguiar corporate account.

The tickets issued to Mr. Barkanic were unconfirmed requests

for transportation and, as a result, did not constitute a con-

tract of carriage with CAAC. Appendix at 6la, 62a. Payment

for the ticket coupons was made by Mr. Barkanic’s employer

to their travel agent nearly one month after the date of the

accident.

l Foreign Air Carrier Permits were formerly issued by the CAB under

49 U.S.C.A. § 1372. With the Civil Aeronautics Board Sunset Act of 1984,

Pub.L.No. 98-443, 1984 U.S. Code Cong. & Ad. News 1703, Congress

transferred this function to the Department of Transportation.

, 4

The record below clearly and unequivocally shows that the

travel agent who issued the request tickets in the United States

was never appointed or approved as an agent of CAAC.

Although in furtherance of the bilateral air treaty CAAC and

Pan American World Airways Inc. (hereinafter “Pan Ameri-

can”) entered into a General Sales Agency Agreement which

permits Pan American to act as a general sales agent in the

United States, that agreement specifically provides that CAAC

has the right to refuse appointment of such sales agents and to

select directly sales agents in the United States. Agreement

between Pan American World Airways, Inc. and the Depart-

ment of International Affairs of the General Administration of

Civil Aviation of China Relating to Mutual Representation,

November 18, 1980 (hereinafter referred to as General Sales

Agency Agreement), § 2.1.7. Appendix at 52a. Moreover, the

General Sales Agency Agreement specifically provides that

valid documents for transportation may not be issued unless

prior confirmation has been obtained. General Sales Agency

Agreement § 2.1.2, Appendix at S5la. The agreement deals

exclusively with international transportation and does not

provide that any private travel agent of Pan American will be

permitted to issue confirmed tickets for travel on CAAC

flights exclusively within China.

Proceedings in the District Court

Respondents commenced this action in the United States

District Court for the Eastern District of New York by filing

their complaint on May 22, 1985. They alleged causes of action

premised upon negligent maintenance, operation, and control

of the accident aircraft; negligent training of flight personnel;

and negligent initiation of a landing. Significantly, the com-

plaint does not allege any claims premised upon breach of

contract, nor does it allege any cause of action pursuant to the

Warsaw Convention’ and makes no allegation that the flight

2 Convention for the Unification of Certain Rules Relating to Interna-

tional Transportation By Air, 49 Stat. 3000, 49 U.S.C. § 1502 et seqg., and the

Montreal Agreement of 1966, CAB 18900, 31 Fed. Reg. 7302.

was “international transportation” within the meaning of

Article 1 of the Convention. Respondents did assert, however,

that CAAC had waived its sovereign immunity by virtue of

holding a foreign air carrier permit to operate into the United

States. Petitioner CAAC answered and denied all of the

material allegations of the complaint and pleaded various

affirmative defenses, including the defense of lack of subject

matter jurisdiction. Subsequently, CAAC moved for dismissal

for lack of subject matter jurisdiction under the Foreign

Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1441(d), 1602-

1611.

On October 17, 1986, the United States District Court for

the Eastern District of New York issued its Memorandum and

Order. Appendix at 8a. The District Court dismissed the

complaint for lack of subject matter jurisdiction under the first

clause of section 1605(a)(2) of the Foreign Sovereign Immuni-

ties Act, 28 U.S.C. §§ 1330, 1441(d), 1602-1611. The Court

found that there was no significant nexus between CAAC’s

commercial activities in the United States and the accident in

China because the transportation requested by the decedents

was for a domestic flight exclusively within the sovereign

territory of the People’s Republic of China and final arrange-

ments and confirmation had to be made in China. Appendix at

17a. The District Court further found that, at the time dece-

dents contacted CAAC in China to make the final arrange-

ments for their flight, CAAC’s office in Nanjing placed

stickers on the original transportation requests, which indi-

cated that the decedents would actually travel on Flight 5109

(the accident flight), not Flight 1508, as requested in the ticket

coupons obtained in the United States. Appendix at 9a. The

Court also found that under the clear and unambiguous

language of the Foreign Air Carrier Permit, CAAC had not

waived its sovereign immunity for purely internal flights over

Chinese territory. Appendix at 20a-21a.

Proceedings in the Circuit Court

of Appeals

Respondents sought review of the District Court’s decision

in the United States Court of Appeals for the Second Circuit.

The appeal was limited to the jurisdictional issues under the

Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330,

1441(d), 1602-1611 (“FSIA”). Although the court found that

CAAC had not waived its sovereign immunity by virtue of

holding a foreign air carrier permit to operate into the United

States, the Second Circuit neverthless reversed. Relying on its

own prior decision in Ministry of Supply, Cairo v. Universe

Tankships, Inc., 708 F.2d 80 (2d Cir. 1983), the Court con-

cluded that under the first clause of section 1605(a)(2) of the

FSIA (the “commercial activity” exception to sovereign immu-

nity), a “nexus” existed between CAAC’s commercial activities

in the United States and the accident in China. The Court

based its decision upon the fact that the ticket coupons request-

ing transportation in China were obtained and paid for in the

United States. Appendix at Sa-6a.

The Court treated as irrelevant the following facts supported

by the record below: (1) Respondents’ claims arise out of the

crash of an aircraft operated by CAAC on purely domestic

flight wholly within the sovereign territory of the People’s

Republic of China; (2) the tickets issued to respondents’

decedents requesting transportation were not issued by CAAC

in the United States or by any of its designated agents; (3)

CAAC did not receive payment for the tickets in the United

States; in fact, payment for the flight was made to the travel

agent nearly one month after the accident; (4) the tickets issued

by the decedents’ travel agent requesting transportation were

not valid until confirmed by CAAC in China; and (5) at the

time of the accident, decedents were travelling aboard Flight

5109, not Flight 1508 as requested on the tickets obtained in

the United States.

REASONS FOR GRANTING THE WRIT

If allowed to stand, the decision of the Second Circuit will

undoubtedly have a dramatic and deleterious impact upon

relations between the United States and the People’s Republic

of China, and may affect U.S. relations with other foreign

sovereigns. This case involves an important question of sover-

eign immunity affecting all foreign government-owned air

carriers who conduct operations in the United States on the

basis of bilateral civil air transport agreements. In its decision,

the Second Circuit ignores a bilateral air treaty between the

United States and the People’s Republic of China relating to

international civil air transportation. That treaty circumscribes

the bounds under which both countries may operate airlines in

each other’s sovereign territory and limits the extent to which

one party may intrude upon the other’s sovereignty arising

from this activity. In addition, the decision of the Second

Circuit seriously undermines the uniformity and predictability

that Congress and the Supreme Court have sought to achieve

in decisions involving foreign sovereigns under the Foreign

Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1441(d), 1602-

1611 (hereinafter “FSIA”). See, H.R. Rep. No. 94-1487, 94th

Cong., 2d Sess., reprinted in, 1976 U.S. Code Cong. & Ad.

News, 6604, 6606; Verlinden B.V. v. Central Bank of Nigeria,

461 U.S. 480, 489 (1983). By exercising subject matter jurisdic-

tion over CAAC in this instance, the Second Circuit exceeded

the jurisdictional authority given United States courts under

the FSIA. Although the Second Circuit purported to adopt the

“nexus” approach in interpreting the first clause of section

1605(a)(2) of the FSIA (that is, that in order to exercise

jurisdiction, there must be a significant connection between the

foreign sovereign’s commercial activities in the United States

and the acts giving rise to the plaintiffs’ claim), its formulation

of the degree of connection required is inconsistent with the

formulation of other circuit and district courts. Under the

present state of the law, foreign sovereigns cannot reasonably

predict when they will become subject to the jurisdiction of

United States courts. This case gives the Supreme Court a

unique opportunity to define more clearly the standards under

which a United States court may exercise jurisdiction over a

foreign sovereign, thereby furthering Congressional intent to

promote uniformity and predictability in decisions involving

foreign sovereign immunity.

I. THE DECISION OF THE SECOND CIRCUIT RAISES

AN IMPORTANT QUESTION FOR THIS COURT’S

REVIEW BECAUSE IT FAILS TO GIVE EFFECT TO

AN INTERNATIONAL TREATY BETWEEN THE

UNITED STATES AND THE PEOPLE’S REPUBLIC

OF CHINA

The decision below will have a substantial and dramatic

impact upon relations between the United States and the

People’s Republic of China. Indeed, the impact of the Second

Circuit’s holding will have far-reaching implications for all

governments who conduct commercial activities in the United

States. The Court below disregarded an international treaty

between the United States and the People’s Republic of China.

Acting in the spirit of the Joint Communique of December 15,

1978 establishing diplomatic relations between the two coun-

tries, the respective governments executed the “Agreement

Between The Government of the United States of America and

the Government of the People’s Republic of China Relating to

Civil Air Transport,” September 17, 1980 T.I.A.S. No. 10326,

Av. L. Rep. (CCH) 4 26,321, reprinied at page 22a of the

Appendix, (hereinafter referred to as the “Air Transport Serv-

ices Agreement”).

The two nations executed the Air Transport Services Agree-

ment in an effort to “develop mutual relations between their

countries, to enhance friendship between their peoples, and to

facilitate international air transport.” See, Air Transport Serv-

ices Agreement of September 17, 1980, Preamble, Appendix

23a (emphasis added). Significantly, the parties entered into

this agreement “[o]bserving the principles of mutual respect

for independence and sovereignty, non-interference in each

other’s internal affairs, equality and mutual benefit and

friendly cooperation.” /d.

In an effort to carry out the intentions of the parties under

the treaty, the Civil Aeronautics Board issued a Foreign Air

Carrier Permit setting fort) the routes and terms of CAAC’s

operations in the United States. Permit to Foreign Air Carrier,

November 26, 1980. See District Court Opinion, Appendix at

18a.

CAAC’s Foreign Air Carrier Permit provides in relevant

part that:

(3) By accepting this permit, the holder waives any

right it may possess to assert any defense of sovereign

immunity from suit in any action or proceeding instituted

against the holder in any court or other tribunal in the

United States (or its territories or possessions) based upon

any claim arising out of operations by the holder under

this permit.

District Court Opinion Appendix at 18a (emphasis added). No

other waiver was executed either expressly or by implication.

Thus, CAAC may raise the defense of sovereign immunity with

respect to operations which are not under the permit. The

language of the paragraph is clear and unequivocal.

To determine what constitutes “operations by the holder

under the permit,” one need only refer to the first page of the

permit where the CAB grants CAAC authority to operate as

follows:

A. Between the coterminal points Beijing and Shanghai,

People’s Republic of China; the intermediate point

Tokyo, Japan (or another point in Japan); and the

coterminal points Honolulu, Hawaii; Los Angeles and

San Francisco, California; and New York, New York,

with an optional technical stop at Anchorage, Alaska.

CAAC may engage in charter foreign air transportation:

B. Between any point or points in the People’s Republic

of China and any point or points in the United States;

and

C. Between any point or points in the United States and

any point or points not in the People’s Republic of

China or the United States.

Permit To Foreign Air Carrier, November 26, 1980, Para-

graphs A, B, and C. See, District Court Opinion, Appendix at

20a. The above-described routes do not include purely internal

flights within the People’s Republic of China that have no

connection with the United States. In fact, the Second Circuit

held that the CAB permit “did not cover the entirely domestic

flight between the terminal points of Beijing and Nanjing in

China.” Appendix at 3a.

It is abundantly clear that the applicable treaty and the

permit issued pursuant to that treaty establish that CAAC

agreed to waive its sovereign immunity only with respect to

specific flights relating to international transportation and to

no others.

As a sovereign state, the People’s Republic of China retains

jurisdiction over all claims arising out of accidents occurring

on its airline on purely domestic flights. The government has

never surrendered or waived that sovereign right. It is well-

established that “a foreign state does not waive its sovereign

immunity by merely entering into a contract with another

nation. There must be an intentional and knowing relinquish-

ment of the legal right.” Castro v. Saudi Arabia, 510 F. Supp.

309, 312 (W.D. Tex. 1980); Frolova v. Union of Soviet Socialist

Republics, 761 F.2d 370, 377-378 (7th Cir. 1985); and Aboujdid

v. Singapore Airlines and Gulf Aviation Ltd., 67 N.Y.2d 450;

503 N.Y.S.2d 555, 558 (1986).

In the instant case, the Second Circuit disregarded the

principle established in a number of Supreme Court decisions

that treaties are to be construed liberally to give effect to the

intention of the parties. The Amiable Isabella, 19 U.S. 1, 71

(1821); Valentine v. United States, 299 U.S. 5, 10 (1936);

Sumitomo Shoji of America v. Avagliano, 457 U.S. 176, 185

(1982). There can be no doubt that under the Air Transport

Services Agreement and the subsequent permit issued by the

CAB, the parties did not intend to relinquish their sovereign

immunity with respect to purely domestic flights over their

respective territories.

The People’s Republic of China has the right to rely upon

the representations of the United States Government as ex-

pressed in the treaties it executes and in the pronounc’ments

made by its government agencies. The exercise of subject

matter jurisdiction upon the tenuous basis found by the Second

Circuit is in complete contravention of the Air Transport

Services Agreement and of the legitimate expectations of the

parties. Moreover, the Court’s holding constitutes an unjusti-

fied transgression into the internal affairs and sovereignty of

the People’s Republic of China.

This Court should grant CAAC’s petition for certiorari to

resolve this important question of international law.

Il. THE DECISION OF THE SECOND CIRCUIT IMPER-

MISSIBLY EXPANDS THE JURISDICTION OF

UNITED STATES COURTS OVER’ FOREIGN

GOVERNMENT-OWNED AIR CARRIERS AND, BY

IMPLICATION, OVER ALL FOREIGN SOVEREIGNS

WHO CONDUCT BUSINESS IN THE UNITED

STATES

The Second Circuit’s decision in Barkanic v. CAAC, if

permitted to stand, will fundamentally alter the principles of

sovereign immunity codified by Congress in the Foreign Sover-

eign Immunities Act, 28 U.S.C. §§ 1330, 1441(d), 1602-1611

(hereinafter referred to as “FSIA”). The decision increases the

confusion and uncertainty already plaguing this area of United

States law. On the basis of an ill-perceived and tenuous

connection between CAAC’s commercial activity in the United

States and an air disaster which occurred on a purely domestic

flight over the sovereign territory of China, the Second Circuit

impermissibly expanded its jurisdictional power over foreign

sovereigns and chose to exercise subject matter jurisdiction

over CAAC.

EES

It is well established that Congress enacted the FSIA with the

aim of clarifying the law with respect to suits against foreign

state defendants. H.R. Rep. No. 94-1487, 94th Cong., 2d Sess.

reprinted in, 1976 U.S. Code Cong. & Ad. News, 6604, 6606.

In addition, because of the potential sensitivity of actions

against foreign states, Congress intended to promote uniform-

ity in decision-making with respect to questions of sovereign

immunity. H.R. Rep. No. 94-1487, 94th Cong., 2d Sess.,

reprinted in, 1976 U.S. Code Cong. & Ad. News, 6604, 6631;

Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 489

(1983). Clearly, the decision of the Second Circuit does not

promote the uniformity and predictability that Congress and

this Court in Verlinden, supra, have sought to accomplish.

At issue here are the jurisdictional limits of United States

courts under the first clause of section 1605(a)(2) of the FSIA

(the commercial activity exception to sovereign immunity).

That section provides in part:

A foreign state shall not be immune from the jurisdiction

of the courts of the United States or of the States in any

case—

* * *

(2) in which the action is based upon commercial activity

carried on in the United States by the foreign state;

28 U.S.C. § 1605(a)(2). This language has been the subject of

widely varying and, at times, contradictory judicial interpreta-

tion. Of this section, the Fifth Circuit Court of Appeals has

commented:

Despite strong congressional intent to promote uni-

formity in decision making through judicial application

of the first clause of section 1605(a)(2), judicial readings

of this clause have not been consistent. Courts of Appeals

and district courts have announced widely varying formu-

lations of the jurisdictional scope of this clause. and these

formulations may be divided into four categories: (1) a

“literal” approach; (2) a “nexus” approach; (3) a bifur-

cated literal and nexus approach; and (4) a “doing busi-

ness” approach.

Vencedora Oceanica Navigacion v. Compagnie Nationale Alge-

rianne, 730 F.2d 195 at 199-200 (Sth Cir. 1984), reh’g denied,

734 F.2d 1479 (Sth Cir. 1984).

In the instant action, the Second Circuit stated that it was

adopting the “nexus” approach, (Appendix at Sa) which, in

theory, requires that a court determine whether there is a

significant connection between the foreign state’s commercial

activity in the United States and the acts giving rise to the

plaintiff’s claims before exercising subject matter jurisdiction.

Vencedora, supra, 730 F.2d at 199-200. However, in applying

this test, the court did not identify any quantitative or qualita-

tive standard to determine whether the “nexus” it found was

sufficiently significant to warrant the exercise of subject matter

jurisdiction. Instead, the Second Circuit merely looked at one

fact: that unconfirmed ticket coupons requesting transporta-

tion in China were provided and paid for in the United States.

CAAC submits that the great weight of prior case authority

compelled the opposite conclusion, i.e. the link between

CAAC’s commercial activities in the United States and the

claim was too attenuated to justify the exercise of subject

matter jurisdiction. Harris v. VAO Intourist, Moscow, 481 F.

Supp. 1056 (E.D.N.Y. 1979); Tigchon v. Island of Jamaica,

591 F. Supp. 765 (W.D. Mich. 1984); Jn re Air Disaster at

Riyadh Airport, 16 Av. Cas. (CCH) § 17,880 (D.D.C. 1981);

Tote v. Iberia International Airlines, 649 F. Supp. 41 (E.D. Pa.

1986).

Under the present state of the law, a foreign government-

owned air carrier cannot reasonably predict when it will be-

come subject to the jurisdiction of United States courts for

activities within its own sovereign territory. Barnett v. Iberia

Air Lines of Spain, No. 85C10265 (D.C. Ill. April 1, 1987)

(available on LEXIS, Genfed Library, Dist file) provides the

most recent example of how a court, faced with an analogous

fact pattern, has reached exactly the opposite result. In

Barnett, plaintiffs brought suit against Trans World Airlines

———————————

(TWA) and Iberia Air Lines of Spain for negligence, breach of

contract, and punitive damages because they suffered a ruined

vacation. None of the plaintiffs’ claims were based on the

Warsaw Convention. The plaintiffs had purchased tickets in

the United States for a vacation in the Spanish Canary Islands.

TWA sold plaintiffs tickets on a TWA flight from New York to

Madrid, and on an Iberia Air Lines flight from Madrid to the

Canary Islands. Because of problems at Madrid Airport,

plaintiffs missed their scheduled Iberia flight and were unable

to get another for their intended destination. Plaintiffs asserted

jurisdiction over Iberia Air Lines under the first clause of

section 1605(a)(2), alleging that TWA acted as Iberia’s agent

when TWA sold plaintiffs the Iberia tickets, much in the same

manner as jurisdiction is asserted in the instant case. Because

the contract which formed the basis for the action was formed

in Chicago, plaintiff claimed that a sufficient connection

existed between the acts of Iberia in Madrid and Iberia’s

commercial transaction with plaintiffs in Chicago to meet the

requirements of the first clause of section 1605(a)(2).

Defendant Iberia moved to dismiss under the FSIA. Al-

though Iberia conducts commercial activities and has offices in

the United States, it claimed that these activities were not

connected to Iberia’s acts at the Madrid airport which gave rise

to plaintiffs’ claims. In holding that it lacked subject matter

jurisdiction, the Court stated:

The court thinks that the necessary nexus between the acts

of Iberia in Madrid and the commercial activities of

Iberia in the United States is missing. While the activities

of TWA as agent for Iberia might be enough to confer

jurisdiction over Iberia under a “doing business” test, the

court believes that the acts of an agent are insufficient

under the nexus approach.

Id.

Similarly, in Harris v. VAO Intourist, Moscow, 481 F. Supp.

1056 (E.D.N.Y. 1979), plaintiff sought to recover wrongful

death damages for an American tourist killed in a Moscow

hotel fire. Defendants were two state-owned Russian tourist

services, one of which, Intourist Moscow, owned and operated

the hotel and the other of which, Intourist USA, promoted

tours to the USSR in New York. In dismissing the complaint,

the Court held that the first clause of section 1605(a)(2) was

not applicable to bring the defendants within the jurisdictional

exception to sovereign immunity since no significant link

existed between the commercial activity of the foreign sover-

eign in the United States and the plaintiff’s claim. “The clause

requires that the court action ‘be based upon’ the specific

commercial activity carried on in the United States.” Jd. at

1061.

In Jn Re Disaster at Riyadh Airport, 16 Av. Cas. (CCH)

q 17,880 (D.D.C. 1981), a suit for the wrongful death of a

passenger killed on a Saudi Arabian airline, the court likewise

held that it lacked subject matter jurisdiction under the first

clause of section 1605(a) (2) of the FSIA. The court stated:

The court cannot assert jurisdiction over the Kingdom on

the basis of the first clause. A ‘commercial activity carried

on within the United States by a foreign state’ is defined

in § 1603(e) to mean a ‘commercial activity carried on by

such state and having substantial contact with the action

is based on a regular cause [sic] of commercial conduct

within the United States, namely Saudi Arabian Airlines’

business activities here. However, the instant action is

based upon an air disaster in Saudi Arabia not upon a

commercial activity carried on within the United States.

The legislative history indicates that there must be a

greater connection between the cause of action and the

United States than exists in this case for the exception to

apply. According to the legislative history, the exception

includes “cases based on commercial transactions per-

formed in whole or in part in the United States, import-

export transactions involving sales to, or purchases from,

concerns in the United States, business torts occuring in

the United States . . . and indebtedness incurred by a

foreign state.” H. Rep. No. 94-1487 at 17. While this is

not an exclusive list of examples, the examples all involve

cases where there is a much closer nexus between the

cause of action and the United States.

16 Av. Cas. at § 17,881 (emphasis added).

In Tote v. Iberia International Airlines, 649 F. Supp. 41

(E.D. Pa. 1986), another wrongful death suit arising out of the

crash of an Iberia 727 jet during a flight from Madrid to

Bilboa, Spain, the Court held there was no jurisdiction and

observed:

Plaintiff in this case has failed to show the requisite nexus

between his grievance, the airline’s alleged negligence

causing the crash and Iberia’s commercial activity carried

on in the United States. The factors present in Sugarman

upon which the Court determined the plaintiff’s claim

was “based upon a commercial activity carried on [by

Iberia] in the United States” 28 U.S.C. 1605(a)(2) (clause

1) are not present here. Unlike that of the Sugarman

plaintiff, plaintiff’s decedent’s flight was a domestic

flight within Spain, and plaintiff’s tickets were not pur-

chased in the United States, but Spain.

649 F. Supp. at 42-43.

The same analysis is echoed in Aboujdid v. Singapore

Airlines, Ltd. and Gulf Aviation, Ltd., 108 A.D.2d 330, 489

N.Y.S.2d 171 (ist Dept. 1985), affirmed, 67 N.Y.2d 450, 503

N.Y.S.2d 555 (1986), where airline passengers brought suit to

recover damages from foreign state-owned airlines for injuries

resulting from a hijacking of an aircraft enroute from Tel Aviv

to Paris. In reversing the lower court and finding that there

was no subject matter jurisdiction under the first clause of

section 1605(a)(2), the Appellate Division of New York stated:

An action cannot be held to be based upon a ‘commercial

activity’ carried on here simply because a defendant does

business here. A close nexus between the incident and the

forum State is required; ‘[o]blique contacts with the

United States wholly unrelated to the instant suit may not

be considered.’ (citations omitted) ‘Commercial activity’

is a more demanding test than the ‘doing business’ test of

CPLR 301 (see Harris v. VAO Intourist, Moscow, 481 F.

Supp. 1056, 1061; Tigchon v. Island of Jamaica, 591 F.

Supp. 765, 767). The actions here are not based on any

commercial activity carried on in this country; they arise

from the defendants’ alleged negligence that occurred in

Bahrain and Abu Dhabi.

108 A.D.2d at 332, 33 (emphasis added). The New York Court

of Appeals affirmed this conclusion. See also, Tigchon v.

sland of Jamaica, 591 F. Supp. 765 (W.D. Mich. 1984);

Castillo vy. Shipping Corp. of India, 606 F. Supp. 497

(S.D.N.Y. 1985).

In stark contrast to these well-reasoned authorities lies the

decision of the Second Circuit in this case. Here, neither

CAAC nor its agents issued valid tickets for airline transporta-

tion to the decedents in the United States, and the tickets

issued in this country had to be confirmed and validated in

China. Indeed, the Second Circuit so recognized when it

stated: “the tickets as issued [in Washington, D.C.] bore the

legend ‘RQY,’ which in airline ticketing practice signifies that

economy seating has been requested and that the entire trans-

action has not been finalized and must be confirmed.” Appen-

dix at 5a. Thus, the facts of the instant case are even further

removed from the jurisdictional line than those in Barnett,

supra. Despite significant countervailing authority, and this

significant factual disparity, the Second Circuit reaches its

determination of jurisdiction, in obvious contravention of the

Congressional mandate for decisional uniformity, as articu-

lated by this Court in Verlinden B.V. v. Central Bank of

Nigeria, 461 U.S. 480, 489 (1983). See also, H.R. Rep. No. 94-

1487, 94th Cong. 2d Sess., reprinted in, 1976 U.S. Code Cong.

& Ad. News, 6604, 6606, 6631.

The above-described confusion is engendered by the lack of

guidance lower courts have received in interpreting the first

clause of section 1605(a)(2). This works to the detriment of

foreign sovereigns conducting commercial activities in this

country. A foreign sovereign has a legitimate interest and right

to retain jurisdiction over actions arising from accidents occur-

ring on government-owned aircraft where the flight is con-

ducted exclusively within its borders and is not connected to

international transportation. Yet under the interpretation es-

poused by the Second Circuit, this sovereign right is frustrated.

In fact, under the Second Circuit’s formulation of the “nexus”

test, any link with the foreign state’s commercial activity in the

United States, no matter how insignificant or remote, would be

sufficient to warrant the exercise of subject matter jurisdiction

under the first clause of section 1605(a)(2). This approach

clearly opens the floodgates for litigation in United States

courts of many foreign controversies, including claims against

government-owned air carriers who conduct business in this

country. In this age of automation, computers, and the sophis-

ticated interfacing of the various networks in the airline indus-

try, it is relatively simple, under the Second Circuit’s “nexus”

formulation, to establish some act in the United States, how-

ever remote, that could be traced back to a foreign sovereign

or its presumed “agents.” As these systems are not peculiar to

the airline industry, virtually all foreign sovereigns who con-

duct business in the United States would be susceptible to U.S.

Court jurisdiction for acts which are at best, tangentially

related to their U.S. activities.

Those decisions finding jurisdiction under the “commercial

activity” exception have uniformly required significantly

greater contacts before exercising subject matter jurisdiction

over a foreign sovereign. See Sugarman v. Aeromexico Inc.,

626 F.2d 270 (3d Cir. 1980) (action for injuries sustained on an

international flight against a government owned airline where

the court found the significant nexus in the fact that the

defendant actually flew the plaintiff from the United States to

Mexico and back, and that plaintiff had purchased his con-

firmed tickets in the U.S.); Velidor v. L./P/G. Benghazi, 653

F.2d 812 (3d Cir. 1981) cert. denied, 455 U.S. 929 (1982) (where

the court found the significant nexus in the fact that the ship

had sailed into a United States port carrying the plaintiffs on

board); Arango v. Guzman Travelers Advisors Corp., 621 F.2d

1371 (Sth Cir. 1980) (action for injuries sustained in interna-

tional travel against a government-owned airline where the

court found the significant nexus in the fact that the defendant

carried the plaintiffs from the United States and sold them

tickets directly); and Colleen M. Bryne v. Thai Airways Inter-

national Ltd., 18 Av. Cas. 4 18,363 (N.D. Ill. 1984) (where the

court found the significant nexus in the fact that the flight

upon which plaintiff sustained her injury originated in the

United States and so was connected to defendant’s commercial

activity here). Even the prior Second Circuit decision interpret-

ing the first clause of section 1605 (a) (2) required more

substantial connections than those existing in the case at bar.

See, Ministry of Supply, CAIRO vy. Universe Tankships Inc.,

708 F.2d 80 (2d Cir. 1983) (where the court found the signifi-

cant nexus in the following facts: (1) the wheat damaged was

carried from a United States port on a vessel under bills of

lading pursuant to the Carriage of Goods by Sea Act

(COGSA), 46 U.S.C. § 1300; (2) the wheat was purchased

under a U.S. statute; (3) the legislative history of the FSIA lists

transactions such as the one involved as conduct under section

1605(a)(2).

Furthermore, research has not revealed any case involving

the transportation of passengers or goods wherein a United

States Court has exercised jurisdiction over a foreign

government-owned entity under the first clause of section 1605

(a) (2), where the passengers or the goods were not actually

transported to or from the United States by the foreign

sovereign. Hence, the decision in Barkanic v. CAAC is very

much out of step with the thrust of prior case law.

In sum, CAAC submits that the decision of the Second

Circuit is evidence of the uncertainty and unpredictability that

a foreign sovereign who conducts commercial activities in the

United States faces. United States courts should implement

and administer clear and concise rules for the exercise of

subject matter jurisdiction over foreign sovereigns, thereby

adhering to the Congressional intent embodied in the FSIA and

permitting foreign soverigns to adjust their operations in ac-

cordance with clearly-defined jurisdictional guidelines. Su-

preme Court review will also serve to mitigate against a serious

irritant to international relations, which in turn fosters an

element of distrust of the United States Court system. It is

respectfully requested that this Court review this very impor-

tant issue and provide desperately-needed guidance and cohe-

sion.

Ili. THE SECOND CIRCUIT ERRED IN ITS INTERPRE-

TATION OF THE GENERAL SALES AGENCY

AGREEMENT BETWEEN CAAC AND PAN AMERI-

CAN AND IGNORED ELEMENTAL PRINCIPLES OF

CONTRACT AND AGENCY LAW

In straining to find jurisdiction, the Second Circuit misinter-

preted the plain and unambiguous language of the General

Sales Agency Agreement executed between CAAC and Pan

American, and ignored the very language of the tickets issued

in Washington, D.C. Moreover, the court overlooked funda-

mental principles of contract and agency law which support

CAAC’s assertion of sovereign immunity.

Under the General Sales Agency Agreement, Pan American

is to act as general sales agent for CAAC in the United States,

and CAAC will perform reciprocal functions for Pan Ameri-

can in China. Appendix at 50a. According to the Second

Circuit’s analysis, provisions in the agreement give Pan Ameri-

can the authority both to select and appoint ticket agents in the

United States and to receive revenue for flights on CAAC.

Appendix at 5a. After reviewing these and other provisions,

the court erroneously concluded that CAAC contracted with

respondents’ decedents in the United States through the agency

of Pan American and the private travel agent in Washington,

D.C. Appendix at Sa-6a.

The Second Circuit’s holding is undermined by several

important factors. First, the Court of Appeais erred in at-

tempting to interpret the language of the General Sales Agency

Agreement without considering the international treaty pursu-

ant to which the agreement was made. The introductory

paragraph of the General Sales Agency Agreement indicates

that it was executed pursuant to the Air Transport Services

Agreement between the Governments of the People’s Republic

of China and the United States signed on September 17, 1980,

T.I.A.S. No. 10326, reprinted in Av.L.Rep. (CCH) 4 26,321,

Appendix at 50a. One of the purposes of that treaty, as

expressed in iis preamble, was to “facilitate international air

transportation.” Av.L.Rep. (CCH) § 26,321, Preamble, Ap-

pendix at 23a. The treaty goes on to define “international air

service” as “air service which passes through the air space over

the territory of more than one State.” Jd. at Article 1(g),

Appendix at 25a. Thus, it is plainly evident that the treaty and

the General Sales Agency Agreement were intended to encom-

pass only international air transportation on the agreed serv-

ices and no other. In addition, the General Sales Agency

Agreement between CAAC and Pan American is replete with

references to international transportation and makes no men-

tion of domestic transportation. See 44 5.1, 5.2, 5.3, Appendix

at 53a-5S4a. Hence, fairly interpreted, the General Sales Agency

Agreement between CAAC and Pan American covers only

international transportation, and no Pan American-designated

travel agent could have issued a valid document for transporta-

tion for a domestic flight within the People’s Republic of

China. See also, General Sales Agency Agreement, § 2.1.2

(where it states that documents valid for transportation cannot

be issued unless reservations are “confirmed” by CAAC,

Appendix at 5la); and § 3.3 (where it states that neither Pan

American nor its agents may vary or modify the terms of the

Agreement, Appendix at 53a).

Second, it is well-settled in the common law that, absent an

express grant of authority, the travel agent is the agent of the

passenger. Simpson v. Compagnie Nationale Air France, 42

Ill.2d 496, 248 N.E.2d 117 (S.Ct. Ill. 1969); Bucholtz v.

Sirotkin Travel, Ltd., 74 Misc.2d 180 (Dist. Ct. Nassau Co.

1973), affirmed, 80 Misc.2d 333 (2d Dept. 1974); Antar v.

Trans World Airlines, 66 Misc.2d 93 (2d Dept. 1970), affirmed,

37 A.D.2d 1049 (2d Dept. 1971); Ostrander v. Billie Holm’s

Village Travel Inc., 87 Misc.2d 1049, 386 N.Y.S.2d 597 (Dist.

Ct. Suffolk Co. 1976). Moreover, the record below unequivo-

cally establishes that the travel agent in this case was not an

agent of CAAC.’ The very sales agency agreement which the _

Court of Appeals cites in support of its conclusion is devoid of

any reference to the travel agent as being an authorized agent

of the Airline. Nothing on the record suggests otherwise. By

contrast, and as the District Court recognized, the record does

contain the uncontradicted Affidavit of Mr. Wu Zhengyu

which clearly states that the travel agent was not an agent of

CAAC. Appendix at 9a.

Finally, the Second Circuit ignored the very language on the

face of the tickets issued in the United States, and by so doing,

ignored basic principles of offer and acceptance. It is well-

established that a legally binding contract arises only when one

party, the offeror, makes an offer and the party to whom the

offer is made, the offeree, accepts. Jngrassia v. Shell Oil

Company, 394 F. Supp. 875, 882 (S.D.N.Y. 1975). To be

enforceable, the contract must be supported by consideration.

Id. There can be no enforceable contract if the parties fail to

agree on essential terms or if one of the parties has no intent to

be bound. /nterocean Shipping Co. v. National Shipping and

Trading Corp., 462 F.2d 673, 676 (2d Cir. 1972), aff’d as

modified, 523 F.2d 527 (2d Cir. 1975), cert. denied, 423 U.S.

1054 (1976); Kansas Power & Light Co. v. Burlington North-

ern, 740 F.2d 780 (10th Cir. 1984), cert. dismissed, 469 U.S.

1200 (1985).

3 Discovery has revealed that the Vanslycke and Reeside Travel

Agency is the sole travel agency that makes travel arrangements for Mr.

Barkanic’s employer and has been making those arrangements for several

years.

The request for transportation on the face of the ticket

coupons must reasonably be interpreted as an offer to CAAC

to enter into a contract for carriage. CAAC did not accept the

offer until the decedents arrived in China, as evidenced by the

stickers that CAAC placed on the coupons issued in the United

States. Appendix at 63a-64a. It was then, and only then, that

CAAC accepted decedents’ offer and entered into a contract to

provide transportation, and that activity occurred wholly

within the sovereign territory of the People’s Republic of

China.

CONCLUSION

The decision of the Second Circuit Court of Appeals is in

contravention to an international treaty between the People’s

Republic of China and the United States of America, and

against generally accepted principles of international law. It

also misapplies the “commercial activity” exception to sover-

eign immunity under the Foreign Sovereign Immunities Act.

For these reasons, petitioner prays that a writ of certiorari to

United States Court of Appeals for the Second Circuit be

granted.

Respectfully submitted,

JOHN K. WEIR, ESQ.*

LOUIS R. MARTINEZ, ESQ.

Haight, Gardner, Poor & Havens

195 Broadway

New York, New York 10007

(212) 341-7000

Attorneys for Petitioner

The Department of International

Affairs of the General

Administration of Civil

Aviation of the People’s

Republic of China

*Counsel of Record

APPENDIX

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

—

No. 881—August Term, 1986

(Argued March 3, 1987 Decided June 29, 1987)

Docket No. 86-7985

LOUISE AGNES BARKANIC, Individually and as Personal

Representative of the Estate of Peter Patrick Barkanic,

Deceased,

GLADYS PATRICIA FOX, Individually and as Personal Repre-

sentative of the Estate of Donald Branford Fox, Deceased,

Appellants,

—vyV eel

GENERAL ADMINISTRATION OF CIVIL AVIATION OF THE PEO-

PLES REPUBLIC OF CHINA, a/k/a CIVIL AVIATION ADMIN-

ISTRATION OF THE PEOPLES REPUBLIC OF CHINA or

CAAC,

Appellee.

Before:

OAKES and WINTER, Circuit Judges,

and ZAMPANO, District Judge.*

. Of the District of Connecticut, sitting by designation.

Appeal from a decision of the United States District Court

for the Eastern District of New York, Charles P. Sifton, Judge,

dismissing wrongful death claims arising out of the crash of a

Chinese airliner inside China on the ground that plaintiffs

failed to show an adequate nexus between the crash and the

defendant’s commercial activity in the United States as re-

quired by the Foreign Sovereign Immunities Act, 28 U.S.C.

§ 1605(a)(2).

Reversed.

Daniel F. Hayes, Salibello,

Hayes & Zahn, New York, NY,

for Appellants.

John K. Weir, Haight, Gardner,

Poor & Havens, New York, NY

(Louis R. Martinez, of counsel),

for Appellee.

OAKES, Circuit Judge:

This case involves a question of subject matter jurisdiction

under the Foreign Sovereign Immunities Act (FSIA), 28

U.S.C. § 1605(a)(2). Representatives of the estates of Peter

Barkanic and Donald Fox, who were killed in the crash of a

China Airlines plane enroute from Nanjing to Beijing, China,

on January 18, 1985, brought this wrongful death action

against CAAC, an agent of the Peoples Republic of China

providing domestic and international air services to passengers

traveling in, to, and’from China. The United States District

Court for the Eastern District of New York, Charles P. Sifton,

Judge, dismissed their claims on the ground that the court

lacked subject matter jurisdiction under the FSIA. We reverse.

CAAC was authorized to operate in the United States by the

Civil Aeronautics Board in 1980. The authorization allowed

CAAC to engage in scheduled foreign air transportation of

persons between the coterminal points of Beijing and Shanghai

in the Peoples Republic of China; the intermediate point

Tokyo (or another point in Japan); and the coterminal points

Honolulu, Los Angeles, San Francisco, and New York, with an

optional technical stop at Anchorage. Attached to the CAB

permit was a waiver of any defeiise of sovereign immunity

from suit “based upon any claim arising out of operations by

the holder under this permit.”’ As originally granted, however,

the CAB permit to CAAC did not cover the entirely domestic

flight between the terminal points Beijing and Nanjing in

China.

Since being issued the CAB permit CAAC has continued

regularly scheduled flight operations into and out of San

Francisco, Los Angeles, and New York, carrying passengers

and freight for hire and making its schedules available to the

traveling public. It maintains its own employees and offices at

two locations in New York which are listed in public telephone

directories. In addition, on November 18, 1980, CAAC entered

into a bilateral interline traffic agreement with Pan American

World Airways and a general sales agency agreement whereby

Pan American was to act as general sales agent for CAAC in

the United States and CAAC was to act as general sales agent

for Pan American in the Peoples Republic of China. Under the

agency agreement, Pan American has the authority both to

select and to appoint ticket agents in the United States and to

receive revenues for flights on CAAC.

Peter Barkanic and Donald Fox were American businessmen

whose tickets for the China Airlines flight from Nanjing to

Beijing were purchased from Vanslycke & Reeside Travel, Inc.,

Washington, D.C., an agent for Pan American World Airways,

on January 9, 1985. It is undisputed that tickets issued for

domestic flights in China in this manner must be confirmed by

CAAC in China and, indeed, Barkanic and Fox did not travel

on Flight 1508 departing 10:25 a.m. on January 18, i985, as

originally designated on the United States issued tickets. In-

stead, stickers attached to the original tickets indicate that the

tickets were changed by the CAAC issuing office in Nanjing,

China, to the ill-fated Flight 5109 departing at 5:05 p.m. on the

same day. There is no evidence in the record that at that time

this change in flights was made Barkanic and Fox were re-

quired to purchase new tickets or pay any additional fee. Flight

5109 crashed while attempting to land in poor weather at

Jinan, China, killing Barkanic, Fox, and many others.

The district court dismissed this wrongful death action for

lack of subject matter jurisdiction under the first clause of

section 1605(a)(2) of the FSIA, 28 U.S.C. § 1605(a)(2).' The

court found that there was no significant nexus between

CAAC’s commercial activities in the United States and the

accident in China because the tickets issued in the United

States were unconfirmed, were indeed changed as to flight

number and departure time in China, and were for travel

entirely within China. The district court also held that CAAC

did not waive its defense of sovereign immunity by accepting

the CAB foreign air carrier permit.

We have previously held, as the district court recognized that

“[w]hen a foreign state has carried on a commercial activity

within the United States, the first clause of § 1605(a)(2). . .

withdraws immunity with respect to claims based not only on

acts within the United States but also with respect to acts

outside the United States if they comprise an integral part of

the state’s ‘regular course of commercial conduct’. . . ‘having

substantial contact with the United States.’ ” Ministry of

Supply, Cairo v. Universe Tankships, Inc., 708 F.2d 80, 84 (2d

Cir. 1983) (quoting 28 U.S.C. § 1603(d) & (e). Though the

Fifth Circuit has suggested that an argument can be made that

Ministry of Supply, Cairo approved a “doing business” inter-

l Section 1605 reads in pertinent part as follows:

(a) A foreign state shall not be immune from the jurisdiction of

courts of the United States or of the States in any case—

(2). in which the action is based upon a commercial activity carried

on in the United States by the foreign state. . . .

28 U.S.C. § 1605.

pretation of clause one of section 1605(a)(2), it nevertheless feit

that “this reading is too broad since the parties did not raise

the ‘doing business’ issue.” Vencedora Oceanica Navigation,

S.A. v. Compagnie Nationale Algerienne de Navigation, 730

F.2d 195, 201 n.12 (Sth Cir. 1984). We agree with the Fifth

Circuit’s reading of Ministry of Supply, Cairo and take it, as

did the district court, that a nexus is required between the

commercial activity in the United States and the cause of

action. See Vencedora Oceanica Navigacion, 730 F.2d at 202;

Gilson v. Republic of Ireland, 682 F.2d 1022, 1027 n.22 (D.C.

Cir. 1982); Velidor v. L/P/G Benghazi, 653 F.2d 812, 820 (3d

Cir. 1981), cert. dismissed, 455 U.S. 929 (1982).

Here the sales agency contract between CAAC and Pan

American expressly permitted Pan American to perform the

following functions on behalf of CAAC: “Handling of reser-

vations for passenger . . . transportation and handling of all

clerical work in connection therewith” (4 2.1.1), and “[i]ssu-

ance and completion of passenger ticket and baggage checks,

excess baggage tickets, airway bills and other traffic documents

for passenger ... transportation over the services of

[CAAC]” (4 2.1.2). The agreement expressly says that “[t]he

above-mentioned traffic documents issued by the General Sales

Agent shall be honored and accepted by the Principal”

(¢ 2.1.2), even though it was understood by Pan American that

“no traffic documents valid for transportation on a particular

flight will be issued unless advance reservation shall have been

confirmed for the transportation and the payment of the

relevant charges pevable therefore [sic] shall have been re-

ceived.” (/d.) Here the tickets that were issued in Washington

covered a specific flight, on a specific date, at a specific time.

This is true even though the tickets as issued bore the legend

“ROY,” which in airline ticketing practice signifies that econ-

omy seating has been requested and that the entire transaction

has not been finalized and must be confirmed.

In our view, by accepting in the United States payment for

transportation between Nanjing and Beijing and by issuing

tickets which, even though stickered in China, were accepted

for the passage of the decedents on the ill-fated flight, CAAC

eee

entered into a contract of carriage with the decedents. Payment

of the fares was consideration for a commercial service to be

performed by a commercial agency in China. Indeed, CAAC

honored the contract it had entered into through the agency of

Pan American and the Washington, D.C., travel agent by

accepting the U.S.-issued tickets for the passage of the dece-

dents on the date in question and, moreover, it was CAAC

policy to accept or confirm such tickets. The reservation status

of the tickets in our opinion simply makes no difference. Had,

for example, the Chinese airline declined to carry Barkanic and

Fox at all, they certainly would have had an action for breach

of contract. It follows that there is a sufficient nexus between

the airplane crash and the commercial activity carried on by

CAAC in this country.

The two cases most relied upon as analogous by the district

court, Jn re Disaster at Riyadh Airport, 16 Av. Cas. 17,880

(D.D.C. 1981), and Harris v. VAO Intourist, Moscow, 481

F.Supp. 1056 (E.D.N.Y. 1979), and a third case not cited by the

district court, Tigchon v. Island of Jamaica, 591 F.Supp. 765

(W.D. Mich. 1984), are all readily distinguishable. In Riyadh,

which involved the death of passengers during a fire in a Saudi

Arabian Airlines aircraft on a scheduled domestic flight be-

tween Rivadh and Jeddah, Saudi Arabia, the plaintiffs were

able to show only that the airline “did business” in the United

States, without establishing any particular tie between its U.S.-

based activities and the air disaster in Saudi Arabia. And in

Harris and Tigchon, both involving hotels operated by their

respective governments at which the plaintiffs-decedents were

fatally injured, the hotels did not even do business in the

United States. As the court said in Harris, “The commercial

activity out of which plaintiff’s claim arises is the operation of

the Hotel in Moscow; despite the apparent integration of the

Soviet tourist industry, the relationship between the negligent

operation of the National Hotel and any activity in the United

States is so attenuated that [§ 1605(a}(2)] is not applicable.

. . This civil court action is not based upon commercial

activity in the United States.” 481 F.Supp. at 1061. The

Tigchon case was similar, with even less connection to commer-

cial activity in the United States in that the Jamaican govern-

ment expressly denied that the tour operator that arranged

plaintiffs’ vacation was its agent or authorized representative.

The present case is closer to Ministry of Supply, Cairo,

supra, where immunity was denied to the Egyptian government

because it had arranged in the United States for a shipment of

wheat from a United States port, although the grain was later

rendered unusable in the course of off-loading in Egypt, or to

Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371,

1379-80 (Sth Cir. 1980), where the court denied immunity to

Dominica Airlines for claims relating to events on a tour

package it had directly sponsored for sale in the United States.

We repeat that the fact that Barkanic and Fox were not

guaranteed passage on a particular domestic flight in China is

irrelevant since the tickets involved here were bought and paid

for in the United States and available and used for passage on

the fatal flight.

Judgment reversed.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

CV-85-1569

LOUISE AGNES BARKANIC, etc., ef alia,

Plaintiffs,

—against—

GENERAL ADMINISTRATION OF CIVIL AVIATION OF

THE PEOPLES REPUBLIC OF CHINA, etc.,

Defendant.

MEMORANDUM AND ORDER

SIFTON, District Judge

This is a wrongful death action arising out of a crash of a

plane flying between Janjing [sic] and Beijing, China. Defend-

ant, General Administration of Civil Aviation of the People’s

Republic of China a/k/a Civil Aviation Administration of the

People’s Republic of China, or CAAC (“CAAC”), is an

agency or instrumentality of the People’s Republic of China

(“PRC”), having its principal place of business there. Jurisdic-

tion is allegedly based on 28 U.S.C. § 1330 in that the claims

are against a foreign state for which the foreign state is not

entitled to immunity. This matter is now before the Court on

defendant’s motion to dismiss the complaint for lack of subject

matter jurisdiction pursuant to the Foreign Sovereign Immu-

nity Act, 28 U.S.C. §§ 1330, 1602-1611, or, in the alternative,

for an order pursuant to Rule 56 of the Federal Rules of Civil

Procedure granting defendant partial summary judgment limit-

ing its liability to $20,000 pursuant to the applicable Chinese

law.

The relevant facts do not appear to be in dispute. In this

action, plaintiffs seek to recover $3,000,000 for wrongful death

damages on behalf of the estates of Peter Barkanic and Donald

Fox, who were passengers on an Antonov 24 aircraft manufac-

tured in the USSR, which was being operated by CAAC

personnel on a fight [sic] between Nanjing and Beijing within

the People’s Republic of China when it crashed in China on

January 18, 1985.

Since the end of 1980, defendant CAAC has been conduct-

ing regularly scheduled flight operations into and out of San

Francisco, Los Angeles and New York, carrying passengers and

freight for hire. CAAC’s schedules are available and advertised

to the public. It maintains its own employees and offices at two

locations within New York. Apparently, CAAC does not have

its own sales agents. Instead, CAAC has appointed at least two

general sales agents, Pan American and Northwest Airlines.

Under the General Sales Agency Agreement with Pan Am, Pan

Am has the authority to appoint ticket agents who can sell

passenger and cargo transportation on CAAC and to receive

revenues for flights on CAAC.

Both Barkanic and Fox were traveling aboard defendant’s

aircraft pursuant to tickets which had been issued by Vanslycke

& Reese Travel Agency in Washington, D.C. Accordingly [sic]

to the uncontradicted affidavit of Wu Zhengyu, government

and legal officer in the International Affairs Department of

CAAC, although CAAC accepts tickets issued by foreign

travel agents of the airlines that have interline agreements with

CAAC, tickets issued for domestic flights exclusively within

the territory of the People’s Republic of China must be

confirmed by CAAC in China. In the instant case, according

to the uncontradicted allegations of defendant, Barkanic and

Fox did not travel on Flight 1508, departing 10:25 a.m. as

originally designated on the U.S.-issued tickets. Instead, stick-

ers attached to the original tickets indicate that plaintiffs’

tickets were changed by CAAC’s issuing office in Nanjing,

China, to Flight 5109, departing 5:05 p.m.

10a

According to the uncontradicted affidavit of Wu Zhengyu

and legal opinion from Weng Siyu of China’s Legal Counsel’s

office in Beijing, China:

“With regard to the compensation for death or personal

injury of passengers in accidents during domestic trans-

portation by air within the People’s Republic of China,

the Financial and Economic Commission of the Govern-

ment Administration Council of the Central People’s

Government of the People’s Republic of China issued on

April 24, 1951, the Rules of Compulsory Personal Acci-

dent Insurance for Passengers during Transportation by

Air.

“Article 5 of the Rules provides that the insured amount

for each passenger, regardless of full fare, discounted fare

or free tickets, will be the equivalent of 1,500 YUAN

(approximately $500) and Article 10 of the Rules provides

that the insured amount plus medical expenses provided

for in the Rules shall be the maximum amount of liability.

In May 1982, with the approval of the State Council for

the People’s Republic of China, the maximum amount

for compensation for foreign passengers, in the event of

personal accidents during domestic transportation by air

within China was increased to $20,000 U.S. plus the

maximum amount of compensation of $400 U.S. per

person for loss or damage to hand baggage and $20 U.S.

per Kilo of check baggage. This is the limitation of

liability applicable to all cases involving personal injury or

death of a foreign citizen on board a domestic flight

within the People’s Republic of China since May 1982.”

Affidavit of Wu Zhengyu, § 7.

Defendant argues that this action should be dismissed for

lack of subject matter and personal jurisdiction pursuant to the

Foreign Sovereign Immunities Act (“FSIA”) on the ground that

a court may not assert jurisdiction over a “foreign state” under

the first clause of § 1605(a)(2) of FSIA where a sufficiently

significant nexus between plaintiffs’ claims and the foreign

state’s commercial activities in the United States does not exist.

lla

Defendant also argues that it did not waive sovereign immunity

pursuant to § 1605(a)(1) by accepting a foreign air carrier

permit. Defendant further contends that, even if this Court

finds subject matter jurisdiction over CAAC under FSIA, this

Court must apply Chinese law and grant an order for partial

summary judgment limiting CAAC’s liability to $20,000.

Plaintiffs argue that there is jurisdiction for their claims

under the first clause of § 1605(a)(2) and under § 1605(a)(1).

Plaintiffs also argue that FSIA does not affect choice of law

rules and that under the choice of law rules of New York, the

law of the decedents’ domicile should be applied to the issue of

damages. Finally, plaintiffs argue that applying Chinese law

would contravene important federal and state policies.

For the following reasons, defendant’s motion to dismiss is

granted. FSIA is the sole basis for federal subject matter

jurisdiction and personal jurisdiction over actions against for-

eign sovereigns or their entities. See Ruggiero v. Compania

Pervana de Vapores, 639 F.2d 872 (2d Cir. 1981). Section

1330(a) provides:

“The district courts shall have original jurisdiction with-

out regard to amount in controversy of any nonjury civil

actions against a foreign state as defined in section

1603(a) of this title as to any claim for relief in personam

with respect to which the foreign state is not entitled to

immunity either under sections 1605-1607 of this title or

under any applicable international agreement.”

There is no dispute that defendant CAAC qualifies as a

“foreign state” as defined in § 1603(a) and (b) either as a

“political subdivision of a foreign state” or as an “agency or

instrumentality” of the People’s Republic of China.

The statutory scheme of FSIA implements the doctrine of

sovereign immunity but specifies several exceptions to that

general rule; the only exception to sovereign immunity which

arguably is applicable to the present action is that contained in

the first clause of § 1605{a)(2), which provides:

12a

“A foreign state shall not be immune from the jurisdic-

tion of the courts of the United States or of the States in

any case—

(2) in which the actior is based upon a commercial

activity carried on in the United States by the foreign

state.”

This clause is clearly not limited to actions in which the

particular misconduct complained of occurred in the United

States. As the Third Circuit explained in Sugarman v. Aero-

mexico, Inc., 626 F.2d 270 (2d Cir. 1980):

“{S]o limiting a construction is belied by the very next

clause, which excepts from immunity an action ‘based

. upon an act performed in the United States in

connection with a commercial activity of a foreign state

elsewhere.’ When Congress intended to limit the acts

subjected to liability to acts carried out (or, as in the third

clause, having direct effects) in the United States, the

statute makes that limitation clear. It is a limitation that

would be expected—perhaps even required by due process

considerations—when, as in the situations addressed in

the second and third clauses, the underlying ‘commercial

activity of the foreign state’ takes place not in the United

States but ‘elsewhere.’ It is a limitation not to be

expected—and surely not required by due process

considerations—when the acts complained of, although

themselves extraterritorial, grow out of ‘a regular course

of commercial conduct,’ which was ‘carried on in the

United States.’ ”

Id. at 273 (citations omitted). See also Ministry of Supply,

Cairo v. Universe Tankships, Inc., 708 F.2d 80, 84 (2d Cir.

1983):

“When a foreign state has carried on a commercial

activity within the United States, the first clause of

§ 1605(a)(2) withdraws immunity with respect to claims

based not only on acts within the United States, but also

13a

with respect to acts outside the United States if they

comprise an integral part of the state’s ‘regular course of

commercial conduct.’ ”

However, while this clause does not require that the miscon-

duct complained of be committed in the United States, the

clause cannot be interpreted as incorporating a simple “doing

business” standard like that of many long-arm statutes. See

Harris v. VAO Intourist Moscow, 48 F. Supp. 1056, 1061

(E.D.N.Y. 1979). The action must “be based upon” the com-

mercial activity carried on in the United States. Thus, the

inquiry in the present case has two parts. First, this Court must

determine whether the defendant has had a “regular course of

commercial conduct” in the United States; second, this Court

must consider whether the conduct complained of that oc-

curred outside the United States had a significant “nexus” with

(see Vecedora Oceanica Navigacian v. Compagnie Nationale

Aloerienne de Navigacian, 730 F.2d 195, 202 (Sth Cir. 1984);

Sugarman v. Aeromexico, supra, 626 F.2d at 273), or in other

words whether the conduct comprised an “integral part of”

(see Cairo, supra at 84), the commercial activity in the United

States.

There is no dispute that defendant has engaged in substantial

commercial activity in the United States. However, in spite of

defendant’s commercial presence in the United States, this

Court must conclude that the instant action does not fall

within the exception to sovereign immunity contained in the

first clause of § 1605(a)(2). While the language and legislative

history of the clause are, at best, unclear as to the closeness of

the connection required between the facts of the alleged injury

and the commercial activity in the United States, courts inter-

preting the clause have almost universally demand [sic] more

significant nexus than that existing in the present case.

In Harris v. VAO, Moscow, supra, an American citizen was

killed in a hotel fire in Moscow. Suit was brought against the

two state-owned Soviet tourist services, one of which, Intourist

Moscow, owned and operated by the hotel, and the other of

which, Intourist USA, promoted tours between the United

l4a

States and the Soviet Union. Intourist USA maintained an

office in New York and conducted substantial business there,

promoting the use of Intourist Moscow’s hotel facilities in

Moscow. Visitors from the United States seeking accommoda-

tions in the Soviet Union made arrangements through private

travel agents and final confirmations of those arrangements

were made through Intourist Moscow. Chief Judge Weinstein

of this Court found § 1605(a)(2) inapplicable in spite of the

commercial activity of Intourist USA in the United States and

what he described as “the apparent integration of the Soviet

tourist industry,” id. at 1061, between Intourist USA and

Intourist Moscow. The court, recognizing that the services

contracted for were to be performed exclusively within the

sovereign territory of the Soviet Union, concluded that the

relationship between the alleged negligent operations of the

hotel and Moscow and “any activity in the United States” was

too attenuated to hold that the action was “based upon” such

activity. Id.

Harris is analogous to the instant case. Here, services to be

performed exclusively abroad were arranged through a private

travel agent. Moreover, as in Harris, these arrangements, made

in the United States, had to be confirmed by the defendant in

the defendant’s own country. '

Also analogous is /n re Disaster at Riyadh Airport, 16 Av.

Cas. 917,880 (D.D.C. 1981), in which the court held that it

lacked subject matter jurisdiction under the first clause of

§ 1605(a)(2). In Riyadh, plaintiffs brought suit seeking dam-

ages for the wrongful death of passengers killed in the crash of

a Saudi Arabian Airlines aircraft on a scheduled domestic

flight between Riyadh and Jeddah, Saudi Arabia. The plain-

l In fact, the action’s-connection with the United States is even weaker

in the present case than it was in Harris. Here, plaintiffs Barkanic and Fox

did not travel on Flight 1508, departing 10:25 a.m., as originally designated

on the U.S.-issued tickets. Instead, stickers attached to the original tickets

indicate that plaintiff’s tickets were changed by defendant’s issuing office in

Nanjing, China, to Flight 5109, departing 5:05 p.m. (Compare Exhibit A to

the Affidavit of John K. Weir with Exhibit A to the Reply Affidavit of John

K. Weir.)

lSa

tiffs contended that the action was “based upon” a regular

course of commercial activity carried on in the United States,

namely, Saudi Arabian Airlines’ business activities in this

country. Saudi Arabian Airlines had four offices in the United

States conducting business in New York, Texas, California and

Missouri. As in Harris, however, the commercial activities

carried on in the United States were found to be too remote

from the injury suffered by plaintiffs and their decedents to

meet § 1605(a)(2).

Plaintiffs attempt to distinguish Riyadh on the ground that

in Riyadh, as opposed to in the present case, none of the

plaintiffs had bought their tickets in the United States. This

distinction is, however, insignificant. As discussed above, the

uncontradicted evidence is that plaintiffs’ tickets, though is-

sued in the United States, were not valid unless confirmed by

defendant in China, and in fact plaintiffs did not travel on

Flight 1508, as designated on the U.S.-issued tickets, but rather

flew on Flight 5109, as designated on the confirmation stickers

issued in China. Moreover, plaintiffs in the instant case ob-

tained tickets in the United States from a private travel agent

and not directly from the defendant. Barkanic and Fox no

more engaged in a commercial transaction in the United States

with defendant than did the plaintiffs in Riyadh engage in a

commercial transaction with the foreign sovereign defendant in

that case.

Decisions cited by plaintiffs which hold that subject matter

jurisdiction exists under the first clause of § 1605(a)(2) are, in

fact, consistent with the principles expressed in Harris and

Riyadh. In Sugarman, supra, for example, plaintiff brought

suit against the national airline of Mexico for injuries he

sustained while awaiting a delayed flight bound for the United

States at a Mexican airport. The district court dismissed the

complaint for lack of subject matter jurisdiction under FSIA.

In reversing the lower court and finding jurisdiction under the

first clause of § 1605(a)(2), the Court of Appeals recognized

that there must be a significant “nexus” between the plaintiff’s

grievance and the defendant’s commercial activity carried on in

the United States. /d. at 272. The court found this significant

l6a

nexus in the following facts: (1) the injury occurred at the mid-

point of a round trip passage on Aeromexico that began and

ended in the United States, (2) the plaintiff purchased his ticket

in his home state, and (3) the injury claimed caused continuing

suffering and economic loss to the plaintiff after he returned

home. /d. at 273. The facts of Sugarman are in marked

contrast to those in the instant case in which the accident flight

was purely domestic within the territory of the foreign sover-

eign.

In Ministry of Supply, Cairo v. Universe Tankships, Inc.,

supra, 708 F.2d 80, which dealt with claims arising from the

discharge of cargo from ships at Port Said, Egypt, the govern-

ment entity Ministry of Supply was engaged in the purchase of

grain and its transportation from the United States to Egypt.

According to the Ministry’s complaint, the cargo transported

from the United States was delivered “short o* otherwise

damaged.” /d. at 82. Upon arrival of the ship of “igypt, delays

in unloading ensued due to the cargo damage. A third party,

Banabaft, which claimed to have suffered loss of the use of the

ship in question while paying charter hire sums for the ship,

intervened in the suit and cross-claimed against the Ministry.

Ruling that the Ministry was not immune from the suit, the

court stated:

“Banabaft’s claim is based upon the plaintiff’s entire

course of activity in arranging in the United States for the

purchase of the wheat and its transportation to Egypt, not

simply on the acts done (or not done) by plaintiffs in the

course of unloading at Port Said.”

Id. at 84. Even though Banabaft’s claims arose from a failure

of the Ministry to unload the ship promptly at Port Said, the

Court found a significant nexus between that failure and the

Ministry’s commercial activities in the United States in the

following facts: (1) the legislative history of FSIA specifically

lists import-export transactions as conduct within the contem-

plation of the first clause of of [sic] § 1605(a)(2), (2) the wheat

was purchased under a United States statute, (3) plaintiff

arranged for the wheat’s carriage to Egypt in the the United

17a

States, and (4) the wheat was carried from a United States port

or a vessel under bills of lading pursuant to the Carriage of

Goods by Sea Act, 46 U.S.C. §§ 1300 et seq. Id. at 84.

Similarly, in Gemini Shipping, Inc. v. Foreign Trade Organi-

zation for Chemicals and Foodstuffs, 647 F.2d 317 (2d Cir.

1981), in which the charterer of a ship delivering grain that had

been purchased by a company owned by Syria brought suit for

breach of an alleged guarantee of demurrage, the Court of

Appeals concluded that the suit was “based upon” defendant’s

commercial activity in the United States and found the requi-

site nexus on the following facts: (1) the case involved an

import-export transaction which was conduct specifically cov-

ered by the first clause of § 1605(a)(2), (2) the purchase of the

grain was made pursuant to a United States statute, (3) Syria

received financing for the transaction from the Department of

Agriculture, and (4) the legislative history of FSIA referred

specifically to transactions under the applicable sale statute

and indicated that the sales were within the scope of FSIA

commercial exceptions. /d. at 319.

These cases, which require a significant link or aggregation

of links to be present in order to support the exercise of

jurisdiction over a foreign sovereign, stand in contrast to the

instant case where the only connection between plaintiff’s

claims and defendant’s commercial activities in the United

States is that a private travel agent in the United States issued

two unconfirmed tickets for a flight to be conducted exclu-

sively in the People’s Republic of China. Plaintiffs show no

direct contact with defendant in the United States. Decedents

did not travel from the United States aboard CAAC and were

not scheduled to return to the United States on a CAAC

aircraft or ticket. This Court must conclude that the connec-

tion presented in this case is not sufficient to justify exercise of

jurisdiction under § 1605(a)(2).

Subsequent to oral argument of this motion, plaintiffs

brought to this Court’s attention an order to show cause issued

by the United States Department of Transportation (“DOT”)

on January 21, 1986, which proposes to revise the language

dealing with waiver of sovereign immunity of Foreign Air

18a

Carrier Permits issued by DOT to foreign airlines. CAAC’s

present permit provides in relevant part:

“By accepting this permit, the holder waives any right it

may possess to assert any defense of sovereign immunity

from suit in any action or proceeding instituted against it

in any court or other tribunal in the United States (or its

territories Or possessions) based upon any claim arising

out of operations by the holder under this permit.”

DOT proposes to change the language of the permit to read:

“{The holder shall wjaive any right it may possess to

assert any defense of sovereign immunity from suit in any

action or proceeding instituted against it in any court of

other tribunal in the United States (or its territories or

possessions) based upon any claim arising out of opera-

tions by the holder of this [permit].”

In the order to show cause, DOT explained that it believes

air carriers owned by foreign governments waive any claim to

sovereign immunity in United States courts by virtue of accept-

ing a foreign air carrier permit, whether or not the transporta-

tion takes place between the United States and a foreign point

or between two foreign points (see DOT Order 86-1-38, at 2).

DOT admits, however, that the current language of the permit

may not be interpreted in that fashion and therefore proposes

to modify the language.

In light of DOT’s order to show cause, plaintiffs argue that

CAAC has waived its defense of sovereign immunity under

§ 1605(a)(1).

Since plaintiffs’ contention presents matters outside the

pleadings, this Court must, pursuant to Rule 12(b) of the

Federal Rules of Civil Procedure, treat defendant’s motion as

one for summary judgment, to be disposed of as provided in

Rule 56. Accordingly, defendant was given the opportunity to

present materials made pertinent to their motion by Rule 56.

After reviewing these materials, the Court concludes that

summary judgment for the defendant should be granted.

19a

As stated in United States v. One Tintoretto Painting, 691

F.2d 603 (2d Cir. 1982):

“The standard under which a summary judgment mction

is tested requires a showing ‘that there is no genuine issue

as to any material fact and that the moving party is

entitled to a judgment as a matter of law.’ Fed.R.Civ.P.

56(c). The burden rests on the moving party to demon-

strate the lack of genuine fact issues. Adickes v. S.H. Kess

& Co., 398 U.S. 144, 157 (1970). In search of the record

the court should resolve all ambiguities and inferences to

be drawn from the underlying facts in the light most

favorable to the party opposing the motion. United States

v. Diebold, Inc., 369 U.S. 654, 655 (1962); Quinn vy.

Syracuse Model Neighborhood Corp., 613 F.2d 438, 445

(2d Cir. 1980). The possibility that a factual issue may

exist will not defeat the motion, rather the party opposing

summary judgment must indicate that a genuine dispute

as to a material fact does exist. Uncertainty as to the true

state of any material fact defeats the motion. Quinn, 613

F.2d at 445.”

Id. at 606.

There is no dispute that for a foreign state to waive its

sovereign immunity there must be an intentional and knowing

relinquishment of the legal right. See Frovola v. Union of

Soviet Socialist Republics, 761 F.2d 370, 377-78 (7th Cir. 1985);

Castro v. Saudi Arabia, 510 F. Supp. 309, 312 (W.D. Tenn.

1980). For this reason, provisions allegedly waiving sovereign

immunity should be narrowly construed. As the court ex-

plained in Zernicek v. Petroleos Mexicanos, 614 F. Supp. 407,

411 (S.D. Tex. 1985), “[c]ourts rarely find that a nation has

waived its sovereign immunity . . . without strong evidence

that this is what the foreign state intended.”

In the present case, there can be no genuine dispute as to

whether CAAC intended to waive its sovereign immunity with

respect to flights completely within China. The plain language

of CAAC’s foreign carrier permit provides that CAAC has

waived its sovereign immunity only with respect to “operations

ail

20a

by the holder of [the] permit.” Since the permit clearly does

not concern flights between two Chinese cities like the flight at

issue in the present case,’ this Court must conclude that the

permit unambiguously excludes purely domestic operations

from the foreign sovereign immunity waiver.

While DOT, in the order to show cause, states that it believes

that the clause in the present permit is ambiguous, neither

DOT nor the plaintiffs make any attempt to show how an

alternative reading of the clause is possible. If plaintiffs were

not correct that by accepting the current permit CAAC waived

the right to assert a defense of sovereign immunity in any

Situation, the clause “based upon any claim arising out of

operations by the holder under [the permit]” would have no

meaning. However, the plain meaning of the clause is to limit

the waiver to specific kinds of ciaims, that is, to claims arising

out of the operations with which the permit deals.

Therefore, since the language of the permit is unambiguous

that CAAC did not waive a sovereign immunity defense with

respect to claims arising out of purely domestic flights, it is

appropriate to grant summary judgment to the defendants.

See, e.g., Tokio Marine & Fire Ins. v. McDonell Douglas

Corp., 617 F.2d 936, 940 (2d Cir. 1980).

2 The permit authorizes CAAC to engage in scheduled foreign air

transportation of persons, property and mail as follows:

A. Between the coterminal points Beijing and Shanghai, People’s

Republic of China; the intermediate point Tokyo, Japan (or another

point in Japan); and the coterminal points Honolulu, Hawaii; Los

Angeles and San Francisco, California; and New York, New York,

with an optional technical stop at Anchorage, Alaska.

CAAC may engage in charter foreign air transportation:

B. Between any point or points in the People’s Republic of China and

any point or points in the United States; and

C. Between any point or points in the United States and any point or

points not in the People’s Republic of China or the United States.

Since there is no mention in the permit of purely domestic flights, such

flights cannot reasonably be considered to be operations under the permit.

2la

The Clerk is directed to enter judgment dismissing the

complaint and to mail a copy of the within to all parties.

SO ORDERED.

Dated: Brooklyn, New York

October 17, 1986

/s/ CHARLES P. SIFTON

United States District Judge

22a

S9.10:

10326

TREATIES AND OTHER INTERNATIONAL ACTS

SERIES 10326

AVIATION

Air Transport Services

Agreement Between the

UNITED STATES OF AMERICA

and the PEOPLE’S REPUBLIC OF CHINA

Signed at Washington September 17, 1980

with

Related Letter

and

Exchanges of Letters

Signed at Beijing September 8, 1980

[SEAL]

NOTE BY THE DEPARTMENT OF STATE

Pursuant to Public Law 89-497, approved July 8, 1966 (80

Stat. 271; 1 U.S.C. 113)—

“.. . the Treaties and Other International Acts Series

issued under the authority of the Secretary of State shall

be competent evidence. . . of the treaties, international

agreements other than treaties, and proclamations by the

President of such treaties and international agreements

other than treaties, as the case may be, therein contained,

in all the courts of law and equity and of maritime

jurisdiction, and in all the tribunals and public offices of

the United States, and of the several States, without any

further proof or authentication thereof.”

23a

PEOPLE’S REPUBLIC OF CHINA

Aviation: Air Transport Services °

Agreement signed at Washington September 17, 1980; Entered

into force September 17, 1980. With related letter and ex-

changes of letters Signed at Beijing September 8, 1980.

AGREEMENT BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINA

RELATING TO CIVIL AIR TRANSPORT

The Government of the United States of America and the

Government of the People’s Republic of China,

Desiring to develop mutual relations between their countries,

to enhance friendship between their peoples, and to facilitate

international air transport;

Acting in the spirit of the Joint Communique of December

15, 1978"! on the Establishment of Diplomatic Relations be-

tween the United States of America and the People’s Republic

of China;

Observing the principles of mutual respect for independence

and sovereignty, non-interference in each other’s internal

affairs, equality and mutual benefit and friendly cooperation;

Recognizing the importance of reasonable balance of rights

and benefits between both Parties under this Agreement;

Being Parties to the Convention on International Civil

Aviation opened fcr signature at Chicago on December 7,

1944;""1

l Department of State Bulletin, Jan., 1979, p. 25.

2 TIAS 1591, 6605, 6681; 61 Stat. 1180; 19 UST 7693; 20 UST 718.

[Footnotes added by the Department of State.]

24a

Have agreed on the establishment and operation of air

transportation involving their respective territories as follows:

ARTICLE 1

Definitions

For the purpose of this Agreement, the term:

(a) “Aeronautical authorities” means, in the case of the

United States of America, the Civil Aeronautics Board or the

Department of Transportation, whichever has jurisdiction, and

in the case of the People’s Republic of China, the General

Administration of Civil Aviation of China, or in either case

any other authority or agency empowered to perform the

functions now exercised by the said authorities;

(b) “Agreement” means this Agreement, its annexes, and

any amendments thereto;

Civil Aviation, opened for signature at Chicago on December

7, 1944, including

— any amendment which has entered into force under

Article 94(a) of the Convention and has been ratified

by both Parties, and

— any annex or any amendment thereto adopted under

Article 90 of the Convention, insofar as such annex or

amendment is effective for both Parties;

(d) “Airline” means any air transport enterprise offering or

operating international air services;

(e) “Designated airline” means an airline designated and

authorized in accordance with Article 3 of this Agreement;

(f) “Air service” means scheduled air service performed by

aircraft for the public transport of passengers, baggage, cargo

or mail, separately or in combination, for remuneration or

hire;

25a

(g) “International air service” means an air service which

passes through the air space over the territory of more than

one State;

(h) “Stop for non-traffic purposes” means a landing for any

purpose other than taking on or discharging passengers, bag-

gage, cargo or mail.

ARTICLE 2

Grant of Rights

(1) Each Party grants to the other Party the rights specified

in this Agreement to enable its designated airline(s) to establish

and operate scheduled air services on the route(s) specified in

Annex I to this Agreement. Such route(s) and services shall

hereinafter be referred to as “the specified route(s)” and “the

agreed services” respectively.

(2) Subject to the provisions of the Agreement, the desig-

nated airline(s) of each Party, while operating the agreed

services on the specified route(s), shall enjoy the following

rights:

(a) to make stops at points on the specified route(s) in

the territory of the other Party for the purpose of taking

on board and discharging international traffic in passen-

gers, baggage, cargo and mail; and

(b) subject to the approval of the aeronautical authori-

ties of the other Party, to make stops for non-traffic

purposes at points on the specified route(s) in the eeeeeny

of the other Party.

(3) Nothing in paragraph (2)(a) of this Article shall be

deemed to confer on the designated airline(s) of one Party the

right of taking on at one point in the territory of the other

Party traffic in passengers, baggage, cargo or mail destined for

another point in the territory of the other Party (stopover and

cabotage traffic), except the non-revenue traffic in personnel

of such airline(s), their families, baggage and household ef-

fects, articles used by the representative offices of such air-

line(s), and aircraft stores and spare parts of such airline(s) of

26a

either Party to carry on-line stopover traffic between the points

on the specified route(s) in the territory of the other Party shall

be subject to consultations at an appropriate time in the future.

(4) The operation of the agreed services by the designated

airline(s) on routes over third countries shall be conducted on

routes available to the airlines of both Parties, unless otherwise

agreed.

(5) Charter air transportation shall be governed by the

provisions of Annex II.

ARTICLE 3

Designation and Authorization

(1) Each Party shall have the right to designate in writing

through diplomatic channels to the other Party two airlines to

operate the agreed services on the specified route(s), and to

withdraw or alter such designations. In the operation of the

agreed services, the designated airlines may operate combina-

tion or all-cargo service or both.

(2) Substantial ownership and effective control of an airline

designated by a Party shall be vested in such Party or its

nationals.

(3) The aeronautical authorities of the other Party may

require an airline designated by the first Party to satisfy them

that it is qualified to fulfill the conditions prescribed under the

laws and regulations normally applied to the operation of

international air services by the said authorities.

(4) On receipt of such designation the other Party shall,

subject to the provisions of paragraphs (2) and (3) of this

Article and of Article 7, grant to the airline so designated the

appropriate authorizations with minimum procedural delay.

(S) When an airline has been so designated and authorized it

may commence operations on or after the date(s) specified in

the appropriate authorizations.

27a

ARTICLE 4

Revocation of Authorizations

(1) Each Party shall have the right to revoke, suspend, or to

impose such conditions as it may deem necessary on the

appropriate authorizations granted to a designated airline of

the other Party where:

(a) it is not satisfied that substantial ownership and

effective control of that airline are vested in the Party

designating the airline or its nationals; or

(b) that airline fails to comply with the laws and

regulations of the Party granting the rights specified in

Article 2 of this Agreement; or

comply with the conditions as set forth under this Agree-

ment.

(2) Unless immediate revocation, suspension or imposition

of the conditions mentioned in paragraph (1) of this Article is

essential to prevent further non-compliance with subpara-

graphs 1(b) or (c) of this Article, such rights shall be exercised

only after consultations with the other Party.

ARTICLE 5

Application of Laws

(1) The laws and regulations of each Party relating to the

admission to, operation within and departure from its territory

of aircraft engaged in the operation of international air service

shall be complied with by the designated airline(s) of the other

Party, while entering, within, and departing from the territory

of the first Party.

(2) The laws and regulations of each Party relating to the

admission to, presence within, and departure from its territory

of passengers, crew, baggage, cargo and mail shall be applica-

ble to the designated airline(s} of the other Party, and the

passengers, crew, baggage, cargo and mail carried by such

28a

airline(s), while entering, within and departing from the terri-

tory of the first Party.

(3) Each Party shall promptly supply to the other Party at

the latter’s request the texts of the laws and regulations

referred to in paragraphs (1) and (2) of this Article.

ARTICLE 6

Technical Services and Charges

(1) Each Party shal! designate in its territory regular airports

and alternate airports to be used by the designated airline(s) of

the other Party for the operation of the agreed services, and

shall provide the latter with such communications, naviga-

tional, meteorological and other auxiliary services in its terri-

tory as are required for the operation of the agreed services, as

set forth in Annex III to this Agreement.

(2) The designated airline(s) of each Party shall be charged

for the use of airports, equipment and technical services of the

other Party at fair and reasonable rates. Neither Party shall

impose on the designated airline(s) of the other Party rates

higher than those imposed on any other foreign airline operat-

ing international air service.

(3) All charges referred to in paragraph (2) of this Article

imposed on the designated airline(s) of the other Party and

reflect, but shall not exceed, an equitable portion of the full

economic cost of providing the facilities or services in question.

Facilities and services for which charges are levied shall be

provided on an efficient and economic basis. Reasonable

notice shall be given prior to changes in charges. Each Party

shall encourage consultations between the competent charging

authorities in its territory and the airline(s) using the services

and facilities, and shall encourage and competent charging

authorities and the airline(s) to exchange such information as

may be necessary to permit an accurate review of the reason-

ableness of the charges.

29a

ARTICLE 7

Safety

(1) Mutually acceptable aeronautical facilities and services

shall be provided by each Party for the operation of the agreed

services, which facilities and services shall at least equal the

minimum standards which may be established pursuant to the

Convention, to the extent that such minimum standards are

applicable.

(2) Each Party shall recognize as valid, for the purpose of

operating the agreed services, certificates of airworthiness,

certificates of competency, and licenses issued or rendered valid

by the other Party and still in force, provided that the require-

ments for such certificates or licenses at least equal the mini-

mum standards which may be established pursuant to the

Convention. Each Party may, however, refuse to recognize as

valid, for the purpose of flight above its own territory, certifi-

cates of competency and licenses granted to or rendered valid

for its own nationals by the other Party.

(3) Each Party may request consultations concerning the

safety and security standards maintained by the other Party

relating to aeronautical facilities and services, crew, aircraft

and operations of the designated airlines. If, following such

consultations, one Party is of the view that the other Party

does not effectively maintain and administer safety and secu-

rity standards and requirements in these areas that at least

equal the minimum standards which may be established pursu-

ant to the Convention, to the extent that they are applicable,

the other Party shall be informed of such views together with

suggestions for appropriate action. Each Party reserves its

rights under Article 4 of this Agreement.

30a

ARTICLE 8

Aviation Security

The Parties reaffirm their grave concern about acts or

threats against the security of aircraft, which jeopardize the

safety of persons or property, adversely affect the operation of

air services and undermine public confidence in the safety of

civil aviation. The Parties agree to implement appropriate

aviation security measures and to provide necessary aid to each

other with a view to preventing hijackings and sabotage to

aircraft, airports and air navigation facilities and threats to

aviation security. When incidents or threats of hijackings or

sabotage against aircraft, airports or air navigation facilities

occur, the Parties shall assist each other by facilitating com-

munications intended to terminate such incidents rapidly and

safely. Each Party shall give sympathetic consideration to any

request from the other Party for special security measures for

its aircraft or passengers to meet a particular threat.

ARTICLE 9

Representative Offices

(1) For the operation of the agreed services on the specified

route(s), tne designated airline(s) of each Party shall have the

right to set up representative offices at the points on the

specified route(s) within the territory of the other Party. The

staff of the representative offices referred to in this paragraph

shall be subject to the laws and regulations in force in the

country where such offices are located.

(2) Each Party shall to the maximum extent practicable

ensure the safety of the representative offices and their staf

members of the designated airline(s) of the other Party, as well

as safeguard their aircraft, stores, and other properties in its

territory for use in the operation of the agreed services.

3la

(3) Each Party shall extend assistance and facilities to the

representative offices and their staff members of the desig-

nated airline(s) of the other Party as necessary for the efficient

operations of the agreed services.

(4) The designated airline(s) of each Party shall have the

right to convert and remit to its country at any time on demand

local revenues in excess of sums locally disbursed. Conversion

and remittance shall be effected without restrictions at the

prevailing rate of exchange in effect for current transactions

and remittance and shall be exempt from taxation on the basis

of reciprocity. Wherever the payments system between the

Parties is governed by a special agreement, that special agree-

ment shall apply.

ARTICLE 10

Personnel

(1) The crew members of the designated airline(s) of either

Party on flights into and out of the territory of the other Party

shall be nationals of the Party designating such airline(s). If a

designated airline of either Party desires to employ crew

members of any other nationality on flights into and out of the

territory of the other Party, prior approval shall be obtained

from that other Party.

(2) The staff of the representative offices of the designated

airline(s) of each Party in the territory of the other Party shall

be nationals of either Party, unless otherwise agreed. The

number of such staff subject to the approval of the competent

authorities of both Parties. Each designated airline shall be

permitted such number of staff as is adequate to perform the

functions described in this Agreement associated with the

provision of the agreed services, and in no event shall be less

than that permitted to any foreign airline performing compara-

ble services. Each Party shall by diplomatic note notify the

other Party of the authorities which shall be considered the

competent authorities which shall be considered the competent

authorities for purposes of this paragraph.

32a

ARTICLE 11

Market Accéss

(1) Matters relating to ground handling pertaining to the

operation of the agreed services may be agreed upon between

the airlines of both Parties, subject to the approval of the

aeronautical authorities of both Parties.

(2) The sale, in the territory of each Party, of air transporta-

tion on the agreed services of the designated airline(s) of the

other Party shall be effected through a general sales agent(s).

The designated airline(s) of each Party shall serve as general

sales agent(s) for the designated airline(s) of the other Party

unless such airline(s) is offered and declines such agency. The

terms and conditions of each general sales agency agreement

shall be subject to the approval of the aeronautical authorities

of both Parties. The Parties shall ensure that, if either Party

designates a second airline for provision of the agreed services,

both designated airlines shall be given the opportunity to act as

general sales agents for the designated airline(s) of the other

Party on the same terms and conditions.

(3) Notwithstanding paragraph (2) of this Article, the desig-

nated airline(s) of each Party, in its representative office(s) in

the territory of the other Party, may sell air transportation on

the agreed services and on all of its other services, directly or

through the agents of its own appointment. Any person shall

be free to purchase such transportation in the currency of that

territory or, in accordance with applicable law, in foreign

exchange certificates or freely convertible currencies. In addi-

tion the representative office(s) may be used for management,

informational, and operational activities of the designated

airline(s).

(4) The general sales agent for a designated airline ap-

pointed in accordance with paragraph (2) of this Article shall

be responsive to the preferences expressed by the traveling and

shipping public regarding airline selection, class of services and

other related matters.

33a

ARTICLE 12

Capacity and Carriage of Traffic

(1) The designated airlines of both Parties shall be permitted

to provide capacity in operating the agreed services as agreed

by the Parties and set forth in Annex V of the Agreement.

Within two and one-half years after the commencement of any

agreed service under this Agreement, the Parties shall consult

with a view to reaching a new agreement which shail apply to

the provision of capacity.

(2) In keeping with the principles set forth in the Preamble

to this Agreement, each Party shall take all appropriate action

to ensure that there exist fair and equal rights for the desig-

nated airlines of both Parties to operate the agreed services on

the specified routes so as to achieve equality of opportunity,

reasonable balance and mutual benefit.

(3) The agreed services to be operated by the designated

airlines of the Parties shall have as their primary objective the

provision of capacity adequate to meet the traffic requirements

between the territories of the two Parties. The right to embark

on or disembark from such services international traffic des-

tined for or coming from points in third countries shall be

subject to the general principle that capacity shall be related to:

(a) traffic requirements to and from the territory of the

Party which has designated the airline and traffic require-

ments to and from the territory of the other Party;

(b) the requirements of through airline operation; and

the airline passes after taking account of local and re-

gional services.

(4) Each Party and its designated airline(s) shall take into

consideration the interests of the other Party and its designated

airline(s) so as not to affect unduly the services which the latter

provides.

34a

(5) If, after a reasonable period of operation, either Party

believes that a service by a designated airline of the other Party

is not consonant with any provision of this Article, the Parties

shall consult promptly to settle the matter in a spirit of friendly

cooperation and mutual understanding.

(6) If, at any time, either Party is of the view that traffic is

not reasonably balanced, that Party may request consultations

with the other Party for the purpose of remedying the imbal-

anced situation in a spirit of friendly cooperation and equality

and mutual benefit.

ARTICLE 13

Pricing

(1) Each party may require the filing with its aeronautical

authorities of fares to be charged for transportation of passen-

gers to and from its territory. Such filing shall be made sixty

(60) days prior to the date on which the fares are proposed to

go into effect. In addition, the aeronautical authorities of both

Parties agree to give prompt and sympathetic consideration to

short-notice filings. If the competent authorities of a Party are

dissatisfied with a fare, they shall notify the competent author-

ities of the other Party as soon as possible, and in no event

more than thirty (30) days after the date of receipt of the filing

in question. The competent authorities of either Party may

then request consultations which shall be held as soon as

possible, an in no event more than thirty (30) days after the

date of receipt of the request by the competent authorities of

the other Party. If agreement is reached during consultations,

the competent authorities of each Party shall ensure that no

fare inconsistent with such agreement is put into effect. If

agreement is not reached during consultations, the fare in

question shall not go into effect, and the fare previously in

force shall remain effective until a new after is established.

35a

(2) If the competent authorities do not express dissatisfac-

tion within thirty (30) days after the date of receipt of the filing

of a fare made in accordance with paragraph (1) above, it shall

be considered approved.

(3) Notwithstanding paragraph (1) above, each Party shall

permit any designated airline to file and institute promptly,

using short-notice procedures, if necessary, a fare for sched-

uled passenger services between a point or points in the United

States of America and a point or points in the People’s

Republic of China, provided that:

(a) the fare is subject to terms and conditions as agreed

in Annex IV to this Agreement, and such fare would not

be less than 70 percent to the lowest normal economy fare

approved for sale by any designated airline for travel

between the same point or points in the United States of

America and the same point or points in the People’s

Republic of China; or

(b) the fare on the specified route(s) (hereinafter, the

matching fare) represents a reduction of an approved fare

but is not below any approved fare or any combination of

fares, whether or not approved, for the provision of

international air service between the United States of

America and the People’s Republic of China (hereinafter,

the matched fare), and is subject to similar terms and

conditions as the matched fare, except those conditions

relating to routing, connections, or aircraft type, provided

that:

(1) if the matched fare is for services provided in

whole or in part by a designated airline over the

specified route(s), the designated airline(s) of the

other Party shall be permitted to institute a matching

fare over the specified route(s);

(ii) if the matched fare is for services provided in

whole or in part by a designated airline over a

route(s) other than the specified route(s), the desig-

nated airline(s) of the Party shall be permitted to

institute a matching fare over the specified route(s)

i ee

36a

which is not less than 70 percent of the lowest comparable

approved fare, excluding discount fares;

(iii) if the matched fare is offered solely by a non-

designated airline(s) over the specified route(s), a desig-

nated airline shall be permitted to institute a matching

fare over the specified route(s) which is not less than 70

percent of the lowest comparable approved fare, exclud-

ing discount fares; and,

(iv) if the matched fare is offered solely by a non-

designated airline(s) over a route other than the specified

route(s), a designated airline shall be permitted to insti-

tute a matching fare over the specified route(s) which is

not less than 80 percent of the lowest comparable ap-

proved fare, excluding discount fares.

The Parties shall review the practice of matching of fares

before the end of three years after commencement of any

agreed service.

Each Party also agrees to apply subparagraph (b), mutatis

mutandis, to fares of the designated airline(s) of the other

Party for the provision of international air service between the

territory of the first Party and a third country.

If, under the terms of subparagraph (b), a designated airline

_ institutes a lower normal economy fare than the fare, or fares,

put into effect pursuant to paragraph (1) of this Article, the

normal economy fare for the purpose of establishing the 30

percent zone of pricing flexibility set forth in subparagraph (a)

shall remain unchanged absent mutual agreement of both

Parties.

Nothing in subparagraph (a) or (b) shall be construed as

requiring a designated airline to institute any specific fare.

(4) (a) Each Party may require the filing with its aeronauti-

cal authorities of rates to be charged for transportation of

cargo to and from its territory by the designated airlines(s) of

the other Party. Such filing shall be made forty-five (45) days

prior to the date on which the rates are proposed to go into

effect. In addition, the aeronautical authorities of both Parties

37a

agree to give prompt and sympathetic consideration to short-

notice filings of the designated airlines.

(b) The competent authorities of each Party shall have the

right to disapprove cargo rates. Notices of disapproval shall be

given within twenty-five (25) days after receipt of the filing. A

rate which has been disapproved shall not go into effect, and

the rate previously in force shall remain effective until a new

rate is established.

other Party to charge rates different from those it authorizes

for its own airline(s) or those or other countries.

(5) Notwithstanding the provisions of this Article, each

Party shall permit any designated airline to file and institute

promptly, using short-notice procedures, if necessary, a fare or

rate identical to that offered by any other designated airjine in

accordance with the provisions of this Article for transporta-

tion between the same points and subject to comparable terms

and conditions.

(6) Each Party shall by diplomatic note notify the other

Party of the authorities which shall be considered the compe-

tent authorities for purposes of this Article.

ARTICLE 14

Customs Duties and Taxes

(1) Aircraft of the designated airline(s) of either party en-

gaged in the operation of the agreed services, as well as their

regular equipment, spare parts, fuel, oils (including hydraulic

fluids), lubricants, aircraft stores (including food, beverages,

liquor, tobacco and other products for sale to or use by

passengers in limited quantities during the flight) and other

items intended for or used solely in connection with the

operation or servicing of the aircraft, which are retained on

board such aircraft shall be exempt on the basis of reciprocity

from all customs duties, inspection fees and other national

charges on arrival in and departure from the territory of the

other Party.

38a

(2) The following shall also be exempt on the basis of

reciprocity from aii customs duties, insm ection fees and other

national charges, with the exception of charges based on the

actual cost of the service provided:

(a) aircraft stores introduced into or supplied in the

territory of a Party and taken on board, within reason-

able limits, for use on aircraft of a designated airline of

the other Party engaged in the operation of the agreed

services, even when these stores are to be used on a part

of the journey performed over the territory of the Party

in which they are taken on board;

(b) ground equipment and spare parts including en-

gines introduced into the ierritory of a Party for the

servicing, maintenance or repair of aircraft of a desig-

nated airline of the other Party used in the operation of

the agreed services; and

introduced into or supplied in the territory of a Party for

use in an aircraft of a designated airline of the other Party

engaged in the operation of the agreed services even when

these supplies are to be used on a part of the journey

performed over the territory of the Party in which they

are taken on board.

(3) Aircraft stores, equipment and suppliés referred to in

paragraph (1) of this Article retained on board the aircraft of

the designated airline(s) of either Party engaged in the opera-

tion of the agreed services may be unloaded in the territory of

the other Party with the approval of the customs authorities of

that other Party. The aircraft stores, equipment and supplies

unloaded, as well as aircraft stores, equipment and supplies

introduced into the territory of the other Party referred to in

paragraph (2) of this Article, shall be subject to the supervision

or control of the said authorities, and if required to fair and

reasonable storage charges, up to such time as they are re-

exported or otherwise disposed of in accordance with the

regulations of such authorities.

39a

(4) The exemptions provided for by this Article shall also be

available where a designated airline of one Party has con-

tracted with another airline, which similarly enjoys such ex-

emptions from the other Party, for the loan in the territory of

the other Party of the items specified in paragraphs (1) and (2)

of this Article. The treatment by a Party of a sale of any such

item within its territory shall be determined by agreement of

the Parties.

(5) Each Party shall use its best efforts to secure for the

designated airline(s) of the other Party, on the basis of reci-

procity, an exemption from taxes, charges and fees imposed by

state or provincial, regional and local authorities on the items

specified in paragraphs (1) and (2) of this Article, as well as an

exemption from fuel through-put charges, in the circumstances

designated in this Article, with the exception of charges based

on the actual cost of the services provided.

ARTICLE 15

Provision of Statistics

The aeronautical authorities of both Parties will consult

from time to time concerning, and will provide, as agreed,

Statistics of traffic carried on the agreed services between the

two countries.

ARTICLE 16

Consultations

(1) The Parties shall ensure the correct implementation of,

and satisfactory compliance with, the provisions of this Agree-

ment in a spirit of close cooperation and mutual support. To

this end, the aeronautical authorities of the Parties shall

consult each other from time to time.

(2) Either Party may, at any time, request consultations

relating to this Agreement. Such consultations shall begin at

the earliest possible date, in no event later than sixty (60) days

from the date the other Party receives the request unless

otherwise agreed.

40a

(3) If any dispute arises between the Parties relating to the

interpretation or application of this Agreement, the Parties

shall, in a spirit of friendly cooperation and mutual under-

standing, settle it by negotiation or, if the parties so agree, by

mediation, conciliation, or arbitration.

_ ARTICLE 17

Modification or Amendment

(1) If either of the Parties considers it desirable to modify or

amend any provision of this Agreement or its annexes, it may

at any time request consultations with the other Party, and

such consultations shall begin within a period of ninety (90)

days from the date of receipt of the request by the other Party

unless both Parties agree to an extension of this period.

(2) Any modification or amendment to this Agreement or its

annexes agreed upon as a result of the consultations referred to

in paragraph (1) of this Article shall come into force when it

has been confirmed by an exchange of notes through diplo-

matic channels. :

ARTICLE 18

Entry into Force and Termination

This Agreement shall enter into force on the date of its

signature and shall remain in force for three years. Thereafter,

it shall continue in force but may be terminated by either Party

by giving twelve months’ written notice to the other Party of

its intention to terminate.

DONE at Washington, this seventeenth day of September

1980 in duplicate, each copy in the English and Chinese

languages, both texts being equally authentic.

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF THE

THE UNITED STATES OF PEOPLE’S REPUBLIC OF CHINA

AMERICA

/s/ Jimmy Carter /s/ Bo Yibo

4la

ANNEX I

I. First Route

A. For the United States of America:

The first airline designated by the United States of America

shall be entitled to operate the agreed services on the following

route, in both directions:

New York, San Francisco, Los Angeles, Honolulu, Tokyo

or another point in Japan, Shanghai, Beijing.

B. For the People’s Republic of China

The first airlines designated by the People’s Republic of

China shall be entitled to operate the agreed services on the

following route, in both directions:

Beijing, Shanghai, Tokyo. or another point in Japan,

Honolulu, Los Angeles, San Francisco, New York.

Anchorage may be utilized as a technical stop in both

directions on this route.

Il. Second Route

Both parties shall consult during the first two years follow-

/ing the commencement of any agreed service to decide on a

route for operation by the second designated airline of each

Party. If the Parties have been unable to agree upon a second

route by the end of the second year, the second designated

airline of each Party shall be entitled to commence operation

of the agreed services on the first route in both directions, and

to operate such services thereafter until the Parties agree upon

a second route. In such circumstances, the Parties shall con-

tinue to consult and to exercise their maximum effort to reach

agreement upon a second route, it being understood that the

establishment of a second route is a mutually shared objective

of both Parties. In the meantime, the Parties shall take overall

review of the specified routes.

Ill. Extra Section

In case any of the designated Ajirline(s) of either Party

desires to operate additional sections on its specified route(s), it

42a

shall submit application to the aeronautical authorities of the

other Party three (3) days in advance of such operation, and

the additional sections can be commenced only after approvals

have been obtained therefrom.

Notes

(1) On or after the effective date of this Agreement, each

Party is entitled to designate one airline for operation of the

agreed services. Beginning two years after the commencement

of any agreed service, a second designated airline of each Party

may also commence the operation of the agreed services. If

either Party does not designate a second airline, or if its second

designated airline does not commence or ceases to operate any

service, that Party may authorize its first designated airline to

operate the agreed services in all respects as if it were also

designated as a second airline.

(2) Each designated airline may at its option omit any point

Or points on the above routes on any or all flights in either or

both directions, provided, however, that the agreed service it

operates begins or terminates at a point on the specified route

in the territory of the Party designating the airline.

(3) Before operation of service through another point in

Japan, referred to in Section I of this Annex, that point shall

be agreed upon by the Parties. If a designated airline of either

Party desires to change the point served in Japan, that airline

shall furnish six (6) months’ notice to the aeronautical authori-

ties of the other Party. Such change shall be subject to the

concurrence of that other Party.

(4) Subject to the provisions of Annex V, the designated

airline(s) of each Party may make a change of gauge in the

territory of the other Party or at an intermediate point or

points on the specified route(s) provided that:

(a) Operation beyond the point of change of gauge shall

be performed by an aircraft having capacity less, for

outbound services, or more, for inbound services, than

that of the arriving aircraft.

43a

(b) aircraft for such operations shall be scheduled in

coincidence with the outbound or inbound aircraft, as the

case may be, and may have the same flight number; and,

problems, the onward flight may operate without regard

to the conditions in subparagraph (b) of this paragraph.

ANNEX II

Charter Air Transportation

(1) In addition to the operation of the agreed services by the

designated airlines of the two Parties, any airline(s) of one

Party may request permission to operate passenger and/or

cargo (separately or in combination) charter flights between

the territories of the Parties as weil as between a third country

and the territory of the Party to which the requests are

addressed. Each Party may provide to the other Party by

diplomatic note a list of airlines qualified under the laws of the

first Party to provide charter air transportation.

(2) The application for charter flight(s) shall be filed with

the aeronautical authorities of the other Party at least fifteen

(15) days before the anticipated flight(s). The flight(s) can be

operated only after permission has been obtained. Permission

shall be granted without undue delay in the spirit of equality of

opportunity for the airlines of both Parties to operate interna-

tional charter air transportation, mutual benefit and friendly

cooperation.

(3) The aeronautical authorities of each Party shall mini-

mize the filing requirements and other administrative burdens

applicable to charterers and airlines of the other Party. In this

connection, the charterers and airline of a Party shall not be

required by the other Party to submit more than the following

information in support of a request for permission to operate a

charter flight or a series of flights:

(a) Purpose of flight;

(b) Nationality of registration, owner and operator of

aircraft;

(d) Either (i) identification marks and call signs of the

aircraft, or (ii) flight number;

(e) Name of captain and number of crew members;

(f) The proposed flight plan (the air route, date, hours

and destination);

(g) The identity of the charterer or charterers;

(h) The number of passengers, and/or the weight of

cargo, on board; and

(i) The price charged by the airline to each charterer.

The information contained in the application for charter

flight(s) and required by subparagraphs (d), (e) and (h) may be

changed, subject to notification prior to each flight. Such

changes shall be contained in the flight plan.

(4) In the event that either Party should have reasons to

disapprove a particular charter flight or series of charter

flights, it shall, under normal circumstances, give timely notifi-

cation of the reasons therefor, and the applicant may, where

appropriate, resubmit an application for approval of the re-

quested flight or flights.

(5) Neither Party shall require the filing by airlines of the

other Party of prices charged to the public for charter trans-

portation originating in the territory of the other party, or a

third country.

(6) The provisions of Articles 2(4), 4, 5, 6, 7, 9(2) and (4),

10, 11(1), and 14 and Annex III of this Agreement shall apply,

mutatis mutandis, to charter air transportation.

ANNEX < III

Technical Services

I. Airports for Scheduled Service

(1) In accordance with Article 6, paragraph (1) of this

Agreement, airlines designated by the Government of the

45a

People’s Republic of China are assigned the following regular

and alternate airports in the United States:

Regular Airports

New York JFK International Airport

Los Angeles, California Los Angeles International

Airport

San Francisco, California San Francisco International

Airport

Honolulu, Hawaii Honolulu International

Airport

Anchorage, Alaska Anchorage International

Airport

Alternate Airports

Baltimore, Maryland Baltimore-Washington

International Airport

Boston, Massachusetts Logan International Airport

Newark, New Jersey Newark International Airport

Philadelphia, Pennsylvania Philadelphia International

Airport

Pittsburgh, Pennsylvania Greater Pittsburgh Airport

Moses Lake, Washington Grant County Airport

Oakland, California Metropolitan Oakland

International Airport

Ontario, California Ontario International Airport

Stockton, California Stockton Metropolitan

Airport

Hilo, Hawaii Hilo International/General

Lyman Airport

Seattle, Washington Sea-Tac International Airport

Kansas City, Kansas Kansas City International

Airport

Fairbanks, Alaska Fairbanks International

Airport

Washington, D.C. Dulles International Airport

(2) In accordance with Article 6, paragraph (1) of this

Agreement, airlines designated by the Government of the

46a

United States of America are assigned the following regular

and alternate airports in China:

Regular Airports

Beijing Capital Airport

Shanghai Honggiao Airport

Alternate Airports

Guangzhou Baiyun Airport

Hangzhou Jiangiao Airport

Tianjin Zhangguizhuang Airport

Il. Airports for Charter Air Transportation

Aircraft of the airline(s) of each Party engaged in the

operation of charter air transportation approved by the aero-

nautical authorities of the other Party may utilize airports

appropriately identified in the Aeronautical Information

Publication of that other Party as available for international

flights, and such other airports as may be approved by such

aeronautical authorities.

Ill. Air Routes

All flight operations by aircraft of the designated airline(s)

of one Party operated in the airspace of the other Party shall

be over established airways/prescribed routes or as cleared by

the appropriate air traffic control service. Each Party will

make reasonable efforts to ensure that air routes entering and

within their sovereign airspace are as direct as practicable in

the interest of economy, efficiency and fuel conservation,

including the establishment of arrangements with controlling

authorities of adjacent airspace as appropriate.

IV. Aeronautical Information

(1) The aeronautical authorities of both Parties shall pro-

vide each other with their Aeronautical Information Publica-

tion.

47a

(2) Amendments and additions to the Aeronautical Infor-

mation Publication shall be sent promptly to the aeronautical

authorities of the other Party.

(3) The International NOTAM Code shall be used in the

transmission of Notices to Airmen (NOTAMs). When the

NOTAM code is not suitable, plain English shall be used.

Urgent NOTAMs shall be transmitted by the quickest available

means to the aeronautical authorities of the other Party.

(4) Aeronautical information and NOTAMs shall be made

available in the English language.

V. Meteorological Services

Mutually acceptable meteorological service shall be provided

in accordance with standards and recommended practices, to

the extent to which they are applicable, developed pursuant to

the Convention of the World Meteorological Organization and

International Civil Aviation Organization.

VI. Radio Navigation and Communication

(1) For the operation of agreed services on the specified

routes, the Parties recognize the requirements for the establish-

ment of point-to-point aeronautical communications between

the two countries. The Parties shall hold consultations as to the

measures and procedures for the establishment of such com-

munications.

(2) The English language and internationally accepted codes

and procedures in force shall be applied in air-ground and

point-to-point communications.

ANNEX IV

Conditions of Discount Fares

Discount fares within the zone of pricing flexibility described

in paragraph (3) of Article 13 of this Agreement shall be

subject to conditions of the type generally applicable to same

or similar fares in other international air transportation mar-

48a

kets. Such discount fares shall be subject to conditions in not

less than four of the following categories:

— Round trip requirements

— Advance-purchase requirements;

— Minimum-Maximum length of stay requirements;

— Stopover restrictions;

— Stopover charges;

— Transfer limitations;

— Cancellation refund penalties;

— Group size restrictions;

— Return travel conditions;

— Ground package requirements.

ANNEX V

Capacity and Carriage of Traffic

(1) The Parties agree that each designated airline shall have

the right to operate two frequencies per week. If a Party does

not designate a second airline, its first designated airline shall,

upon the commencement of service by the second airline of the

other Party or upon the passage of two years from the

commencement of any agreed service, whichever is earlier, be

entitled to add to its operation two frequencies per week. For

purposes of this Agreernent a frequency is: one (1) round trip

flight of an aircraft having a maximum certified take-off gross

weight not less than 710,000 pounds but not more than 800,000

pounds; one and one-half (1'/2) round trip flights of an aircraft

having a maximum certified take-off gross weight equal to or

greater than 430,000 pounds but less than 710,000 pounds; and

two (2) round trip flights of an aircraft having a maximum

certified take-off gross weight of less than 710,000 pounds, it

shall be entitled to one additional round trip flight of an all-

freight configured aircraft having a maximum certified take-

off gross weight of less than 430,000 pounds for every two

frequencies. All unused frequencies may be accumulated by a

designated airline and used at its discretion at any time. Any

increase in frequencies during the first three years after com-

mencement of any agreed service in excess of the frequencies as

49a

mentioned above shall be subject to prior consultation and

agreement between the Parties.

(2) With a view of realizing the objectives set forth in Article

i2, paragraph (2), the Parties agree that there should be a

reasonable baiance of the traffic carried by their respective

designated airline(s) on the specified route(s) in terms of

number of passengers and tons of cargo taken up and put

down in the territory of the other Party.

The consultations referred to in Article 12, paragraph (6)

shall take place as soon as possible, and in no event later than

thirty (30) days following the date of receipt of the request by

the latter Party. The Parties shall undertake to reach agreement

within thirty (30) days as to effective measures for remedying

the imbalances situation and fully implement such agreed

measures. In considering the measures to be undertaken, the

Parties shall take into account all relevant factors, including

commercial decisions of the designated airlines, load factors

and actions of third parties. In case the agreed measures fail to

remedy the imbalance within three months after their imple-

mentation, the Parties shall meet together to look into the

cause of such failure and agree upon measures for remedying

the imbalanced situation. In case the Parties fail to reach

agreement on effective remedial measures, they shall look into

the cause of the imbalance and consider amendments to this

Agreement which may be required to eliminate such cause.

(3) The provision of paragraph (2) of this Annex is valid for

three years from the date of commencement of any service

under this Agreement. Not later than six months prior to the

end of this three-year period, the Parties shall consult with a

view to agreeing to the means to achieve reasonable balance of

traffic referred to in paragraph (2) of this Annex.

50a

AGREEMENT BETWEEN

PAN AMERICAN WORLD AIRWAYS, INC.

and

THE DEPARTMENT OF INTERNATIONAL AFFAIRS

GENERAL ADMINISTRATION OF CIVIL AVIATION OF CHINA

RELATING TO MUTUAL REPRESENTATION

The Department of International Affairs of the General

Administration of Civil Aviation of China and Pan American

World Airways, Inc. (hereinafter referred to as the Contracting

Parties), in pursuance of Article 11 of the Air Transport

Agreement between the Government of the People’s Republic

of China and the Government of the United States of America

signed in Washington, D. C. on September 17, 1980, hereby

agree On mutual representation as follows:

Article One

RECIPROCAL APPOINTMENTS

1.1. The Department of International Affairs of the General

Administration of Civil Aviation of China, hereinafter in this

connection referred to as the Principal, appoints Pan Ameri-

can World Airways, Inc. as its General Sales Agent in the

territory of the United States of America for the sale of

passenger and cargo transportation.

1.2. Pan American World Airways, Inc., hereinafter in this

connection referred to as the Principal, appoints the Depart-

ment of International Affairs of the General Administration of

Civil Aviation of China as its General Sales Agent in the

territory of the People’s Republic of China for the sale of

passenger and cargo transportation.

1.3. Sales of a passenger and cargo transportation may be

made directly by the Representative Offices of the Principal

stationed in the Territory of the Genera! Sales Agent, as

permitted by the Air Transport Agreement. The General Sales

Sla

Agent shall be under the supervision of the Representative

Offices of the Principal stationed in the Territory of the

General Sales Agent.

Article Two

FUNCTIONS OF THE GENERAL SALES AGENT

2.1 Without in any way limiting the right granted to the

Principal by the Air Transport Agreement to perform such

functions in its Representative Offices, the General Sales Agent

shall perform in thé territory of its own country the following

functions on behalf Of the Principal:

2.1.1. Handling of reservations for passenger and

cargo transportation and handling of all clerical work in

connection therewith.

2.1.2. Issuance and completion of passenger ticket and

baggage checks, excess baggage tickets, airway bills and

other traffic documents for passenger, baggage and cargo

transportation Over the services of the Principal. The

above-mentioned traffic documents issued by the General

Sales Agent shall be honored and accepted by the Princi-

pal. Such traffic documents may provide for turning over

to other air carrier(s) for onward carriage by them of

passenger, baggage or cargo destined beyond points

served by the Principal, and in such event the Principal

shall act in accordance with standard industry practice

governing such onward carriage. It is understood by the

General Sales Agent that no traffic documents valid for

transportation On a particular flight will be issued unless

advance reservation shall have been confirmed for the

transportation and the payment of the relevant charges

payable therefore shall have been received in accordance

with the tariffs and regulations of the Principal, and in

case of absence Of such confirmation, only “open date”

traffic documents may be issued.

52a

2.1.3. Arranging for reasonable distribution and dis-

play of timetables and such publicity materials it seems

appropriate provided by and in accordance with the

requirements of the Principal.

2.1.4. Causing or arranging for the consignments to be

delivered to the receiving points designated by the Princi-

pal with respect to cargo transportation.

2.1.5. Handling of Prepaid Ticket Advice, including

necessary reservation and issuance of ticket and baggage

checks.

2.1.6. Promotion of passenger and to the operations of

the services of the Principal.

2.1.7. Selecting and appointing sales agents in the terri-

tory of its own country provided that the Principa! shall

have the right to refuse appointment of such sales agents

and to select directly by itself the sales agent in the

territory of the General Sales Agent.

2.1.8. Giving instructions to and supervising its sales

agents.

2.1.9. At the request of the Principal, contacting the

appropriate departments and authorities of its own gov-

ernment on matters relating to the operations of the

services of the Principal.

Article Three

OBSERVANCE OF INSTRUCTIONS AND TARIFFS

3.1. The Principal shali provide its rules, regulations, tar-

iffs, conditions of carriage, timetables and other information

necessary for the sale of transportation over its services to the

General Sales Agent and shall provide any modification of or

amendment to the foregoing as far as in advance as practica-

ble.

53a

3.2. The General Sales Agent shall accurately observe all the

rules, regulations, tariffs, conditions of carriage, timetables

and other such information provided by the Principal and shall

be responsible for its sales agents doing the same.

3.3. The General Sales Agent shall not vary or modify or

allow its sales agents to vary or modify the terms and condi-

tions set forth in the conditions of carriage or other publica-

tions of the Principal.

Article Four

TRAFFIC DOCUMENTS

4.1. The General Sales Agent shall, in general, use its own

traffic documents in selling transportation over the services of

the Principal. However, the traffic documents of the Principal

may also be used when x: is agreed upon between both Parties.

4.2. The sales agents shall use the traffic documents of

either the General Sales Agent or the Principal.

4.3. The Representative Office of the Principal stationed in

the territory of the General Sales Agent may use its own

documents when sales of passenger and cargo transportation

are made directly by itself.

Article Five

COMMISSIONS

5.1. The Principal shall pay to the General Sales Agent

commission at the following rates in respect of transportation

sold on its services by the General Sales Agent:

9% in respect of international passenger transportation.

5% in respect of international cargo transportation.

5.2. The Principal shall pay to the General Sales Agent an

overriding commission at the following rates in respect of sales

made in the territory of the country of the General Sales Agent

for transportation over its services:

54a

3% in respect of international passenger transportation.

2.5% in respect of international cargo transportation.

Overriding commission shall not be payable in respect of

transportation sold by the Principal in its Representative Of-

fices or solely on the domestic air services of the Principal. The

above-mentioned overriding commission shall be the sole re-

muneration for all services rendered by the General Sales

Agent under this Agreement with the exception of out-of-

pocket expenses defined in paragraph 5.7 below.

5.3. The Principal shall pay a commission of 5% of the

charter price to the General Sales Agent for charter flights

booked and sold on the international air services of the

Principal.

5.4. No commission shall be payable in respect of tickets

issued by the General Sales Agent against the Prepaid Ticket

advice of the Principal. However, the General Sales Agent shall

be entitled to a service charge of 3% of the ticket fare in such

event.

5.5. No commission shall be paid on the following: mail

transportation, excess baggage charges, baggage valuation

charges, transportation sold in connection with official govern-

ment travel at a government discount, airline employee or

agency discounted tickets, taxes and fees on fares or rates,

cargo insurance, non-aifline charges at origin and destination.

Commission shall be payable on cargo valuation charges.

5.6. If the Principal for any reason shall make or allow a

refund of the whole or part of any fare or other charge for

transportation sold by the General Sales Agent, no normal

commission or overriding commission shall be payable to the

General Sales Agent on any sum so refunded. The General

Sales Agent shall reimburse the Principal for any commission

which has already been paid in respect of any sum so refunded.

5.7. Out-of-pocket expenses, other than communications

expense, are subject to the Principal’s explicit authorization

and are to be paid separately by the Principal to the General

Sales Agent:

55a

5.7.1. Expenses caused by special publicity or press

campaigns;

5.7.2. Expenses in connection with the distribution of

promotional material and/or timetables, unless distrib-

uted jointly with material/timetables of the General Sales

Agent; ,

5.7.3. Taxes and duties in connection with expenses

covered by this paragraph 5.7;

5.7.4. Any other expenses for the account of the Prin-

cipal.

Article Six

ENDORSEMENTS

6.1. The Principal grants the General Sales Agent the au-

thority to effect endorsement of the traffic documents of the

Principal in the territory of the General Sales Agent, provided

that in the city of the territory of the General Sales Agent

where the Principal has a representative office, the consent of

the representative office of the Principal for endorsement is

required. .

Article Seven

SETTLEMENT

7.1. Each Party shall render the other Party invoices cover-

ing charges applicable to the transportation performed and

services rendered in accordance with this Agreement. Separate

invoices shall be prepared for passenger, cargo (freight), excess

baggage and miscellaneous charges. Invoices are acceptable

within a period of one year as from the first day of the month

subsequent to the month in which the transportation or service

is provided. If one Party disagrees with any item in the invoice

submitted by the other Party, it may bring forward a rejection

memorandum to this effect. However, rejection memorandum

is also acceptable within a period of one year after receipt of

56a

the invoice from the other Party. All necessary vouchers and

documents shall be attached to the invoice.

7.2. Invoice and settlement therefore shall be in terms of

U.S. Dollars. The rates of exchange between the currencies

used by each Contracting Party and the U.S. Dollar shail be

the mean average exchange rate of the last five days ending on

the 20th day of the month previous to the month of transporta-

tion performed and service rendered, as is generally applied in

interline settlement.

7.3. Each Party shall send the other Party a monthly state-

ment of account, showing all the invoices submitted to and all

invoices received from the other Party in the preceding month.

After both Contracting Parties have sent their statements of

account, the balance of the statement payable to the creditor

Party shall be remitted in U.S. Dollars by the debtor Party to

the Creditor Party within thirty (30) days after receipt of such

Statement to the debtor. The charge for remittance shall be

borne by the debtor Party. If the balance is in favor of Pan

American World Airways, Inc., payment shall be made by U.S.

Dollars to:

Pan American World Airways, Inc.

Sub-account “A”,

Account No. 1257-0676

Citibank, N.A., 399 Park Avenue

New York, N. Y. 10022, U.S.A.

If the balance is in favor of the Department of International

Affairs, General Administration of Civil Aviation of China,

payment shall be made in U.S. Dollars to:

The Bank of China, Beijing

The People’s Republic of China

For credit to the account of the Department of Interna-

tional Affairs, General Administration of Civil Avia-

tion of China

7.4. In the event of one Party incurring an exchange loss

due to delay by not fulfilling the above-mentioned obligation

within the time limits prescribed or due to an error caused by

57a

the other Party, such a loss shall be borne by the defaulting

Party.

7.5. All correspondence as to the billing and the statement

under the Agreement shall be addressed to:

Manager-Revenue and Interline Processing

Pan American World Airways, Inc.

Rockleigh Industrial Park

King Road

Rockleigh, N. J. 07647 USA

and

International Accounting Office

Department of International

Affairs

General Administration of Civil

Aviation of China

P. O. Box 638, Beijing

The People’s Republic of China

Article Eight

LIABILITY AND INDEMNITY

8.1. Each Contracting Party shall indemnity and hold free

and harmless the other Contracting Party and its sales agent(s)

in respect of claims, liabilities, fines and expenses arising from

Or in connection with the transportation sold by the other

Contracting Party or its sales agent(s), except in the case that

such claims, liabilities, fines and expenses are due to the

misconduct and negligence of the other Contracting Party or

its sales agent(s).

8.2. The General Sales Agent shall be responsible to the

Principal for the correct issuance of all the traffic documents

(passenger tickets and baggage check, excess baggage tickets,

exchange orders/miscellaneous charges orders, and consign-

ment notes) for transportation over the services of the Princi-

pal, and shall be responsible for proper remittance in

accordance with this Agreement, of the amounts due the

Principal.

58a

8.3. In the event that any claim is made against the Con-

tracting Party entitled to be indemnified in accordance with

paragraph 8.1 of this Article, such Party shall give prompt

written notice to the other Party, and shall cooperate by

furnishing promptly to the other Party at its request all

pertinent data, papers, records and information which are at

its disposal.

Article Nine

TRANSFER OF OBLIGATIONS

9.1. Unless otherwise provided in this Agreement, the Gen-

eral Sales Agent shall not assign, transfer or delegate the

representation and/or other obligations as stipulated in this

Agreement to any Third Party without written consent of the

Principal.

Article Ten

HEADINGS

10.1. Headings are inserted in this Agreement for the pur-

pose of reference and convenience only and in no way define,

limit or describe the scope of intent of this Agreement.

Article Eleven

MODIFICATIONS OR ADDITIONS

11.1. Any disagreement of opinion and/or dispute arising

between the Parties hereto from the implementation or inter-

pretation of this Agreement shall be settled by prompt and

friendly consultation between the Parties.

11.2. If one Party considers it desirable to modify and/or

amend this Agreement, such Party may at any time notify the

other Party in writing to effect such modification and/or

amendment through consultation. Modifications of or addi-

tions to the Agreement must be approved in writing by both

Parties.

59a

11.3. Modifications and/or amendments referred to above

shall come into force on the date as agreed upon by both

Parties.

Article Twelve

COMMUNICATIONS

12.1. The General Sales Agent shall provide reasonable

communication facilities for the sale of transportation over the

services of the Principal.

Article Thirteen

AMENDMENT AND TERMINATION

13.1. In the event that a second airline is designated by the

aeronautical authorities of the government of either Party, and

such airline wishes to exercise its right under the Air Transport

Agreement to become a General Sales Agent for either party,

the Parties shall meet to negotiate appropriate adjustments to

this Agreement.

13.2. If either Party desires to terminate this Agreement

after the coming into force of this Agreement, it may at any

time notify the other Party of such intention in writing, and

this Agreement shall terminate sixty (60) days after the receipt

of the notice by the other Party.

13.3. Such termination shall not relieve either Party from all

obligations and liabilities incurred under this Agreement before

the date of such termination.

Article Fourteen

GOVERNMENT APPROVALS

14.1. The terms and conditions of this Agreement shall be

subject to the approval of the aeronautical authorities of the

governments of both Parties.

60a

Article Fifteen

EXECUTION

15.1. This Agreement shall come into force from the date of

its approval by the aeronautical authorities of the governments

of both Parties. Done at New York on the 18th day of

November, 1980, in duplicate.

FOR PAN AMERICAN WORLD - FOR THE DEPARTMENT OF

AIRWAYS, INC. INTERNATIONAL AFFAIRS,

GENERAL ADMINISTRATION

OF CiVIL AVIATION OF CHINA

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.