Order on Discussion Authority Regarding Limits and Conditions of Passenger Liability Established by the Warsaw Convention

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

[Docket 49152 and Order 95-2-44]

Order on Discussion Authority Regarding Limits and Conditions of

Passenger Liability Established by the Warsaw Convention

SUMMARY: We are publishing the entire order as an appendix to this

document.

DATES: Issued in Washington, D.C., February 22, 1995.

EFFECTIVE DATE: February 28, 1995.

FOR FURTHER INFORMATION CONTACT: Peter Bloch, U.S. Department of

Transportation, Office of the Assistant General Counsel for

International Law, Room 10105, 400 Seventh Street, S.W., Washington,

D.C. 20590. (202) 366-9183.

Patrick V. Murphy,

Acting Assistant Secretary for Aviation and International Affairs.

Order

On September 24, 1993, the International Air Transport

Association (IATA) filed an application requesting approval of, and

antitrust immunity for, intercarrier discussions concerning the

limits and conditions of passenger liability established by the

Warsaw Convention (Convention).

IATA states that pending ratification and entry into force of

Montreal Protocols Numbers 3 and 4 to the Convention, there is a

need for interim passenger liability rules that are adequate to

current day standards of compensation. The current regime, as

embodied in the Montreal intercarrier agreement of 1966 (Agreement)

and which covers all carriers serving the United States, establishes

a liability limit of $75,000 for personal injury and death.1

Adjusted for inflation, IATA notes that this amount would be over

$300,000 in today's dollars. Despite this, adherence to the

Agreement's $75,000 limit continues to be a condition for all

carriers to operate to the Untied States. Against this background,

IATA states that air carrier parties to the Agreement need the

authority to discuss bringing the Agreement up to date. It states

that such discussions may include possible amendments to, or

replacements for, this Agreement. IATA states that its request for

discussion authority and antitrust immunity is consistent with

Department precedent.

\1\ The Warsaw Convention, to which the United States became a

party in 1934, established a number of uniform rules regarding

international air transportation, including in Article 22 an air

carrier liability limit of approximately $10,000 for each passenger

injury or death, absent a finding of willful misconduct. The Hague

Protocol of 1955, which doubled the liability limit, was not

ratified by the United States. Rather, in 1966, the carriers serving

the United States agreed to adopt a special contract under Article

22, establishing what remains the current regime (Agreement CAB

18900, approved by Order E-23680, May 13, 1966) (Docket 17325).

Under the Agreement's terms, these carriers also agreed not to avail

themselves of the defense of non-negligence under Article 20(1) of

the Convention for claims under that amount.

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No answers were filed in response to the IATA application.

Decision

The Department has decided to grant the requested discussion

immunity subject to the conditions described below. The United

States has a firmly-established policy that liability limits should

be adequate to contemporary standards of compensation and that the

current regime needs to be updated to provide sufficient protection

to the traveling public. We are granting the application because the

discussions proposed by IATA may bring about an interim solution

that will serve either until Montreal Protocols 3 and 4 are ratified

and enter into force, or until negotiation and entry into force of a

new Convention meeting all U.S. requirements.

We may authorize intercarrier discussions and grant them

antitrust immunity where we find that the discussions are necessary

to meet a serious transportation need or to achieve important public

benefits and that such benefits or need cannot be secured by

reasonably available alternatives that are materially less

anticompetitive.2 49 U.S.C. 41308, 41309.

\2\ We assume for the purposes of our decision here that the

proposed discussions could reduce competition among carriers.

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The purpose of the discussions in this case is to secure the

important public benefit of a liability regime that reflects

contemporary standards of compensation. The discussions are

consistent with a strong and long-standing Department policy of

seeking a uniform set of passenger liability rules that meet today's

needs.

We find that there are no reasonably available alternatives to

the requested discussions having a materially less anticompetitive

effect. The best alternative, of course, is an international

agreement such as the Montreal Protocols and Supplemental

Compensation Plan, but it is because that approach has proven to be

such a complex and lengthy one, and given the pressing need to have

an updated liability regime, that we are entertaining this

discussion authority request. Another alternative would be to allow

individual carriers to apply to the Department for modifications to

their tariffs and conditions of carriage to implement individual new

special contracts under Article 22 of the Convention. We do not

believe that approach is workable. Some carriers would probably

attempt this, while others would not. Those that did would likely

offer contracts with different terms from one another. One clear and

unacceptable result of such an approach would be that portions of

the traveling public would not be adequately protected. A final

alternative would be for the United States to unilaterally establish

a regime that all carriers operating to the United States would have

to abide by. This approach, however, could engender such significant

opposition from our trading partners that our ability to implement

the plan unilaterally could very well be jeopardized.

We also find that the requested approval and grant of antitrust

immunity to discuss an interim liability regime is appropriately

limited in nature and well-calculated to achieve a result consistent

with our objective of having in place a liability regime that

reflects contemporary standards of compensation. IATA seeks

discussions geared toward producing a temporary arrangement,

recognizing the immediate need to increase the liability limits

through a uniform system of rules. This is fully consistent with our

objectives. IATA would announce a place and date for such

discussions and has said that it would invite all its member

carriers.

IATA requests that we not impose conditions on such discussions

that would restrict the ability of the participant carriers to

consider all options in structuring a liability regime. We will not

impose conditions other than those that we consider standard and

which we have set out below. However, we believe that in

constructing any intercarrier agreement, the participants should

seek to reflect the basic objectives which we have pursued in our

efforts to secure ratification of the Montreal Protocols and

creation of a supplemental compensation [[Page 12814]] plan. We have

strived for a uniform international system that allows U.S. victims

to receive fair recoveries within a reasonable period of time.

Specifically, we would expect that any agreement reached by the

carriers would be consistent with the following guidelines: first,

with regard to passenger claims arising from international journeys

ticketed in the United States, passengers would be entitled to

prompt and complete compensation on a strict liability basis with no

per passenger limits and with measures of damages consistent with

those available in cases arising in U.S. domestic air

transportation; second, this coverage should be extended to U.S.

citizens and permanent residents traveling internationally on

tickets not issued in the United States.

We have decided to grant the request for discussion authority

and antitrust immunity in this order, rather than through a show-

cause proceeding. The discussions sought by the applicants seek to

carry out our established public policy goal, the modernization of

passenger liability limits. Implementing that goal as soon as

possible will redound to the immediate benefit of the traveling

public and therefore provide important public benefits. We are

willing to grant antitrust immunity in this instance because, unlike

most situations where it has been sought, the purpose of the

discussions at issue here is fully consistent with the public

interest. Furthermore, any agreement reached by the carriers may not

be implemented without our approval, and interested persons will

have an opportunity to comment on any application for such approval.

In addition, to minimize any adverse impact on the public

interest, we will condition our approval and grant of antitrust

immunity upon the following express conditions: (1) The discussion

authority is limited to 120 days from the date of publication of

this order; (2) advance notice of any meeting shall be given to all

U.S. and foreign air carriers as well as to the Department of

Transportation and the Department of Justice; (3) representatives of

the Department of Transportation and the Department of Justice shall

be permitted to attend the meetings authorized by this order; (4)

IATA shall file within 14 days with the Department a report of each

meeting held including inter alia the date, place, attendance, a

copy of any information submitted to the meeting by any participant,

and a summary of the discussions and any proposed agreements; (5)

any agreement reached must be submitted to the Department for

approval and must be approved before its implementation; (6) the

attendees at such meetings must not discuss rates, fares or

capacity, except to the extent necessary to discuss ticket price

additions reflecting the cost of any passenger compensation plan;

and (7) the discussions will be held in the metropolitan Washington,

D.C. area.

Accordingly

1. The Department approves the request for discussion authority

filed by IATA in this docket, subject to the restrictions listed

below, under section 41308 of title 49 of the United States Code,

for 120 days from the date of publication of this order, for

discussions directed toward producing a uniform set of passenger

liability limits;

2. The Department exempts persons participating in the

discussions approved by this order from the operation of the

antitrust laws under section 41309 of Title 49 of the United States

Code;

3. The Department's approval is subject to the following

conditions:

(a) Advance notice of any meeting shall be given to all

identifiably interested U.S. air carriers and foreign air carriers,

as well as to the Department of Transportation and the Department of

Justice;

(b) Representatives of the entities listed in subparagraph (a)

above shall be permitted to attend all meetings authorized by this

order;

(c) IATA shall file within 14 days with the Department a report

of each meeting held including inter alia the date, place,

attendance, a copy of any information submitted to the meeting by

any participant, and a summary of the discussions and any proposed

agreements;

(d) Any agreement reached must be submitted to the Department

for approval and must be approved before its implementation;

(e) Attendees at such meetings must not discuss rates, fares or

capacity, except to the extent necessary to discuss ticket price

additions reflecting the cost of any passenger compensation plan;

(f) The Department shall retain jurisdiction over the

discussions to take such further action at any time, without a

hearing, as it may deem appropriate; and

(g) Any meetings authorized by this order shall be held in the

metropolitan Washington, D.C. area.

4. Petitions for reconsideration may be filed pursuant to our

rules in response to this order;

5. We will serve a copy of this order on all parties served by

IATA in this docket, as indicated by the service list attached to

its application; and

6. We will publish a copy of this order in the Federal Register.

Patrick V. Murphy,

Acting Assistant Secretary for Aviation and International Affairs.

[FR Doc. 95-5588 Filed 3-7-95; 8:45 am]

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