BANGKOK TO MONTREAL GOING ALL THE WAY? DEVIATION OR DIRECT? MARCH 2015

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1 BRIEFING BANGKOK TO MONTREAL GOING ALL THE WAY? DEVIATION OR DIRECT? MARCH 2015 THAILAND S NEW INTERNATIONAL AIR TRANSPORT ACT WILL COME INTO FORCE ON 16 MAY THE LAW IS INTENDED TO GIVE EFFECT TO THE MONTREAL CONVENTION OF 1999 BUT HAS SOME UNIQUE FEATURES WHICH DEVIATE FROM MC99. Thailand s new International Air Transport Act (the Act) will come into force on 16 May The law is intended to give effect to the Montreal Convention of 1999 (MC99) but has some unique features which deviate from MC99 and the uniform liability regime introduced by MC99. Key features: Limits of liability for damage to or loss of baggage and cargo; Limits of liability for passenger delays; Strict liability up to Special Drawing Rights (SDRs) 113,100 for passenger death or injury claims; Provisions to apply to Thai domestic carriage; Liability limits diverge from MC99 limits; No five year review of liability limits; No enumerated jurisdictions for claims? Carriage of Passengers levels of compensation to take off? For the first time, Thai law introduces, in effect, a minimum liability limit for

2 1 Watson Farley & Williams passenger death and injury claims of SDRs 113,100 and stipulates that advance payments can be requested by passengers. Although this may not have been the intention of the drafters of Article 21 of MC99, it is likely to be (mis)interpreted in this way. Carriers should assert that strict liability is only for proven damages up to this limit. However, this will be a matter for each court to decide as it sees fit. Thai courts are not bound by the decisions of other courts and judgments of other Thai courts are influential or persuasive at best. THE THREAT OF PROCEEDINGS IN OTHER JURISDICTIONS, PARTICULARLY THE UNITED STATES, AND ACTIONS BY AGGRESSIVE PLAINTIFF LAWYERS MAY INCREASE THE UPWARD PRESSURE ON LEVELS OF SETTLEMENTS AND COMPENSATION. Levels of compensation in Thailand are comparably low by global standards and damages of SDRs 113,100 are relatively unusual and generally only awarded in exceptional cases. It remains to be seen whether strict liability up to SDRs 113,100 will create upward pressure on compensation claims and demands. The threat of proceedings in other jurisdictions, particularly the United States, and actions by aggressive plaintiff lawyers may increase the upward pressure on levels of settlements and compensation. This is particularly in the context of the ambiguities as to applicable jurisdictions in which claims can be brought. Thai personal injury claims routinely include compensation for future medical expenses. The Act does not directly address this issue other than to stipulate that only claims must fall within the scope of the Act regardless of the basis for such claims. It is likely that the Thai courts will continue to award such compensation for claims subject to the Act. Carriage of Baggage liability limited The Act introduces a liability limit of SDRs 1,131 per passenger for baggage loss, damage or delay claims. This is a positive step for carriers since it appears to remove the uncertainty over the extent of their liability. Prior to the Act, there was no statutory limit of liability and carriers had to rely on their contractual liability limits and the uncertainty over compliance with requirements for the express agreement of the passenger to contractual limits of liability. Provided the Thai courts accept that s. 16 of the Act overrides Article 639 of the Civil and Commercial Code (CCC), the Courts should enforce the liability limit. Carriage of Cargo liability limited The Act introduces a liability limit of SDRs 19 per kilogram for cargo loss, damage or delay claims. This is a long overdue improvement on the previous position. As for baggage claims, carriers sought to rely on contractual liability limits in the absence of ratification of the Warsaw and/or Warsaw-Hague Conventions. The difficulties carriers have faced in proving the express consent of a shipper to contractual liability limits led to a practice of settlement by reference to the invoice value of cargo claims. Provided the Thai courts accept that s. 39 of the Act overrides Article 625 of the CCC, this practice should no longer be the basis for settlement of cargo claims. The position in support of this is reinforced by the incorporation of Article 11 and specifically reference to the air way bill as evidence of the conditions of contract stipulated in the air way bill. Although the Act gives effect to the provisions of MC99 in relation to disposal of cargo, it is not clear how smoothly this will be implemented in view of existing procedures and practices, particularly where delivery is to a party other than the named consignee. One issue to consider is potential customs duties and other taxes where cargo is delivered to a party when in transit in Thailand. Although the consignor is liable for any expenses resulting from the exercise of the right of disposition, airlines may face pressure to meet customs duties and any storage and handling charges, particularly where the consignor is not based in Thailand.

3 BANGKOK TO MONTREAL GOING ALL THE WAY? DEVIATION OR DIRECT? 2 THE ACT CONTAINS NO PROVISION EQUIVALENT TO ARTICLE 24 AND THERE IS NO PROVISION IN THE ACT WHICH WOULD ALLOW FOR ANY REVISION OF THE STATED LIABILITY LIMITS. Liability limits The limits stipulated in the Act reflect the December 2009 revisions, made in accordance with review provisions in Article 24 of MC99. This provision was included to ensure that liability limits remain current and reflect changes in costs and prices and presumably to address consumer and government concerns that inflation and other upward costs pressures could devalue liability limits. The Act contains no provision equivalent to Article 24 and there is no provision in the Act which would allow for any revision of the stated liability limits. Whilst this is favourable to carriers, over time this may raise concerns as to the limits of liability, particularly in relation to cargo and baggage and may invite attempts to circumvent these limits, including by pursuing a claim under the Consumer Case Procedure Code (the Consumer Code). Jurisdiction/s and litigation The only reference to jurisdictions in which claims can be brought is the designation of the Central Intellectual Property and International Trade Court in as the court with jurisdiction over claims arising out of domestic carriage. The benefit of this designation is that the IP&IT Court is arguably the court most experienced with and best equipped for claims arising from international carriage by air. Whether this will prove to be a practical step for claims arising outside remains to be seen. IN RELATION TO INTERNATIONAL CARRIAGE, IT IS NOT CLEAR WHY THE ACT DIVERGES FROM THE PROVISIONS OF ARTICLES 33 AND 46 BY NOT INCORPORATING THE JURISDICTIONS STIPULATED IN THE ACT. In relation to international carriage, it is not clear why the Act diverges from the provisions of Articles 33 and 46 by not incorporating the jurisdictions stipulated in the Act. The Act also does not include the final provisions of Article 33 authorising courts to deal with questions of procedure according to local law. Notwithstanding this omission, it is likely that Thai courts will deal with this issue according to established principles to determine the applicable and relevant jurisdiction. The provisions in the contract of carriage, particularly the air way bill, stipulating a jurisdiction or jurisdictions in which claims can be brought, may then play a critical role. If this is the case, although a fixed and unbreakable liability limit may serve to reduce the volume of cargo claims litigation, uncertainty over the applicable jurisdiction/s and potential forum shopping may moderate this reduction in litigation. It is also important to consider the reluctance of Thai courts to make interim orders or declarations or to hand down summary judgments. In such claims, a Thai court may not be prepared to make interim or preliminary orders as to the applicable jurisdiction and may prefer to hear the entire case and address issues of jurisdiction in its final judgment. A further omission from the Act is Article 34 allowing parties to resolve their disputes by arbitration. Although this does not prevent the parties agreeing to arbitrate rather than litigate claims, it is necessary to ensure that the contract of carriage contains a carefully and appropriately worded arbitration clause, particularly in light of the way in which the Act deals with the applicable jurisdictions for claims arising from international carriage. Conflict with other Thai laws Although s. 54 expressly excludes claims for punitive damages, it is unclear how this provision will be dealt with in the context claims framed within the scope of the

4 3 Watson Farley & Williams A THAI COURT COULD CONSIDER A SHIPPER OR CONSIGNEE A CONSUMER OF INTERNATIONAL AIR CARRIAGE SERVICES AND AWARD PUNITIVE DAMAGES. Consumer Code, which allows for claims for punitive damages. Recent judgments have allowed punitive damages across a range of claims, including those brought by corporations as consumers of commercial products. If a court accepted a claim arising from international carriage and framed within the scope of the Consumer Code, it is not inconceivable that a Thai court could consider a shipper or consignee a consumer of international air carriage services and award punitive damages. On the radar full implementation of MC99? The National Legislative Assembly (the NLA) is reported to be considering a Memorandum of Underlying Principles (the Memorandum), which would result in an amended Act to ensure that Thailand gives full effect to the provisions of MC99. It is not clear when the NLA will decide on the Memorandum and, assuming it is approved, when any changes will come into force. From 16 May 2015 until the date any amended legislation comes into force, the provisions set out above will apply. A further update will be provided once the status of the Memorandum is clarified. However, the key amendments are understood to include the following Articles of MC99: Article 33 setting out the jurisdictions in which claims can be brought, including the fifth jurisdiction Article 34 allowing for arbitration of disputes Article 25 allowing for liability limits higher than those set out in the Act The amendments are not understood to include incorporation of Article 24 to allow for five yearly reviews of the limits of liability. Any review of the liability limits appears likely to be carried out by the Ministry of Transport and/or the DCA. The amendments are also understood to empower the DCA to prohibit a carrier from entering, leaving or flying through Thai airspace where a carrier is unable to present the DCA evidence that it holds satisfactory insurance. A further update will be provided once the full and final details of the amendments are known and once the likely date for implementation has been announced.

5 Watson Farley & Williams CONTACTS Should you like to discuss any of the matters raised in this Briefing, please speak with one of the authors below or your regular contact at Watson Farley & Williams. ALAN POLIVNICK Partner apolivnick@wfw.com RACHAPOL SIRIKULCHIT Associate rsirikulchit@wfw.com SUPATTANA SUTHAPORN Associate ssuthaporn@wfw.com RHIAN WOODEND Trainee /London rwoodend@wfw.com All references to Watson Farley & Williams and the firm in this publication mean Watson Farley & Williams LLP and/or its affiliated undertakings. Any reference to a partner means a member of Watson Farley & Williams LLP, or a member or partner in an affiliated undertaking, or an employee or consultant with equivalent standing and qualification. The transactions and matters referred to in this publication represent the experience of our lawyers. This publication is produced by Watson Farley & Williams. It provides a summary of the legal issues, but is not intended to give specific legal advice. The situation described may not apply to your circumstances. If you require advice or have question or comments on its subject, please speak to your usual contact at Watson Farley & Williams. This publication constitutes attorney advertising LON KW KW 06/03//2015 Watson Farley & Williams 2015 wfw.com