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As matter of first impression, Second Circuit affirms judgment against FedEx in suit brought by Japanese Company and decides issue of first impression whether Warsaw Convention provisions have been abated or extinguished following entry into force of Hague Protocol
Fujitsu Limited, a Japanese corporation, shipped a container of silicon wafers from Narita, Japan to Ross Technologies, Inc. in Austin, Texas using Federal Express (FedEx). Ross rejected the goods in Austin and FedEx shipped them back via Memphis. FedEx did not prepare a new airway bill for the trip from Austin to Memphis and used an incomplete bill for the return to Japan. When it got the wafers back, Fujitsu noted that an oily substance covered the goods. Fujitsu reported the damage to FedEx who admitted that the damage occurred while goods were in their possession.
Plaintiff sued FedEx in federal district court, based upon breach of contract and negligence. FedEx contended that, under the Convention for the Unification of Certain Rules relating to International Transportation by Air (October 12, 1929, 49 Stat. 3000 (1934), 137 L.N.T.S. 11, reprinted in note following 49 U.S.C.S. Section 40105) (Warsaw Convention) governing international cargo shipments, it carried the cargo with a proper air waybill and was thus entitled to limitation on its liability to $9.07 per pound, or a total of approximately $1,200 for the entire shipment.
The lower court gave partial summary judgment to Fujitsu, finding that the bill did not comply with the requirements of the Convention and that the initial air waybill could not cover the shipment from Austin to Japan. The court found FedEx liable to Fujitsu for $726,640.
FedEx appealed complaining of a judicial misinterpretation of liability issues under the Convention. The U.S. Court of Appeals for the Second Circuit affirms. FedEx argued that it is not the Original Warsaw Convention, but rather the Warsaw Convention as modified by the international agreement referred to as the “Hague Protocol” that governs in this case. The latter would allow for limited liability protections for the defendant.
The issue of first impression is whether common law, the general savings statute, or customary international law governs whether a later treaty such as the Hague Protocol abates or extinguishes provisions of a prior treaty such as the Convention. Japan ratified the Hague Protocol in 1967, however it did not enter into force for the United States until March 4, 1999. The Warsaw Convention, as amended by the Hague Protocol, Article 9 “deprives carriers of the Convention’s limited liability protections only if ‘cargo is loaded on board the aircraft without an air waybill having been made out’ or if ‘the air waybill does not include notice required by Article 8 which requires the carrier to give the consignor notice to the effect that, if the carriage involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable is matters concerning limited liability.”
In particular, the question here is whether by applying The Hague Protocol to the facts of this case where the shipment took place almost two years before the agreement’s entry into force for the United States would abrogate inconsistent provisions of the original Warsaw Convention.
The Court determines that “the issue of whether the provisions of a treaty have been abated or extinguished following the entry into force of a subsequent treaty is governed by neither the common law doctrine of abatement nor the general savings statute. Rather [w]e apply the rules of customary international law enunciated in the Vienna Convention of the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331.”
On this matter, the Court used the Vienna Convention’s distinct rules concerning amendment, modification, suspension, and termination of international agreements. Customary international law contains no baseline presumption that the provisions of a new agreement automatically abate and extinguish any prior treaty relating to the same subject matter. To the contrary, international customary law “furnished almost the opposite baseline norm, pacta sunt servanda, which provides that a treaty in force is “binding upon the parties to it and must be performed by them in good faith” unless the treaty has been affirmatively terminated or suspended.”[Slip op. 25]. See Vienna Convention Art. 26.
Many multilateral treaties such as the Warsaw Convention exist and they are frequently modified – but not thereby terminated – by amending agreements binding only those parties that are willing to accept the amendment while leaving the original or earlier provisions still in force to govern the relations between other parties, as well as between the other parties and the amending group. Therefore, it is common for several versions of a multilateral treaty to exist at the same time, with different sets of provisions operating between different groups of states.
Therefore the Court concludes that “while the Hague Protocol and Original Warsaw Convention clearly relate in subject matter, it is equally clear that the Original Warsaw Convention was not terminated by enactment of the Hague Protocol.” [Slip op. 27]. Since the United States was not a party to the Hague Protocol at the time of the shipment, the Court does not have to consider whether Fed Ex would be able to invoke the liability limitation under the terms of the Amended Warsaw Convention. The Original Warsaw Convention is applicable in this case regardless of the entry into effect of the Hague Protocol during the pendency of the case.
Citation: Fujitsu Limited v. Federal Express Corp., No. 00-7343, 2001 U.S. App. LEXIS 7356 (2nd Cir. April 20, 2001).
Filed in: 2001 International Law Update, Issue5
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In litigation over lost shipment of Nike athletic shoes from Indonesia, Ninth Circuit holds that Carmack Amendment applies on U.S. leg of international shipment under single bill of lading and that damages include “lost markup” value, not just replacement cost
The Burlington Northern and Santa Fe Railway Company (Burlington) lost a container of Nike shoes it was conveying from Los Angeles, California, to Nike’s distribution center in Memphis, Tennessee. This shipment was part of a single “through” bill of lading between Neptune Orient Lines, Ltd. (Neptune) and Nike, Inc. The bill did not contain any declaration of value. Nike changes its shoe models so often that replacements for the same shoes are sometimes not available. After paying Nike the market value of the shipment or $182,892.08, Neptune sued Burlington for reimbursement.
In its motion for summary judgment, Neptune sought to recover the fair market value of the lost shoes. Burlington disagreed and argued that Neptune was only entitled to their replacement cost, that is, $94,567.13. The district court gave summary judgment to Neptune and Burlington appealed. The U.S. Court of Appeals for the Ninth Circuit affirms.
The Carmack Amendment (49 U.S.C. Section 11706) determines carrier liability for “transportation in the United States between a place in … the United States and a place in a foreign country.” (49 U.S.C. Section 10501(1)(F)). The Ninth Circuit had interpreted an earlier version of that provision to apply to separate inland bills of lading for shipments to or from overseas ports. The statute encompasses the inland leg of an overseas shipment conducted under a single “through” bill of lading (as is the case here) to the extent that the shipment was not subject to the Carriage of Goods by Sea Act (COGSA) (see 46 U.S.C. Sections 1300 & 1301(e), 1303(2)) (carrier liable once goods are loaded onto ship until discharged).
The Court agrees with Neptune that the “lost markup” is part of the actual loss. The “market value at destination” is the proper measure of the actual loss where the shipment is lost or destroyed. On the other hand, replacement cost is an appropriate measure of damages where the injured party could mitigate the loss by replacing the goods. Since Nike was unable to replace the lost shipment, it is therefore entitled to the entirety of its actual loss, that is, the market price at destination.
Citation: Neptune Orient Lines, Ltd. v. Burlington Northern and Santa Fe Railway Co., No. 98-17387 (9th Cir. May 24, 2000).
Filed in: 2000 International Law Update
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In suit over damage to containers en route from Japan to U.S., Eleventh Circuit finds that higher liability under Hague-Visby Rules applies based on forum selection clauses in shipping documents
Itel, a container leasing company, bought 198 refrigerated containers in Japan and arranged for Candyline Ltd. (UK) to ship them to Savannah, Georgia. Their shipping contract was boilerplate, except for a typewritten addendum to the Booking Note stating that English law applies. The Bill of Lading made the Hague Rules and the Hague-Visby Rules applicable under certain circumstances. The contract designated England as forum. English law is also applicable.
[The Hague Rules are based on a 1924 Convention, ratified by the U.S. in 1924. The U.S. implemented the Convention through the Carriage of Goods by Sea Act (COGSA). The U.S., however, did not adopt the 1968 Protocol to Amend the Hague Rules of 1924 (Visby Amendments), raising the per package limitation on liability. During the relevant time period, England had adopted the Visby Amendments, Japan had not].
Candyline contracted with Mammoet Shipping B.V. (Netherlands) to do the actual shipping. The Booking Note and Bill of Lading were identical to the ones between Itel and Candyline. During the voyage, 20 containers fell overboard and 6 were severely damaged. Itel sued in federal court to recover damages.
The court found Candyline liable for damages under the Hague-Visby Rules (as adopted in England) that provide for higher liability limits than U.S. law. The court also ruled that Candyline could only seek indemnity from Mammoet based on COGSA with its lower liability limit. Candyline appealed.
The U.S. Court of Appeals for the Eleventh Circuit affirms in part and reverses in part.
As for the Itel/Candyline agreement, the Court agrees that the higher liability limits of the Hague-Visby Rules apply. First, Clause 3 of the Bill of Lading selects the country of the carrier’s place of business, i.e. England. Second, Clause 10 in the addendum to the Booking Note looks to English law. The Supreme Court has recently held that COGSA does not nullify foreign arbitration clauses set forth in maritime bills of lading. See Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 535-36 (1995) [see 1995 Int'l Law Update 2 (December)] This is enough precedent to require enforcement of the above clauses.
As for the Candyline/Mammoet agreement, the Court finds that the factors that counseled our applying the English Hague-Visby Rules to the Itel/Candyline contracts are also present. Even if there were no Clause 10, the Netherlands, like England, has adopted the Hague-Visby Rules.
The Court therefore remands for a determination of the amount of indemnification to which Candyline is entitled pursuant to the English Hague-Visby Rules.
Citation: Itel Container Corp. v. M/V Titan Scan, No. 97-8278 (11th Cir. May 1, 1998).
Filed in: 1998 International Law Update, Issue 5
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U.S. adapts regulations on transport of hazardous materials to international rules
The U.S. Department of Transportation, Research and Special Programs Administration (RSPA), has issued a final rule to adapt U.S. regulations to changes in international rules for the carriage of hazardous materials. In particular, it adapts 49 C.F.R. Part 171 to recent changes in:
- The International Maritime Organization’s Maritime Dangerous Goods Code (IMDG Code), and
- The International Civil Aviation Organization’s Technical Instructions for the Safe Transport of Dangerous Goods by Air (ICAO Technical Instructions).
The rule incorporates the IMDG Code (Amendment 28) and the ICAO Technical Instructions (1997 98) by reference. RSPA will issue another final rule to carry out those specific changes in the IMDG Code and the ICAO Technical Instructions.
Though the effective date of these amendments is June 1, 1997, RSPA permits voluntary compliance starting on January 1, 1997.
Citation: 61 Federal Register 65958 (December 16, 1996).
Filed in: 1997 International Law Update, Issue 1
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Seventh Circuit refuses to apply limitations period in bill of lading to entire agreement
Zenith Electronics Corp. sued its forwarding agent Panalpina, Inc. for its alleged breach of contract, and of its duties under the 1984 Shipping Act, 46 U.S.C. § 1701. Since Panalpina had failed to timely deliver the bills of lading to a guarantor bank before the letter of credit expired, Zenith could not collect the price of 2,100 TVs it had shipped to Peru by Pantainer, Inc., Panalpina’s wholly owned subsidiary.
The district court granted Panalpina summary judgment because the bills of lading contained a clause requiring a party to bring suit against the “carrier” within one year of the delivery of the goods. Zenith appealed.
The U.S. Court of Appeals for the Seventh Circuit reverses. In the Court’s view, Zenith’s letter of instruction shows that Panalpina was not only in charge of carriage; it also had other duties, such as presenting the bills of lading to the guarantor bank. Since the instructions did not mention any time limits and did not refer to the time restriction in the bills of lading, the time restriction fails to protect Panalpina’s forwarding services. Furthermore, Panalpina failed to establish the existence and applicability of a trade custom under which the time restriction of the bill of lading would apply to the parties’ entire agreement.
Citation: Zenith Electronics Corp. v. Panalpina, Inc., 68 F.3d 197 (7th Cir. 1995).
Filed in: 1995 International Law Update, Issue 3
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Comprehensive air transport agreement between the United States and Canada enters into force
Recognizing the unique geographic and political relationship between the two countries, the governments of the United States and Canada entered into a comprehensive new agreement on air transport in Ottawa effective February 24, 1995. Among the goals are the enhancement of commercial air service, fair competition to benefit each other’s carriers as well as the flying public, avoidance of discrimination and the promotion of the highest degree of safety.
Among the many other issues dealt with in its twenty-four main Articles include pricing, computer reservation systems, airport access and user fees, tariffs, customs charges, and dispute resolution. Each party is impartially to apply its own laws and regulations to the carriers of the other party whenever they operate locally. The parties also pledge to help the other in carrying out obligations under governing international air transport agreements including those dealing with hijacking and other crimes aboard aircraft. In four detailed Annexes, the agreement deals with schedules and routes, slot allocations to high density airports such as Washington National and O’Hare, charter flights, and continuation of designations and authorizations.
Citation: State Dept. No. 95-73, KAV No. 4196.
Filed in: 1995 International Law Update, Issue 3
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United States concludes “open skies” agreements with ten European nations
The United States has recently concluded “open skies” agreements on air transport with Austria, Belgium, Denmark, Finland, Iceland, Luxembourg, Netherlands, Norway, Sweden, and Switzerland. For example, on September 5, 1995, the U.S. and Belgium amended their 1980 air agreement with an “open skies” provision. It allows Belgian carriers to fly to any destination in the U.S. (U.S. carriers already had that right in Belgium).
These agreements also provide easy access to airports, and put no limits on the capacity or number of airlines. They also allow for “coach sharing,” that is, the airlines can sell other airlines’ flights. At this point, only the Netherlands Agreement of October 14, 1995, has entered into force. Some countries are provisionally applying the terms of the open skies agreements until the agreements legally enter into force.
The parties have not yet published these agreements but they rest on the same standard “open skies” agreement (Air Transport Agreement Between the Government of the United States of America and the Government of …). In the context of these agreements, several airlines have filed requests for antitrust immunity with the U.S. Department of Transportation to protect their close cooperation from U.S. antitrust laws.
Citation: Information received from the U.S. Department of State, Aviation Negotiations, Washington, DC, Phone: (202) 647-8001.
Filed in: 1995 International Law Update, Issue 3
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Delta Airlines’ petition for review of DOT’s award of two London routes to American Airlines is denied by D.C. Circuit
After two routes to London became available for U.S. air carriers, the Department of Transportation [DOT] began carrier selection procedures under its expedited “show cause” process of Subpart Q. American and Delta air lines sought these routes. After considering only the written submissions from the airlines and other parties, DOT awarded both routes to American. DOT conceded that awarding one of the routes to Delta would enhance competition among U.S. carriers since American was already the dominant carrier in the U.S. to U.K market. On the other hand, DOT deemed American’s better ability to compete with foreign carriers the more urgent concern. Delta then filed a petition for judicial review.
The U.S. Court of Appeals for the District of Columbia Circuit, however, denies Delta’s petition. It rejects Delta’s claim that DOT had disregarded its own regulations by failing to employ a procedure insulated from political influence including an evidentiary hearing before an ALJ. The Court also sees no merit in Delta’s complaint about the power of a political appointee to determine which procedure to adopt in a route selection matter.
The Court concludes that, though aware of the dangers of political influence in awarding international air routes, Congress had consciously declined to require DOT to make use of insulated procedures in all international carrier proceedings. Finally, DOT’s assessment of the relevant statutory factors fell within its congressional mandate.
Citation: Delta Air Lines v. Dept. of Transportation, 51 F.3d 1065 (D.C. Cir. 1995).
Filed in: 1995 International Law Update, Issue 2