Law and Regulation of Air Cargo

276 Pages·2018·2.42 MB·English

by  Ruwantissa Abeyratne

Ruwantissa Abeyratne
Law and
Regulation
of Air Cargo
Law and Regulation of Air Cargo
Ruwantissa Abeyratne
Law and Regulation
of Air Cargo
Ruwantissa Abeyratne
Aviation Strategies International
Montreal, Québec, Canada
ISBN 978-3-319-92488-5 ISBN 978-3-319-92489-2 (eBook)
https://doi.org/10.1007/978-3-319-92489-2
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Preface
The International Civil Aviation Organization (ICAO1), in its World Civil Aviation
Report for 2016, records that cargo traffic recorded an annual growth of +1.7% in
2015 in terms of freight tonne kilometres reflecting a substantial decline as compared
to +4.7% increase in 2014. The outlook for 2042 is an overall 4.5% growth rate.
Boeing in its World Air Cargo Forecast 2016–2017 says: “world air cargo traffic has
struggled to maintain sustained growth since the end of the global economic down-
turn in 2008 and 2009. After bouncing back in 2010, then stagnating in 2011 and
2012, air cargo began growing again in mid-2013, even growing 4.8% in 2014.
Growth accelerated in the first quarter of 2015, but, then traffic volumes remained flat
1 The International Civil Aviation Organization is the United Nations specialized agency dealing
with international civil aviation. ICAO was established by the Convention on International Civil
Aviation (Chicago Convention), signed at Chicago on 7 December 1944. Fifty-two States signed
the Chicago Convention on 7 December 1944. The Convention came into force on 4 April 1947,
on the thirtieth day after deposit with the Government of the United States. Article 43 of the
Convention states that an Organization to be named the International Civil Aviation Organization
is formed by the Convention. ICAO is made up of an Assembly, which is the sovereign body of the
Organization composed of the entirety of ICAO member (Contracting) States, and a Council which
elects its own president. The Assembly, which meets at least once every three years, is convened
by the Council. The Council is a permanent organ responsible to the Assembly, composed of 36
Contracting States. These 36 Contracting States are selected for representation in the Council in
three categories: States of chief importance to air transport; States not otherwise included which
make the largest contribution to the provision of facilities for international air navigation; and
States not otherwise included whose designation will insure that all the major geographic areas of
the world are represented on the Council. Article 47 of the Chicago Convention provides that
ICAO enjoys “such legal capacity as may be necessary for the performance of its functions” and
goes on to say that “full juridical personality shall be granted to the Organization wherever com-
patible with the constitution of the laws of the State concerned.” The Council has two main subor-
dinate governing bodies, the Air Navigation Commission and the Air Transport Committee. The
Air Navigation Commission is serviced by the Air Navigation Bureau and is responsible for the
examination, coordination, and planning of all of ICAO’s work in the air navigation field. This
includes the development and modification of SARPS contained in the ICAO Annexes (all except
Annexes 9 and 17), subject to the final adoption by the ICAO Council. At the time of writing,
ICAO had 192member States.
v
vi Preface
for the rest of that year. Air cargo traffic gathered some strength after a weak first
quarter of 2016 and is projected to return to trend growth by 2018. Despite the weak
growth of the past decade, more than one-half of air cargo is still carried on freighters.”2
ICAO and the World Customs Organization (WCO) convened their second Joint
Conference on Enhancing Air Cargo Security and Facilitation on 16 and 17 April
2014 in Manama, Bahrain. The Conference hosted by Bahrain’s Ministry of Transport
(Civil Aviation Affairs) was expected to heighten awareness among aviation security
authorities, customs administrations, and stakeholders of the challenges facing the
global air cargo industry as well as their possible solutions. Both Organizations pledged
to inter alia enhance international cooperation to prevent acts of unlawful interference;
encourage close coordination between authorities at the State level responsible for
aviation security and customs; support a risk-based approach to ensure additional
security measures are applied to high-risk cargo while facilitating the movement of
low-risk consignments; promote security measures that focus on outcomes and pro-
vide a level of operational flexibility to accommodate different circumstances; align
policy and regulatory frameworks to achieve synergy, and avoid duplication; and pro-
mote mutual recognition of air cargo security regimes and joint oversight activities.
ICAO and WCO may take care of the regulatory aspects of air cargo. These
aspects stem from fundamental principles of law. The law of air cargo involves
many aspects—from security to liability and compensation for air cargo as well as
safety in the context of the carriage of dangerous goods. In the context of security,
the air cargo supply chain security is important and is addressed in Annex 17 to the
Convention on International Civil Aviation (Chicago Convention) of 1944 by way
of Standards and Recommended Practices (SARPs), the thrust of which is sup-
ported by provisions in the Aviation Security Manual of ICAO (Doc 8973—
Restricted). In terms of liability for lost or damaged cargo the Montreal Convention3
of 1999 contains provisions that require jurisdictions to comply with.
The 2013 case of Durunna v. Air Canada brings to bear several issues that affect
both the consignor and consignee. Durunna was a case where a consignment of 10
laptop computers carried by air from Canada to Nigeria disappeared during carriage.
The defendant Air Canada invoked the limitation of liability of the carrier guaranteed
by the Montreal Convention, whereas the plaintiff claimed the total value of the com-
puters along with shipping costs. On the flimsiest and most tenuous of reasons imag-
inable, the court awarded judgment to the plaintiff as claimed, on the ground that the
defendant did not give sufficient notice to the plaintiff of the latter's limitation of
liability and therefore the limitation provisions of the Convention did not apply.
For one, there is no provision in the Montreal Convention that requires notice by
the carrier to the consignor that limitation of liability provisions would apply to the
carriage of cargo. More compellingly, Article 9 of the Convention is explicit in that
even in the absence of documents of carriage of whatever nature, the contract of
2 Boeing World Air Cargo Forecast 2016–2017. http://www.boeing.com/commercial/market/
cargo-forecast/.
3 Convention for the Unification of Certain Rules for International Carriage by Air, done at
Montreal on 28 May 1999.
Preface vii
carriage will remain valid and that limitations of liability will apply. The only win-
dow of opportunity the plaintiff would have had to justify his claim for the full value
of cargo would have been for him to show that he had declared the value of the cargo
as a basis for compensation for loss, as was decided in the 2003 case of MDSI
Mobile Data Solutions Inc. v. Federal Express where the plaintiff had declared the
value of cargo as $214,000, which the court interpreted to have replaced the limited
liability of 250 Francs per kilogram.
The Durunna decision, which was incorrect, focuses our attention to a more seri-
ous issue, which is cargo theft which leaves the hapless consignor with compensa-
tion of 17 Special Drawing Rights per kilogram under the Montreal Convention,
unless the consignor makes, at the time of delivery of the cargo to the carrier, a
special declaration of interest at delivery at destination and pays a supplementary
sum if required. It is only this measure that obligates the carrier to pay the declared
sum, unless the carrier proves that the sum is greater than the consignor’s actual
interest in delivery at the destination.
Unlike in the context of liability for damage sustained by the passenger or his
checked baggage, where a two-tier liability system operates where the carrier’s lia-
bility exceeds the 100,000 Special Drawing Rights of the first tier unless the carrier
proves that the damage was not due to the negligence of the carrier or his servants
or that there was negligence on the part of the plaintiff or other wrongful act or
omission of a third party, there is no such stringent onus placed on the carrier in
case of loss or damage to cargo.
There is no room for doubt that cargo crimes, among which theft of cargo is
significant, are prolific. The CRS Report for Congress on Air Cargo Security,
updated in 2007, places the extent of cargo theft in the United States for all forms of
transportation at 10–25 billion dollars per annum. The same report voices concern
about cargo theft rings in JFK International, Logan International, and Miami
International Airports. It identifies the insider threat as the most ominous where
cargo workers assist in cargo theft and calls for more background checks and the
enhancement of security of cargo operations.
Lack of effective cargo theft reporting, weaknesses in current transportation
crime laws, lack of understanding of the nature of cargo carriers, and the need to
improve expertise in countering cargo theft are some of the issues raised.
From the Franklin Mint case, argued in 1983, which involved the carriage of a
cargo of valuable coins valued at $250,000 to date, the liability regime regarding the
carriage of cargo has caused much debate. The solution seems to lie both at law and
at containment of the crime. It is time to take another look.
This book is intended to provide some insight into the legal and regulatory prin-
ciples applicable to the carriage of cargo by air as well as the principles of competi-
tion between carriers that govern such carriage.
Montreal, QC, Canada Ruwantissa Abeyratne
March 2018
Contents
1 General Principles of the Carriage of Air Cargo . . . . . . . . . . . . . . . . . 1
1.1 Early Trends in the Carriage of Air Freight . . . . . . . . . . . . . . . . . . . 3
1.2 Liberalization of Air Freight Market Access . . . . . . . . . . . . . . . . . . 7
1.3 Early ICAO Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.4 Legal Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.5 The Actual Carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.6 Multimodal Transportation of Freight . . . . . . . . . . . . . . . . . . . . . . . 24
1.7 Emergent Trends of Contracting for Carriage by Air or Freight . . . 26
1.7.1 E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.7.2 The Contract of Carriage by Air . . . . . . . . . . . . . . . . . . . . . 28
1.7.2.1 Encryption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.7.2.2 Offer and Acceptance . . . . . . . . . . . . . . . . . . . . . . 29
1.7.2.3 Time and Place of Contract . . . . . . . . . . . . . . . . . . 32
1.7.2.4 Delivery of the Air Waybill . . . . . . . . . . . . . . . . . . 35
1.7.2.5 Issues of Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . 35
1.8 Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2 Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.1 Regulatory Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.2 Air Cargo and Artificial Intelligence . . . . . . . . . . . . . . . . . . . . . . . . 48
2.2.1 Ethical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.2.2 Artificial Intelligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
2.3 Application of Artificial Intelligence to Air Transport . . . . . . . . . . 60
2.3.1 Operation of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
2.3.2 Air Cargo and Market Access . . . . . . . . . . . . . . . . . . . . . . . 63
2.3.3 Liberalizing Air Cargo Market Access. . . . . . . . . . . . . . . . . 70
2.3.4 ICAO Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
2.3.5 Multimodal Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ix
x Contents
3 General Principles of Competition in Air Carriage . . . . . . . . . . . . . . 79
3.1 Philosophy of the Conference in 1944 . . . . . . . . . . . . . . . . . . . . . . 81
3.2 Philosophy of the Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
3.3 E quality of Opportunity to Compete . . . . . . . . . . . . . . . . . . . . . . . 86
3.4 C ompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
3.4.1 State Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
3.4.2 Corporate Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
3.5 L egal Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
3.5.1 Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
3.5.2 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
3.6 Open Skies the Theory of Contracts . . . . . . . . . . . . . . . . . . . . . . . 97
3.7 Competition in Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
3.8 Theory of Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
3.8.1 Theories of Competition . . . . . . . . . . . . . . . . . . . . . . . . . . 103
3.8.2 Defragmentation of Air Transport . . . . . . . . . . . . . . . . . . . 104
3.9 Application of the Theory of Contracts to Competition Under 
Open Skies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
3.10 Anatomy of an Open Skies Agreement . . . . . . . . . . . . . . . . . . . . . 106
3.10.1 Key Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
3.10.2 Meaning and Purpose of Open Skies . . . . . . . . . . . . . . . . . 108
3.11 Subsidies in Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
3.11.1 The Us Carriers Vs the Middle East Carriers . . . . . . . . . . . 113
3.11.2 The Law of Subsidies in Air Transport Services . . . . . . . . 120
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
4 R egulation of Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
4.1 R egulations Under ICAO’S Preview . . . . . . . . . . . . . . . . . . . . . . . 129
4.1.1 Facilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
4.1.2 Facilitation Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
4.2 Carriage of Dangerous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . 137
4.3 Carriage of Human Remains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
4.3.1 The Berlin Agreement of 1937 . . . . . . . . . . . . . . . . . . . . . 143
4.3.2 Agreement on the Transfer of Corpses
(Strasbourg—1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
4.3.3 Resolution 2003/2032 (INI) . . . . . . . . . . . . . . . . . . . . . . . . 146
4.3.4 ICAO Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
4.4 Annexes 9 and 18 to the Chicago Convention . . . . . . . . . . . . . . . . 149
4.5 IATA, WHO and United States Guidelines . . . . . . . . . . . . . . . . . . 151
4.6 C arriage of Live Animals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
5 P rice Fixing and Anti Competitive Conduct in Air Cargo
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
5.1 P rice Fixing in the European Union . . . . . . . . . . . . . . . . . . . . . . . . 158
5.2 P rice Fixing in The United States . . . . . . . . . . . . . . . . . . . . . . . . . 160
5.3 Other Anti Competitive Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Contents xi
5.4 International Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
5.4.1 Issues of Territoriality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
5.4.2 Local Legislation and Air Services Agreements . . . . . . . . 174
5.5 ICAO’S Involvement in Air Services Agreements . . . . . . . . . . . . 178
5.6 Annex 17: Security of Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . 187
5.6.1 Screening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
5.6.2 Weapons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
5.6.3 The Fort Lauderdale Case . . . . . . . . . . . . . . . . . . . . . . . . . 190
5.6.3.1 Interaction Between the Airport and Airline . . . 193
5.6.3.2 R egulatory Principles of Airport Management . . . 196
5.6.4 Specific Measures Relating to Cargo, Mail and Other
Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
5.6.5 Security Manual (Doc 8973 Restricted) . . . . . . . . . . . . . . 200
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
6 Liability Issues Under Treaty Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
6.1 The Montreal Convention of 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 204
6.2 Liability of the Carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
6.3 Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
7 The Air Cargo Supply Chain and Contract of Carriage . . . . . . . . . . 217
7.1 Trucking Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
7.2 Noise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
7.3 Breach of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
7.3.1 Non-Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
7.3.2 Mistake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
7.3.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
8 Conclusion: A Suitable Analogy and Comparison . . . . . . . . . . . . . . 239
Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263