Aviation and aerospace

Time up for historic PTSD claims?The recent Scottish case of Abrahm v British International Helicopters Limited [2013] CSOH 69 suggests that litigants who claim that Post Traumatic Stress Disorder (PTSD) constitutes “bodily injury” will not be able to delay court proceedings indefinitely in order to allow science to catch up with their claims.

BackgroundIn November 1988 the claimant boarded a helicopter on a North Sea oil platform in order to travel to Aberdeen. The helicopter suffered mechanical problems and ditched into the North Sea. The claimant escaped and was rescued but alleged that he suffered from PTSD as a result of the accident. Since the claim was governed by the Warsaw Convention as incorporated into domestic law, the claimant had to establish that his PTSD amounted to “bodily injury” in order to succeed in his action.

The case was beset by delays; the action was raised in the Aberdeen Sheriff Court in 1990 and was immediately stayed, no progress was then made until 1995, when the claimant instructed new solicitors. There were then further delays whilst legal aid was obtained and an expert was instructed. In 1999 the case was transferred to the Court of Session and a date for the hearing was fixed. However, the action was again stayed pending the House of Lords decision in King v Bristow Helicopters, delivered in 2002. The stay was recalled in 2003 and a hearing was proposed on dates to be arranged between the parties. However the parties failed to arrange any dates. There was then further abortive correspondence regarding settlement which ceased in September 2007. By 2013 the claimant was still building his case.

The defendant eventually lost patience and applied to the Court to have the case struck out on the grounds that there had been an inordinate and inexcusable delay on the part of the claimant’s solicitors in progressing the claim and that, taking into account all the circumstances, the delay resulted in unfairness to the defendant.

ContentsTime up for historic PTSD claims?Page 1

Defining the boundaries for nervous shockPage 3

Federal preemption and the evolving definition of airline “services”Page 6

Regulation 261/2004 – The Commission’s proposalPage 9

Recent developments relating to food information requirementsPage 11

New top level domain names in 2013Page 13

Automatic pensions enrolment – a challenge for the airline industryPage 15

French Court applies Warsaw Convention to claim by manufacturer against airline Page 17

Aviation BulletinAugust 2013

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DecisionThe Judge agreed that the defendant was entitled to have the claim struck out. He found that of the 24 years between the accident and the strike-out application, the total period of time representing culpable delay attributable to the claimant amounted to 13 years. In the circumstances this was inordinate and inexcusable.

The Judge also found that the delay would cause unfairness to the defendant. The claimant wanted to instruct an American neurologist to examine his brain for physical or chemical changes some 25 years after the accident. The Judge held that in doing so, the claimant had effectively “waited for science to catch up with his claim”. He held that it was unfair that the defendant should remain a party to litigation while the claimant waited to see whether he had a case.

It was also held that there was a real danger that the claimant’s evidence as to the extent and severity of his symptoms would amount to his own assertions. The symptoms of PTSD were unlikely to be in the claimant’s medical records and the quality of witness evidence as to his symptoms would inevitably have suffered. The Judge felt that the defendant would not be able to test the claimant’s evidence as to the overall effect of PTSD on his life due to the poor quality of the evidence available. The impossibility of testing this evidence in court would effectively deprive the defendant of the right to a fair trial.

Accordingly the claim was struck out on the grounds that the delay was inordinate and inexcusable, resulting in unfairness to the defendant.

CommentThe claimant would no doubt argue that the issue of whether or not PTSD amounts to “bodily injury” for the purposes of the Warsaw and Montreal Conventions has not been definitively decided on the basis of the different reasoning of their Lordships in King v Bristow; Lords Steyn and Hope were of the opinion that PTSD could never amount to bodily injury whereas Lords Nicholls and Hobhouse appeared to take the view that PTSD might amount to bodily injury but only if medical science develops so as to prove a physical change in the chemistry or structure of the brain. Currently this is not possible.

What is clear from the decision in Abrahm is that even if PTSD does amount to bodily injury, a claimant cannot wait for science to catch up with his claim. In doing so he risks the claim being struck out on procedural grounds. Even where the delay has not been “inordinate or inexcusable”, it may still be open for defendants to argue that the effluxion of time and associated deterioration in witness evidence has made it impossible to substantiate or quantify the claim thereby depriving them of their right to a fair trial. Air operators facing ongoing claims for PTSD arising from accidents which happened years or decades ago should bear in mind the fact that this kind of litigation need not be left hanging over their heads. However it should be noted that this decision is currently under appeal.

For further information, please contact David Willcox or William Healy

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Defining the boundaries for nervous shockPrevious articles discussing mental injury have focussed on persons directly involved in an accident and liability under the Warsaw/Montreal Convention system. Less frequently considered are the principles arising where the Convention does not govern, relating to claims by ‘secondary victims’ suffering nervous shock as a reaction to harm caused to a primary victim. The circumstances in which such claims may succeed are contentious because of the boundaries defining who can claim.

The absence of a uniform international regime means that a court faced with a nervous shock issue is left to rely on its domestic law. With a notable absence of Parliamentary intervention, English law on nervous shock has been created by a collage of judicial decisions, making noteworthy a recent decision, benefitting insurers, of the English Court of Appeal – Crystal Taylor v A Novo (UK) Limited [2013] EWCA, which provides helpful guidance on the relationship between a causative event and the onset of psychiatric illness.

What is nervous shock and who is a secondary victim?Nervous shock is a term used to describe psychiatric illness or injury, such as post traumatic stress disorder (PTSD) or clinical depression, arising from witnessing a traumatising event. A person suffering from nervous shock may not necessarily suffer any physical harm or any personal danger.

While English law imposes a duty of care not to cause nervous shock, it generally excludes compensation where an injury arises only from the circumstances of a relationship to a primary victim – suffering normal emotions such as grief and stress is not compensable. Judicial precedent has provided an exception to the general rule where psychiatric illness stems from witnessing injury or danger to a primary victim.

The law on recovery for pure psychiatric harm developed against a perceived need for pragmatism rather than a logical consideration of what constitutes a meritorious claim. The key need for pragmatism arises as to who can claim as a “secondary” victim because of the potential for a large number of secondary claimants. One only has to think in the context of major incidents, such as a plane

crash, to appreciate how many people could be affected. The leading decision is Alcock v Chief Constable of South Yorkshire Police [1992], where the House of Lords prescribed ‘control mechanisms’ limiting who could claim for the trauma of witnessing the 1989 Hillsborough stadium disaster. The Alcock claimants, neither injured nor in danger of injury from the crush, argued that what they saw and heard at the stadium had caused nervous shock. The intention of these control mechanisms was to keep liability within what would be regarded as acceptable bounds, and accordingly, a claimant must:

– Be physically in close proximity to the accident

– Perceive the event or the immediate aftermath in-person and unaided

– Suffer injury from a sudden shock to the nervous system

– Have a relationship of love and affection to the primary victim

– Be of “normal fortitude” so that it is reasonably foreseeable that psychiatric damage would result

Ms Taylor’s caseThe claimant’s mother was injured in an accident at work caused by the negligence of the employer. Three weeks later, while apparently making a good recovery, she suddenly and unexpectedly collapsed and died at home, from a heart attack consequent upon a deep vein thrombosis caused by the injuries sustained in the accident. Her daughter, Crystal Taylor, witnessed her mother’s death and suffered PTSD as a result.

Ms Taylor claimed that she was legally entitled to damages from her mother’s employer as a “secondary victim” of her mother’s accident. The trial judge agreed, holding that the Alcock control mechanisms were satisfied.

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The employer, Novo, unsuccessfully argued that there was no proximity either in time or space because Ms Taylor suffered shock at witnessing her mother’s death 21 days after the accident. The trial judge considered that he was dealing with a novel situation not covered by previous authority. He dismissed Novo’s argument by holding that Ms Taylor’s injury was a reasonably foreseeable consequence of Novo’s negligence as to the first event – the underlying workplace accident – even though the event causing Ms Taylor’s injury was witnessing her mother’s death. Novo appealed.

The Court of Appeal’s decision – overruling the trial judgeDid the trial judge misconstrue the Alcock test for proximity? The Court of Appeal considered that the relevant event for any secondary victims was Ms Taylor’s mother injury in the workplace, not subsequently witnessing her death.

The Court of Appeal recognised that the term ‘proximity’ is used as a shorthand description of the famous neighbour principle defining the legal relationship to which a duty of care applies. However, in secondary victim cases it is used differently as a physical description of temporal and spatial proximity to an underlying event, and so fixes the ambit of the neighbour principle.

The leading judgment stated that the boundaries of proximity needed to reflect what the ordinary reasonable person would regard as acceptable, meaning that the law must distinguish between different categories of secondary victim. The logic of the trial judge’s ruling was that, if Ms Taylor’s mother had died months or years after the accident, then she would still have had a valid claim provided she witnessed the actual death. Although many aspects of the Alcock control mechanisms were satisfied, imposing liability for witnessing a death three weeks after an accident would extend the temporal restriction beyond the current concept of physical proximity. This would dramatically change the law – a job for Parliament.

Law affecting aircraft operatorsWhere is the limit upon the class of person to whom an airline is liable? Rare and improbable though they may be, it is not difficult to envisage a scenario in which an air disaster – or even a near miss – causes distress to secondary victims.

One example which this firm handled - Glen & others v Korean Airlines Company Limited - was a fatal accident from 1999 when a B747 cargo flight crashed shortly after take-off from Stansted. Certain people in the nearby village of Great Hallingbury, unconnected with the airline and the flight, claimed to have been in fear for their lives and suffered nervous shock as a result. They claimed pursuant to the statutory tort in Section 76(2) of the Civil Aviation Act 1982, in which an aircraft owner is strictly liable (i.e. without proof of negligence or intention) for damages “where material loss or damage” is caused by an aircraft falling from the sky or an object falling from it while in flight, taking off or landing.

The Act defines “loss or damage” to include “personal injury” and the Glen Court concluded that this term also covered psychiatric injury, recoverable against common law principles. Thus, a secondary victim today would need to satisfy the Alcock control mechanisms, including the clarification from the Taylor ruling above as to proximity.

DiscussionWhile the Taylor decision should be generally be welcomed by insurers exposed to risks in the UK for its precedential value binding all lower courts, it is difficult to argue that the decision is right or wrong. The Court did not comment upon whether the law should allow claimants such as Ms Taylor to recover for their injuries. Rather, the Taylor decision recognised that current policy prevents them from developing the law, as the trial judge tried to do. It is accepted that the concept of proximity, as a control mechanism, is artificially set to limit the extension of the neighbour principle. Like judges in earlier cases, the Taylor Court recognised that incremental development of the law is unsatisfactory but noted that Parliament will need to intervene for radical changes to law. As far as we are aware, the Government has no current proposal.

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In the context of aviation and private international law, liability for third party victims has been the subject of debate for years without achieving any broad consensus. The most recent and high profile example is the 2009 Montreal Conventions on Compensation for Damage Caused by Aircraft to Third Parties, where an aircraft operator’s liability for mental injury is limited to those “directly” affected. These Conventions are not currently in force for lack of sufficient ratifications (and show no sign of achieving the required number of ratifications). While there are several reasons for this absence of international support, the nervous shock cases demonstrate an obvious area where policy makers can reasonably disagree about where to set the boundaries.

What amounts to psychiatric illness will depend heavily on expert medical evidence, and it is noteworthy from a claims handling perspective that the latest edition of the medical profession’s ‘bible’ – the Diagnostic and Statistical Manual of Mental Disorders, published in May 2013, has attracted criticism that it does not reflect current the medical understanding of psychiatric dysfunction.

For further information, please contact Nick Medniuk or Martin Vogler

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Federal preemption and the evolving definition of airline “services”The preemption clause of the US Airline Deregulation Act was designed to ensure that states would not contravene federal deregulation of the commercial aviation industry. However, federal courts of appeal have arrived at conflicting interpretations of the term “service” in this clause. The US Supreme Court’s most recent decision on the issue indicates that the scope of “services”, and therefore of federal preemption, is broader than some courts of appeal had previously ruled.

Background: The Airline Deregulation ActBeginning in 1938, domestic interstate air transportation in the United States was regulated by the federal Civil Aeronautics Board (CAB), and intrastate air transportation was regulated by individual state governments. This regulatory system was increasingly scrutinized as being inefficient and costly.

Accordingly, in 1978, Congress passed the Airline Deregulation Act (ADA). The ADA was designed to allow competitive market forces to shape the commercial aviation industry instead of the government, which was expected to benefit airlines and consumers alike. Remaining regulatory authority was transferred to the US Department of Transportation, and the CAB was dissolved in 1984.

To ensure that states would not undo federal deregulation, the ADA included a preemption clause, codified at 49 U.S.C. Section 41713, providing that states “may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a rate, route, or service of an air carrier.” The reenactment of the ADA in 1994 modified the language to “price, route, or service.”

The ADA preemption clause functions to provide airlines with a ground for restricting the application of state laws and dismissing state law-based actions when the state law relates to the airline’s prices, routes or services.

US Supreme Court preemption casesUS Supreme Court decisions have emphasized the expansive scope of federal preemption under the ADA.

The first Supreme Court case to address ADA preemption was Morales v Trans World Airlines, Inc (1992), which concerned the enforcement against airlines of state consumer protection laws that stood to govern the form and content of airline advertising. The Supreme Court recognized that the state laws would place binding requirements on airlines as to how they could market tickets, which would in turn reduce their incentive to price competitively, an effect contradictory to the ADA’s purpose. The Supreme Court therefore found preemption proper.

Morales was significant because in reaching its decision, the Supreme Court clarified the sweeping scope of ADA preemption. It interpreted the phrase “relating to” in the preemption clause to mean “having a connection with, or reference to,” and indicated that this language should be construed to serve Congress’ broad preemptive purpose. The Supreme Court also clarified that the ADA preempts state laws of general applicability, not only those targeting the aviation industry. The Supreme Court also held that the ADA should displace any and all state laws within its sphere, whether consistent or inconsistent with federal laws.

Following Morales, the Supreme Court decided American Airlines, Inc v Wolens (1995), which involved the enforcement of state consumer protection laws against the airline based on changes made to its frequent flier program. The state supreme court had denied preemption, finding that

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frequent flier programs were not essential, but rather, peripheral to the airline’s operation. The Supreme Court reversed, finding that the distinction between essential and non–essential matters was irrelevant, and that state laws should be preempted.

Airline “services” under the Airline Deregulation ActWhile there has not been much disagreement among courts about the terms “price” and “routes,” the definition of “service” is less clear. The ADA does not define “service,” nor has the Supreme Court interpreted it, and various federal courts of appeal have articulated conflicting definitions of the term.

Broad interpretation by the Second, Fourth, Fifth, Seventh and Eleventh CircuitsThe Fifth Circuit adopted a broad definition of “service” in Hodges v Delta Airlines, Inc (1995). Hodges involved a state personal injury claim by a passenger who was stuck by a case of rum that fell from an overhead bin. Though the airline was not successful in preempting this claim under the ADA, in deciding the case, the Fifth Circuit interpreted “service” broadly, taking the term to refer to “a bargained-for or anticipated provision of labor” which encompassed “ticketing, boarding procedures, provision of food and drink, and baggage handling, in addition to the transportation itself.”

The Seventh Circuit agreed in Travel All Over the World v Kingdom of Saudi Arabia (1996), a case which involved state claims for tortious interference and defamation, among others, brought by a travel agency against an airline for statements made regarding canceled tickets. The Seventh Circuit adopted the Fifth Circuit’s definition of “service,” but found that the claims against the airline were not preempted under that definition.

In Smith v Comair, Inc (1998), the Fourth Circuit had to decide whether state claims for false imprisonment and intentional infliction of emotional distress, asserted against an airline in relation to its refusal to allow a passenger to board a flight, were preempted by the ADA. Though the Fourth Circuit did not adopt the Fifth Circuit’s definition of “service” or articulate its own, it held that “boarding procedures are a service rendered by an airline” and ruled that the claims against the airline were preempted insofar as they were based on the airline’s boarding practices.

The Eleventh Circuit adopted the Fifth Circuit’s definition in Koutsouradis v Delta Air Lines, Inc (2005), a case involving a state breach of contract claim arising out of harassment of a passenger when inspecting her baggage. In deciding whether the ADA preempted, the Eleventh Circuit looked to the Fifth Circuit’s definition from Hodges. Because the Eleventh Circuit found that the claim against the airline pertained to “services” of boarding procedures and baggage handling, it ruled that the claims were preempted.

In Air Transport Association of America v Cuomo (2008), the Second Circuit had to decide whether the ADA preempted enforcement of a state law requiring airlines to provide amenities such as food and water during ground delays. The Second Circuit noted the Fifth Circuit’s definition in Hodges and held that the airline’s provision of food, water, electricity, and restrooms to passengers during ground delays was a “service”, stating that “services” included “boarding procedures, baggage handling, and food and drink-matter incidental to and distinct from the actual transportation of passengers.”

Narrow interpretation by the Third and Ninth Circuits The Ninth Circuit articulated a narrow definition of “service” in Charas v Trans World Airlines, Inc (1998). Charas consolidated multiple state personal injury actions against an airline arising out of, for example, injuries sustained when a passenger was struck by a beverage service cart or by luggage falling from an overhead bin. The airline argued that ADA preemption applied because the injuries related to “services”. The Ninth Circuit opined that because of the economic purpose of the ADA, “service” was limited to “prices, schedules, origins and destinations of the transportation of passengers, cargo or mail” and did not include an airline’s provision of in-flight beverages, personal assistance to passengers, luggage handling or other amenities.

The Third Circuit agreed in Taj Mahal Travel, Inc v Delta Airlines, Inc (1998). In Taj Mahal, the airline faced a state defamation claim arising out of letters it issued to customers who bought tickets through a travel agency, which stated that the tickets were purchased illegitimately. The airline argued for ADA preemption on the ground that it pertained to the ticketing “service” of the airline. The Third Circuit adopted the Ninth Circuit’s definition of “service,” ultimately ruling that ADA preemption did not apply.

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Rowe implicitly overrules the Ninth Circuit definition of “service”Lending some insight to the definition of “service,” the US Supreme Court most recently decided Rowe v New Hampshire Motor Transportation Association (2008). Rowe involved a federal law similarly worded to the ADA that forbade states to enact or enforce laws related to the prices, routes or services of motor carriers, and whether this preempted a Maine tobacco delivery law requiring verification of package recipients. The Supreme Court looked to its previous ADA decisions to interpret the analogous preemption clause. It noted that the state law would require motor carriers to offer new services or force them to continue service they might later want to discontinue and therefore found that the state law was preempted.

In holding that preemption in Rowe extended to recipient verification requirements, the Supreme Court interpreted “service” to extend to something beyond merely prices, schedules, origins and destinations, as held by the Ninth Circuit in Charas. Indeed, subsequent federal district and appellate courts have indicated that the Charas definition of “service” was effectively overruled by Rowe.

Notably, the definition of “service” is at issue in a case currently pending in California Superior Court in San Francisco County, State v Delta Air Lines, Inc, which involves a claim against the airline for violation of state online privacy laws, arising out of alleged collection of passenger data through the airline’s mobile application. This application enables passengers to purchase tickets, view reservations, check in, pay for luggage, upgrade their seats and more, activities that are arguably “services” under Hodges but not Charas. Whether the definition from Charas will be disregarded in this case remains to be seen.

ConclusionThe definition of “service” continues to be uncertain, and cases in which airlines seek ADA preemption of state claims that relate to “services” appear to be decided on the particular facts at issue. Rowe suggests that the Supreme Court is unlikely to articulate definition as narrow as the one adopted by the Ninth and Third Circuits. If the Supreme Court sets forth an inclusive definition of “service,” the results could be favorable to the aviation industry by providing a dispositive defense to state law-based litigation against airlines.

For further information, please contact Natalie Kwan

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Regulation 261/2004 – The Commission’s ProposalOn 13 March 2013 the European Commission published its proposal for a Regulation to amend Regulation 261/2004 on air passenger rights. In the context of ongoing industry lobbying and the progression of the Commission’s proposal through the EU’s ordinary legislative procedure, we examine below a number of key areas of concern for the air transport industry.

Certain changes welcomed by the industryAt the outset it should be noted that in a number of respects the Commission’s proposal has been well received by the industry. The introduction of a hour threshold for the provision of care in the case of flight delay, as against the current thresholds of 2, 3 or 4 hours depending on flight distance, is recognised as representing an improvement for consumers as well as being easier to administer from the perspective of the carrier. A further proposed change which has broadly been welcomed is the replacement of the Sturgeon threshold for flight delay compensation (delay on arrival of 3 hours or more) with more reasonable 5, 9 and 12 hour thresholds depending on flight distance. That said, the flight distance bandings associated with those thresholds remain subject to criticism given their misalignment with the distance thresholds which dictate the level of compensation actually payable, and it remains to be seen whether the proposed thresholds of 5, 9 and 12 hours will survive the scrutiny of the European Parliament and Council.

Connecting flightsA key area of concern remains the proposed rules governing connecting flights, particularly for those carriers operating feeder flights connecting to long haul routes. With delay calculated on the basis of arrival at final destination, the carrier operating the feeder service faces exposure to compensation of up to EUR 600 where a short delay to its flight (which in itself falls well below the threshold for delay compensation) causes a passenger to miss his or her onward long haul connection. It is our understanding that there is significant ongoing lobbying on this point, not least given the potential impact of the proposed rules on flight connectivity and interlining, with the loss or reduction of either clearly being detrimental to consumers.

Re-routingThe proposed obligation for carriers to re-route a delayed passenger with another carrier or on another mode of transport where delay on arrival is expected to exceed 12 hours has also attracted considerable industry criticism. In particular, the proviso that the other carrier or transport operator “shall not charge the contracting carrier a price that goes beyond the average price paid by its own passengers for equivalent services in the last three months” is rather ill-defined, and it remains unclear how such a price cap would be implemented and enforced in practice. Jurisdictionally it is also unclear how that requirement will be enforced, particularly against non-Community air carriers operating flights departing from non-EU airports. The proposed price cap also gives rise to potential competition law concerns, given that it seems to encourage the exchange of pricing information between carriers. We understand that industry stakeholders are lobbying for various changes to these provisions, including clarification that the obligation to re-route is limited to the same class of service and amendment of the price cap provision such that the cap is linked to the ticket price paid for the delayed flight rather than a three month average of ticket prices of the “second” carrier.

Extraordinary circumstancesAs expected, the Commission’s proposal provides a definition of extraordinary circumstances which falls broadly in line with the Court of Justice of the European Union’s decision in Wallentin-Hermann. Whilst efforts continue to have the definition of extraordinary circumstances tightened, particularly given the current inclusion of vague terms such as “inherent” and “normal”, overall the codification of the definition is accepted as a positive step. Similarly, the inclusion of a non-exhaustive annex of extraordinary and non-extraordinary circumstances (currently the subject of discussion and amendment at NEB level) has broadly been welcomed, subject again to the careful definition of such circumstances.

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Under the Commission’s proposal the extraordinary circumstances defence applies where the cancellation, delay or change in schedule “could not have been avoided even if all reasonable measures had been taken.” Significantly, this differs from the position under the current Regulation, where the air carrier must use all reasonable measures to avoid the extraordinary circumstances rather than the cancellation (or per Sturgeon, the delay). Whilst the new wording arguably falls in line with the CJEU’s position in the Air Baltic judgment, that judgment remains controversial given the onerous and ill-defined obligations it places on air carriers with respect to (inter alia) crew reserve times. We understand that air carriers are lobbying for this wording to be amended so that they must use all reasonable measures to avoid the extraordinary circumstances, and not the cancellation, delay or change in schedule which may flow from it.

The Commission’s proposal also limits the application of the extraordinary circumstances defence to situations where those circumstances “…affect the flight concerned or the previous flight operated by the same aircraft.” That limitation has invoked considerable criticism from air carriers, not least given the knock-on effect that the non-operation (or delayed operation) of one flight can have on subsequent aircraft movement throughout the day. The proposal’s wording implies that disruption to a carrier’s programme can be rectified within a short period. In practical terms that contention is unrealistic in many circumstances. We understand that the industry is pressing for the scope of the defence to be expanded to situations where a

carrier is able to demonstrate a clear causal link between the extraordinary circumstances and the particular cancellation or delay. Should the current wording be retained, there exists a risk that air carriers may choose to cancel a flight rather than suffer knock-on delays to an aircraft’s entire line of flying in circumstances where they would be unable to invoke the extraordinary circumstances defence later in the day should a right to compensation arise. Such action would clearly be to the detriment of consumers on the cancelled service.

Prospects The new Regulation is currently expected to come into force in early 2015, although the legislative timetable will be subject to further change depending on the degree of agreement that can be reached at European Parliament and Council level. It remains to be seen whether the ongoing lobbying will be have the desired effect, so that the final text of the proposed amending Regulation properly and proportionately balances passenger rights with the legitimate interests of the air transport industry.

For further information, please contact Alan Meneghetti or Thomas van der Wijngaart

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Recent developments relating to food information requirementsThis article highlights recent developments in England in relation to EU Regulation 1169/2011 on the provision of food information to consumers (the “Regulation”). An article in the February 2012 edition of this Bulletin discussed the general application of the Regulation and its implications for airlines. Importantly, its provisions (on the requirements for food information to be provided to consumers of prepacked and non-prepacked food) apply not only to EU airlines and caterers, but also to non-EU airlines whose flights depart from an EU Member State. By virtue of the fact that it is a regulation, the Regulation has direct effect in each Member State which means that it applies directly in the Member States and to all applicable food catering businesses without the need for any enabling legislation to be passed.

National measuresHaving said that, Chapter VI of the Regulation does allow for national measures to be implemented by individual Member States in respect of certain aspects of the Regulation. Such discretion (within certain defined parameters) includes allowing Member States to implement more stringent measures than those set out in the Regulation, but only in respect of certain parts of the Regulation.

Of particular importance to airlines is Article 44 and the discretion allowed to Member States to adopt more stringent national measures in respect of non-prepacked food. The provision of allergens and intolerances information is mandatory under the Regulation for non-prepacked food; however, Article 44 allows for non-mandatory information in respect of non-prepacked food to be made mandatory by individual Member States at their discretion. There is therefore scope under the Regulation for differing measures in this respect to be adopted in each Member State with the inevitable consequence that different labelling requirements may apply for non-prepacked food amongst the Member States.

The position in EnglandFood policy is a devolved matter and therefore the approach of the other parts of the UK (Wales, Scotland and Northern Ireland) may be different to that of England detailed below. The Department for Environment, Food & Rural Affairs (DEFRA) is working with equivalent organisations in the other parts of the UK to try to coordinate the approaches taken.

England is in the process of adopting The Food Information Regulations 2013 (FIR 2013), which are currently in draft format. The consultation stage for this proposed Statutory Instrument ended on 30 January 2013 and DEFRA is currently analysing the responses. The outcome to the public feedback is due to be published on the DEFRA website (www.defra.gov.uk) imminently.

DEFRA has stated in its consultation paper that its preferred approach is to reduce the burden on businesses where possible. Where there are options to implement national measures under the Regulation, and if those measures would place additional burdens on industry, DEFRA would prefer the use of the national measure to be avoided. However, DEFRA has said that it will take the opinions expressed via the public consultation into account. Consequently, in respect of Article 44, the current draft of FIR 2013 does not require more stringent information than the Regulation to be provided in respect of non-prepacked food.

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Essentially, DEFRA is taking a pragmatic approach to the issue of national measures. However, other Member States may differ in their approach, thereby leading to different national measures. This is particularly important for airlines which may operate out of a number of EU Member States, as there is clearly scope for differing national measures to apply in each of those Member States. Compliance is necessary with all of them and therefore it is necessary to understand the national measures adopted within each Member State from which flights are being operated and catering services provided.

Enforcement The Regulation also expects Member States to carry out official controls in order to enforce compliance with the Regulation. These controls should be in accordance with EC Regulation 882/2004 on official controls performed to ensure the verification of compliance with feed and food law. In short, this means that such controls must be implemented with the aim of preventing, eliminating or reducing to acceptable levels risks to humans, and to guarantee fair practices in food trade and protecting consumer interest, including food labelling and other forms of consumer information.

In England, the draft of FIR 2013 provides for local food authorities to have the duty of enforcement. DEFRA’s guidance notes on the FIR 2013 envisage that the local food authorities will be likely informally to try to bring an offending supplier of catering services into compliance with the Regulation. If this informal approach proves unsuccessful, the FIR 2013 can then formally be used. It is worth noting here that where the initial breach is serious, an improvement notice may be issued in the first instance without the use of informal discussions.

The issue by a local authority of an improvement notice under the FIR 2013 identifying the breach puts an entity formally on notice of its breach of the Regulation. There is an appeal process to this improvement notice system. Continued non-compliance in England (which would include in respect of flights departing from England) however, can result in a criminal offence and a fine of up to GBP 5,000. The FIR 2013 also allows for criminal offences and fines of up to GBP 5,000 where there is a contravention of the Regulation’s requirements relating to food allergen indications to protect public health.

In our view, the current draft of the FIR 2013 - despite the eventual criminal offence and fine - proposes an enforcement procedure which reasonably tries to ensure compliance rather than to punish outright.

SummaryThe draft of FIR 2013 is still in the public consultation stage, with the results of that consultation to be published imminently by DEFRA. Further information on the draft may be found at https://www.gov.uk/government/consultations/food-information-regulations-fir-2013.

Other Member States can adopt differing national measures and enforcement provisions (although the latter must comply with EC Regulation 882/2004); it is therefore imperative to understand the requirements in each Member State from or within which catering services are provided.

For further information, please contact Alan Meneghetti or Tina Collier

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New top level domain names in 2013A top-level domain name is the last part of an internet address set out after the final dot, for example .com and .org. In 2012, the body responsible for the allocation and management of domain names, the Internet Corporation for Assigned Names and Numbers (ICANN), invited applications to create new top-level domain names. These could potentially cover brand names, geographic locations and industries as well as generic words. ICANN received close to 2,000 applications for new top level domain names (TLDs), some of which are due to go live very soon.

The creation of new TLDs will provide businesses with the opportunity to register more industry specific internet addresses and so increase their internet presence. However, counter to this, the TLD expansion will also create significant opportunities for misuse and cybersquatting and accordingly lead to increased costs and issues for brand owners looking to protect their valuable brands.

The Trademark ClearinghouseThe potential for abuse in relation to the expansion of the domain name system has been anticipated by ICANN and certain rights protection mechanisms have been developed and implemented by it to enable trademark holders to protect their rights and mitigate the foreseen risks.

The Trademark Clearinghouse was established by ICANN and plays a central part in ICANN’s rights protection mechanisms. The Trademark Clearinghouse is a central global repository for trade mark data, and functions by authenticating information from rights holders and providing this information to the registries and registrars of each new TLD.

A rights holder may, for a fee, submit for recording at the Trademark Clearinghouse any word mark that it has rights in which is nationally or regionally registered (for example, a Community trade mark). However, at this time, marks that have not yet been registered are unlikely to be eligible for submission unless they have been judicially validated or are recognised by treaty.

The Trademark Clearinghouse will verify each submission and will function as a repository of verified records of eligible trade marks. The basic cost of authenticating a single trade mark with the Trademark Clearinghouse is

USD 150 for one year, USD 435 for three years and USD 725 for five years although certain volume discounts do apply.

For each new TLD, there will be a new registry which is responsible for certain administrative functions in respect of the TLD including maintaining a database of all domain name registrant details for that TLD. The registries have key roles in relation to the protection afforded to rights holders by ICANN under its rights protection mechanism.

The Sunrise ServiceEach new registry must now provide a “Sunrise Service”. This is a period of at least 30 days before the launch of a new TLD, during which trade mark owners may apply to register second level domain names (for example, in clydeco.com, “.com” is the TLD and “clydeco” is the second level domain name) that are an exact match to their mark. This will enable trade mark owners to purchase domain names before they are made available to the public.

If a brand owner wants to make use of this service then evidence of use of the mark must be submitted to the Trademark Clearinghouse.

One note of caution, however, is that verification in the Trademark Clearinghouse does not guarantee allocation of a second level domain name as there may be more than one owner of the same mark for different goods and services. Any dispute arising out of sunrise registrations will be resolved according to each registry’s dispute resolution procedure.

Trademark claims serviceFor no less than 90 days immediately after a registry opens a new TLD to the public for general registration, registries

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must provide a trademark claims notice to anyone seeking to register a second level domain name that matches a trade mark registered in the Trademark Clearinghouse. If the applicant continues to register the domain name, the relevant trade mark owner will be notified of the registration.

Although the trade mark owner will not be able to block the registration the owner will be entitled to file a Uniform Rapid Suspension System or Uniform Domain Name Dispute Resolution Policy action to suspend or obtain the domain name. In such proceedings the receipt of the trademark claims notice will make it difficult to argue that the applicant had no knowledge of the trade mark owner’s rights.

A point to note is that persons which/who have submitted their marks to the Trademark Clearinghouse will only receive alerts of any registered or attempts to register domain names that are an exact match to the registered owner’s mark.

Steps to take to protect brandsRecording rights at the Trademark Clearinghouse provides important protection in relation to potential misuse of all owner’s brand. As it is anticipated that the time taken for the Trademark Clearinghouse to verify the data submitted will increase as demand for the service grows and with the imminent and ongoing launch of new TLDs, brand owners should act quickly to protect their rights.

The Trademark Clearinghouse may be accessed via the following link: http://trademark-clearinghouse.com.

For further information, please contact Alan Meneghetti or Rebecca Chant

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Automatic pensions enrolment – a challenge for the airline industryStarting from October 2013, all employers are being required by law to make arrangements for their workers in the UK to be automatically enrolled into a pension scheme. For the first time, employers will be required to make contributions towards their workers’ pension savings.

The legislationAutomatic enrolment is being phased in gradually, with larger employers being required to comply first. All employers with more than 50 workers will have to comply by April 2015, and all businesses (other than start-ups established during the phasing-in period) will have come within the ambit of the legislation by 1 April 2017. The Pensions Regulator will write to each employer to notify it of the approach of its date for compliance, which is known as the “staging date”.

The Regulator has stated that employers need up to 18 months of preparation for automatic enrolment. This may seem a lengthy period, but it is important for every employer to ensure that it is in a position to comply properly with the obligations. Time will be needed to examine the employer’s existing pension arrangements, to find a new pension provider where necessary, to get the appropriate HR and payroll arrangements ready and to bottom out the status of non-conventional workers such as overseas workers and workers on fixed-term contracts.

The main obligation on an employer is the requirement to automatically enrol “eligible jobholders” into a pension scheme. Eligible jobholders are workers who:

– Work or ordinarily work in the UK

– Are aged between 22 and State pension age

– Have “qualifying earnings” (currently GBP 9,440 per year)

A defined contribution scheme can be used for this purpose. The employer will need to pay contributions totalling at least 3% of the earnings of the eligible jobholders in the band from GBP 5,668 to GBP 41,450. The total minimum contributions paid in respect of each eligible jobholder must amount to 8% of earnings in this band, with the remainder being made up of 4% from the worker and 1% in tax relief (3% + 4% + 1% = 8%). If the

employer finds it administratively inconvenient to calculate contributions on the basis of the specified earnings band, it can opt to comply with other contribution criteria which are substantially similar.

Workers who are not eligible jobholders need not be automatically enrolled into a pension scheme, but they have the right to join a pension scheme. If they do so, they are entitled, in some cases, to receive the same employer contributions as eligible jobholders.

Workers in the airline industryAs noted above, the requirement to automatically enrol a worker applies only if the worker “is working or ordinarily works in [the UK] under the worker’s contract”.

The provision can raise tricky questions about the treatment of individuals who have links both to the UK and to another country. This will often be the case in the airline industry. It is clear from the case-law that an individual can be held to be “ordinarily working” in the UK even if s/he has spent or is currently spending more time working overseas than in the UK.

The guidance issued by the Pensions Regulator provides several practical examples. There is the case of a pilot who commutes from his home in France to fly long-haul flights out of Heathrow. S/he is paid in Sterling and is subject to UK National Insurance. The Regulator, perhaps unsurprisingly, concludes that s/he is ordinarily working in the UK despite the fact that s/he lives in France. However, the Regulator follows this with the example of a pilot who commutes from Antwerp to fly long-haul flights out of Heathrow for a company based in Antwerp. This pilot is paid in Euros and is not subject to UK National Insurance. This worker, according to the Regulator, is not ordinarily working in the UK, despite working out of a location within the UK.

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Careful consideration will often be required to determine an employee’s status. The key question is where the employer’s base is located under the employment contract. However, this will not always be obvious. In many cases, the contract will be silent or ambiguous on this point. What if the contract provides that the employee will report to a manager based at Heathrow but also provides that the employee will be paid in Dollars and will be subject to US taxes and social security deductions?

There is a further layer of complexity. It may not be enough to look only to the wording of the employment contract – the practical details of the employment relationship may also be relevant.

In summary, the Regulator, the courts and the tribunals are likely to look at a number of factors, including where the worker’s residence is, where the worker’s headquarters is, where s/he begins and ends work, whether s/he pays National Insurance contributions in the UK and what currency s/he is paid in. In many cases, specialist advice will be required to make a judgement call on a particular worker’s status.

Even where a worker’s status is clear, further questions may arise. Let us say that a worker who has been based overseas is transferred to work exclusively in the UK under a contract with a UK entity within the corporate group. S/he is already a member of an overseas group pension scheme. S/he is likely to be held to be ordinarily working in the UK for the purposes of automatic enrolment. Can the employer leave the employee in the overseas pension scheme in order to satisfy the requirements?

The answer is Yes – provided that the overseas scheme satisfies certain criteria laid down in the legislation. In summary, it will do so if it is a defined contribution scheme which is subject to local regulatory oversight, meets criteria relating to tax relief, and the local regulatory rules “provide that some of the benefits applicable to the jobholder may be designated for the purpose of providing that jobholder with an income for life” – in other words, a regular pension in retirement. However, the case would be different if the worker was not already a member of the overseas scheme and the UK employer wanted to enrol the worker into that scheme for the first time when s/he came under the automatic enrolment regime. Different and more stringent criteria would apply in such case, the principal difference being that the scheme would not satisfy the legislation if it was based outside the EEA. There would also be additional criteria regarding the benefits provided by the scheme.

In conclusion, the automatic enrolment legislation represents a sea change in work-based pensions in the UK. The issues thrown up by it are sure to challenge both employers and the pensions industry for some time to come.

For further information, please contact Mark Howard or Jack Wheeler

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French Court applies Warsaw Convention to claim by manufacturer against airline In a decision that will please many carriers and their insurers, a judgment of the Toulouse Court of Appeal issued in March 2013 has held that the Warsaw Convention applies not only to passenger claims brought directly against an airline, but also to an attempt by a manufacturer to join an airline as a third party to an action brought by passenger interests against the manufacturer of the aircraft involved in an accident. The purpose of such third party proceedings was effectively for the manufacturer to claim indemnity or contribution from the airline in respect of any liability the manufacturer may have to the passengers.

The legislationThe case involved flight RNV967 from Yerevan in Armenia to Sochi in Russia on 2 May 2006, which tragically crashed into the Black Sea during an attempt to land in difficult weather conditions, killing all those aboard. Just three months after the accident, the families of nearly all the victims settled their claims with the airline and its insurers. As part of the settlement formalities, the families signed full release and indemnity documentation acknowledging that they had been compensated and releasing the airline and other parties, including the aircraft manufacturer, from all liability.

Some two years after settlement, a number of these same families began legal proceedings against the aircraft manufacturer in Toulouse, France, claiming further compensation on the basis that the aircraft had been a defective product with technical faults. Another two years passed before the manufacturer attempted to join the airline to the action as a third party, claiming crew error had caused the accident and not any product defect.

In May 2011, the Toulouse District Court declared that the manufacturer’s claim was governed by the Warsaw Convention 1929 (to which both Armenia and Russia are signatories) and, accordingly, the Court did not have territorial jurisdiction to hear the claim against the airline. Under Article 28 of the Warsaw Convention 1929, an action for damages can only be brought in either the country where the carrier is ordinarily resident or has its principal

place of business or has an establishment by which the contract was made (in this instance, Armenia), or in the country of destination (in this case, Russia). Unsurprisingly, the manufacturer appealed this decision.

In its appeal, the manufacturer argued that the Warsaw Convention was not applicable to its attempt to join the airline to the action, on the basis that a manufacturer has an obligation regarding product safety, which is not covered by the Convention. The manufacturer stated that the Convention only applies to parties linked by a contract of carriage (i.e. to the victims/their families and the airline) and not to manufacturers, thus making reference to prior decisions made by courts in the United States.

In reply, the airline stated that, in the event of death, Article 24 of the Convention states that any action for damages, however founded, can only be brought subject to the conditions and limits set out in the Convention and, the airline argued, this applied whether an action was brought by a victim’s family or by a third party. Also, the Convention provides four jurisdictions in which an action can be brought against a carrier, none of which would be France in this instance.

In its decision on the manufacturer’s appeal, the Toulouse Court of Appeal considered whether the proceedings brought by the manufacturer were governed by Article 24 of the Convention. It agreed that there was no contract of carriage between the victims’ families and the manufacturer, or between the manufacturer and the

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airline. However, despite the manufacturer’s arguments to the contrary, the Court decided that the manufacturer was not bringing a personal action against the airline, but was attempting to join the airline to the proceedings in order to establish the carrier’s liability for the accident. The Court stated that the Convention does not make any distinction regarding the basis on which an airline is brought into proceedings or regarding the person seeking the airlines’ liability. Accordingly, the Court decided that the Convention should govern any and all actions seeking to engage the airline’s liability, regardless of who brought the action or the basis on which they claimed to be acting.

Given that the Court found that the Convention governed the proceedings, it followed that the French courts could not have jurisdiction to hear the claim, as France was not one of the four jurisdictions permitted under the Convention.

It remains to be seen whether the manufacturer will file a further appeal (which would have to be to the Cour de Cassation in Paris), but this is an encouraging decision for airlines and their insurers. In a jurisdiction which is sometimes seen to be increasingly claimant-friendly, this is particularly heartening as this judgment effectively prevents aircraft manufacturers from circumventing the provisions of the Warsaw Convention. If the Convention applies to any action attempting to find the carrier liable, then it is arguable that the potential defences provided by the Convention would also be available to carriers. Not only is there the possibility to argue that a court does not have territorial jurisdiction, but it might also be possible to argue that the right to damages has been extinguished two years after any accident and, under the Warsaw Convention, maybe even that the limit of liability of 125,000 Convention francs (most usually converted to USD 10,000) should be applied. Moreover, it is conceivable that the French courts could apply similar reasoning when deciding cases under the Montreal Convention 1999.

For further information, please contact Maylis Casati-Ollier or Benjamin Potier

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© Clyde & Co LLP 2013

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CC003644 - August 2013