1. Liability Update and US Sanctions Overview Daniel E. Correll Clyde & Co US LLP The Chrysler Building 405 Lexington Avenue New York, New York 10174 (212) 710-3921 daniel.correll@clydeco.us

2. 1McGill Conference on International Aviation Liability and Insurance 2015 Liability Update Montreal Convention recent cases –Preemption –Period of Limitations –“Fifth” Jurisdiction US Sanctions Overview Background on OFAC Effect on Aviation Claims Questions Agenda

3. 2McGill Conference on International Aviation Liability and Insurance 2015 Liability Update

4. 3McGill Conference on International Aviation Liability and Insurance 2015 Naqvi v. Turkish Airlines, Inc., 2015 WL 757198 (D.D.C. Feb. 23, 2015) International flight from Washington, DC to Istanbul—claim governed by the Montreal Convention. Plaintiff requested exit row during check in and was told that all of the exit row seats, which were reserved for "Elite Class" passengers, had been assigned. Upon boarding, plaintiff saw that all of the exit rows were occupied by what appeared to be persons of Turkish descent, many of whom were women who were shorter than six feet, despite being told passengers needed to exceed that height to sit in the exit row. Plaintiff allegedly suffered extreme emotional distress that manifested in physical malaise and a loss of appetite during the flight. Plaintiff sued under 42 U.S.C. §1981 (federal anti-discrimination statute), 41310(a) and 40127(a) of the Airline Deregulation Act, and for breach of contract. Liability Update—Preemption

5. 4McGill Conference on International Aviation Liability and Insurance 2015 Holding: Court granted defendant's motion to dismiss finding that the plaintiff's discrimination claims were preempted by the Montreal Convention. o ADA does not provide a private cause of action Court also found that plaintiff's breach of contract claim was preempted o Claims for contractual non-performance not preempted, but claims indistinct from tort claims are preempted. Liability Update—Preemption

6. 5McGill Conference on International Aviation Liability and Insurance 2015 Ireland v. AMR Corporation, 20 F. Supp. 3d 341 (E.D.N.Y. 2014) Plaintiff sued for injuries allegedly suffered aboard a flight operated by American Airlines between Miami and Kingston, Jamaica. American and its parent company moved to dismiss the complaint on the grounds that the action was not commenced within two years of the date of the flight's arrival in Jamaica. Plaintiff argued that his time for commencing suit was extended by the defendants' bankruptcy filing, which resulted in an automatic stay of all litigation pursuant to the US Bankruptcy Code. Holding: Period of limitations is condition precedent. Plaintiff’s claim dismissed. Liability Update—Period of Limitations

7. 6McGill Conference on International Aviation Liability and Insurance 2015 Choi v. Asiana Airlines, Inc., 2015 WL 394198 (N.D. Cal. Jan. 29, 2015) Plaintiff allegedly sustained injuries as a result of severe turbulence on flight between Honolulu and Incheon, Republic of Korea. Plaintiff asserted Article 33 jurisdiction in US claiming US was her “principal and permanent residence”, or, in other words, “the one fixed and permanent abode of the passenger at the time of the accident.” Plaintiff sued in US, carrier moved to dismiss for lack of Article 33 jurisdiction. Concept akin to “domicile” under US law. Liability Update—“Fifth” Jurisdiction

8. 7McGill Conference on International Aviation Liability and Insurance 2015 Factors considered by court: –Plaintiff Korean national with Korean passport, but also a US permanent resident –Plaintiff maintained residence in Korea since 2002 –Purchased condominium in Hawaii –Other factors Despite factors showing some connection to US, court held that when plaintiff was in the country, she was just visiting. Holding: No jurisdiction in US. Liability Update—“Fifth” Jurisdiction

9. 8McGill Conference on International Aviation Liability and Insurance 2015 US Sanctions Overview

10. 9McGill Conference on International Aviation Liability and Insurance 2015 Overview on US Sanctions US economic sanctions administered by various governmental entities including: US Department of Treasury—through the Office of Foreign Assets Control (OFAC)—most often implicated in the case of aviation claims US Department of State US Department of Commerce

11. 10McGill Conference on International Aviation Liability and Insurance 2015 Active Sanctions Programs Balkans Belarus Burma (Myanmar) Central African Republic Cote d’Ivoire (Ivory Coast) Cuba Congo Diamond Trading Global Terrorism Iran Iraq Lebanon Liberia Libya Magnitsky Kingpin Narcotics Narcotics Trafficking Non-Proliferation WMD North Korea South-Sudan Sudan Syria Somalia Ukraine-related Yemen Zimbabwe

12. 11McGill Conference on International Aviation Liability and Insurance 2015 All US sanctions regulations impose prohibitions upon US Persons, which are defined as: 1)US citizens and permanent resident aliens; 2)entities (including insurers) organized under the laws of the US or a US State (including the foreign branches of such entities); and 3)individuals or entities within US territory. These prohibitions are set forth in the particular regulations US sanctions concerning Iran and Cuba also impose prohibitions upon entities "owned or controlled" by the foregoing, thus encompassing majority-owned foreign subsidiaries of US companies. OFAC—US Persons

13. 12McGill Conference on International Aviation Liability and Insurance 2015 US Persons are prohibited from “facilitating” transactions by foreign persons or companies if such transaction would be prohibited if performed by a US Person. US sanctions prohibit US Persons from dealing with persons listed by OFAC as Specially Designated National ("SDN") Air Carriers and require US Persons to "block" (i.e., freeze) the property and interests in property of SDNs, including funds of SDNs in the possession of US banks. OFAC—US Persons

14. 13McGill Conference on International Aviation Liability and Insurance 2015 SDN List (searchable and can be found at http://sdnsearch.ofac.treas.gov/.) http://sdnsearch.ofac.treas.gov/

15. 14McGill Conference on International Aviation Liability and Insurance 2015 Some US sanctions apply to non-US Persons, including sanctions targeting Iran, Syria, Proliferators of Weapons of Mass Destruction and perpetrators of Global Terrorism Sanctions that apply to non-US Persons do not prohibit conduct by non-US Persons, as they do US Persons; instead, they target conduct by non-US Persons. If a non-US Person engages in the targeted conduct, the US imposes penalties depending on the particular conduct at issue. OFAC—Non-US Persons

16. 15McGill Conference on International Aviation Liability and Insurance 2015 OFAC issues general licenses to erode the breadth of a particular sanctions program. General licenses identify the particular type of transaction or activity that is permissible that otherwise not would be. If a transaction is prohibited and no general license applies, a specific license can be requested. Specific licenses can take up to 6-9 months. OFAC Licensing Scheme

17. 16McGill Conference on International Aviation Liability and Insurance 2015 High limit policies with US and non-US insurers/reinsurers Multi-national claimants SDN Air Carriers SDN Claimants SDN Reinsureds Impact on the Aviation Industry

18. 17McGill Conference on International Aviation Liability and Insurance 2015 Civil Penalties By Year 2015- 3 penalties (as of March 27 th ), U.S. $267,099,096 2014- 29 penalties, U.S. $1,209,298,807 2013- 27 penalties, U.S. $137,075,560 2012- 16 penalties, U.S. $1,139,158,727 2011- 21 penalties, U.S. $91,650,055 2010- 27 penalties, U.S. $200,735,996

19. 18McGill Conference on International Aviation Liability and Insurance 2015 Thank you! Daniel E. Correll Clyde & Co US LLP The Chrysler Building 405 Lexington Avenue New York, New York 10174 (212) 710-3921 daniel.correll@clydeco.us Questions?

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