1. Recent developments in aviation liability & insurance: The 1973 Hague Convention on the law applicable to products liability: choice of law issues in aviation cases Thomas RouhetteApril 17, 2015 8 TH A NNUAL M C G ILL C ONFERENCE ON I NTERNATIONAL A VIATION L IABILITY & I NSURANCE

2. www.hoganlovells.com 2 -1973 Hague Convention: in force in 11 European countries (Croatia, Finland, France, Luxembourg, Macedonia, Montenegro, the Netherlands, Norway, Serbia, Slovenia and Spain) -Rome II Regulation: in force within the EU (except Denmark) and applicable for events giving rise to damage which occured after January 11, 2009. 2 applicable texts before the European Courts to the law governing the aircraft manufacturer's liability  Both texts are applicable to the liability of aircraft manufacturers  The Hague Convention prevails over the Rome II Regulation whenever it is found applicable  The designated law has a universal application (shall be applied whether or not it is the law of a Signatory country/ Member state)

3. www.hoganlovells.com Conflict-of-laws rules applicable to products liability 3 1973 Hague ConventionRome II Regulation Main connecting factors (by order of priority) State of the habitual residence of the person directly suffering damage State of the place of injury State of the habitual residence of the person directly suffering damage State where the product was acquired by the person directly suffering damage State of the place of injury Secondary connecting factors State of the principal place of business of the person claimed to be liable State where the product was acquired by the person directly suffering damage The product has to be marketed in the State designated by the main connecting factor Subsidiary rule  Plaintiff can choose between State of the principal place of business of the person claimed to be liable AND State of the place of injury State of the habitual residence of the person claimed to be liable Superseding rule State of the principal place of business of the person claimed to be liable (if the requirement of foreseeability is not satisfied by neither of the main connecting factors) State with manifestly closer connections with the tort

4. www.hoganlovells.com Scope of the applicable law Matters determined by the law made applicable by the Hague Convention & Rome II include: –the basis and extent of liability –the grounds for exemption, any limitation and division of liability –the kinds, form and extent of compensation –the question whether a right to claim may be transferred –the persons who may claim compensation for damage sustained personally –liability for the acts of another person –the rules of prescription and limitation 4

5. www.hoganlovells.com Matters excluded from the scope of the applicable law by the Explanatory Report of the Hague Convention and which are covered by Rome II: –Choice-of-law clauses in an agreement, whether made before or after the injury, between the person directly injured and the manufacturer  article 14 of Rome II applies as lex fori and determines the conditions in which parties may enter into such agreement –Direct actions of victims against insurers  such action is admitted under Article 18 of Rome II if the law applicable to the manufacturer's liability or the law applicable to the insurance contract so provides –Recourse actions and subrogation  under Article 19 and 20 of Rome II, the applicable law is the one governing the merits of the main claim Grey area for matters not expressly enumerated by both texts 5 Scope of the applicable law

6. www.hoganlovells.com Risk of conflict between the two texts As the connecting factors of both texts are not identical, the application of either text may lead to the designation of different applicable laws Lack of uniform application of the Rome II Regulation within the EU because of the ratification and non denunciation of the Hague Convention by 7 Member States Risk of forum shopping 6

7. www.hoganlovells.com DHL Flight 611 / Bashkirian Airlines Flight 2937 Mid-air collision accident on 1 July 2002 in German airspace Relatives of the Russian victims sued the US manufacturers of the anti-collision instrument known as TCAS (Traffic Collision Avoidance System) before the Spanish Courts 7 Risk of conflict – DHL case study

8. www.hoganlovells.com Risk of conflict – DHL case study 8 1973 Hague Convention (Spain jurisdiction) Rome II Regulation (ex: German jurisdiction) Main connecting factors (by order of priority) Habitual residence of the person directly suffering damage  RUSSIA State of the place of injury  GERMANY State of the habitual residence of the person directly suffering damage  RUSSIA Secondary connecting factors State of the principal place of business of the person claimed to be liable  US (Arizona & New Jersey) State where the product was acquired by the person directly suffering damage  Factor rejected by the Spanish Court The product was marketed in the State designated by the main connecting factor  YES Subsidiary rule State of the principal place of business of the person claimed to be liable  US (Arizona & New Jersey) Arizona / New Jersey Russia

9. www.hoganlovells.com Irrelevance of the 1973 Hague Convention in aviation cases Difficult combination of the main & secondary connecting factors in aviation cases  irrelevance of the State of the place of injury as a connecting factor  ambiguity on the determination of the place of acquisition of the product Easier recourse to the alternative rule set in Article 6  distortion of the spirit of the Hague Convention "Forum shopping" of plaintiffs in an attempt to apply US law to obtain higher compensation 1973 & 1971 Hague Conventions share the same philosophy although different logic should be applicable to plane and car accidents Conflict-of-laws rules provided by the Rome II Regulation are better suited to modern society and to aviation liability cases 9

10. www.hoganlovells.com Should the forum grant the million-dollar-compensation provided by some jury trial verdicts in the US? 10 What if US law is found applicable by the Hague Convention?

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