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Air Carrier Liability in International Carriage according to Brazilian Courts

Liability in international carriage is regulated by international treaties signed by the Brazilian Government. Brazil is a signatory to the Convention for the Unification of Certain Rules for International Carriage by Air of 1999 (the Montreal Convention), which was enacted internally in 2006 under Decree 5.910. The country was also a signatory of the Warsaw Convention of 1929, the Hague Convention of 1955, the Guadalajara Convention of 1961, the Guatemala Protocol of 1971 and the Montreal Protocols 1, 2, 3 and 4 of 1975.

Domestically, air carrier´s liability matters are regulated by the Brazilian Aeronautical Code (Law 7.565/86). In brief, this legislation has provisions that are similar to those established in the relevant international conventions, but the standard limitation amounts established by such law are outdated. The Brazilian Aeronautical Code sets forth that in case of baggage loss and flight delays, airlines' liability shall be limited to an amount corresponding to 150 National Treasury Bonds (OTNs), which corresponds to R$ 1,755. In cases of passenger death or injury, the Brazilian Aeronautical Code sets forth that airlines' liability shall be limited to 3,500 OTNs, which corresponds to R$ 40,950. Other legislations can apply as well, namely the Consumer Code, on matters not specifically covered by the Conventions and specific laws applicable to air carriage.

It is widely known that Brazilian courts are inclined to deny enforceability to certain provisions of the Montreal Convention (as well as the Brazilian aeronautical code) what has been causing a significant increase in the volume of litigation against airlines in the country over the years.

There are various non-binging judgements from Brazilian Courts throughout the country which found that the Brazilian Consumer Code has superseded the Conventions and that liability caps would be inconsistent with the Brazilian Constitution, hence, awarding compensation in cases of baggage loss/delay for property damage and moral damage in amounts significantly higher than the equivalent to 1131 SDR as established in article 22 of the Montreal Convention.

Following the same rationale, Courts have been rejecting applicability to article 19 of the Montreal Convention, thus awarding compensation to passengers in situation of flight delays regardless the cause of the delay. Carriers have been required to compensate passengers when a delay is caused by mechanical problems, ATC issues and even force majeure, under the interpretation that delays are part of the risk of the business undertook by air carriers, so they should be held strictly liable in such circumstances, regardless the cause of the delay.

Also, Brazilian Courts used to reject the two-years statutes of limitation established in article 35 of the Convention and apply the 5-years term as set forth in the Brazilian Consumer Code.

Precisely, because there has been a great debate on whether the Conventions shall apply or not, in 2011 the Supreme Court accepted to review a baggage case in which Air France had been sued by a passenger. In such case, the State Court of Appeals awarded compensation for property damages based on the provisions of the Brazilian Consumer Code, in an amount higher than the limits established by the Warsaw Convention (at the time the suit was filed, the Montreal Convention of 1999 was not yet effective in Brazil), so Air France appealed to the Supreme Court claiming that the liability caps should apply.

Likewise, the Supreme Court accepted to review a suit filed against Air Canada. In this case the company defended under the grounds plaintiff was time barred to litigate since, at the time the suit was filed, the 2-years term set forth in article 35 of the Montreal Convention had already expired. State Court of Appeals judged the case based on the Consumer Code which allows a 5-years term for filing suits, so Air Canada appealed to the Supreme Court aiming at having the Convention applied.

In the two above referred cases, the Supreme Court determined that the judgement should have binding effects, given the multiple similar suits pending at lower Courts.

On May 25th, 2017, the Supreme Court rendered a decision in which the majority of the Justices found that the international Conventions should prevail over conflicting provisions established in the Consumer Code (such decision was named as "Tema 210"). Justices Rosa Weber, Luiz Edson Fachin, Ricardo Lewandowski, Luiz Fux, Dias Toffoli, and Carmen Lucia voted in favor of the precedence of the international treaties over the Consumer Code on the matters of liability limits for property damages, as well as statutes of limitation. Note that Justices Luis Roberto Barroso, Teori Zavascki, and Gilmar Mendes had already voted in the same manner.

Justice Rosa Weber made a thoughtful review of the matter of international treaties on air carriage, especially the Warsaw Convention and the Montreal Convention of 1999 in light of article 178 of the Brazilian Constitution, and explained the many reasons why the Convention must prevail.

Justices Marco Aurelio and Celso Mello voted against it – in the sense the rules established in the Consumer Code should apply, but not the international treaties.

On the other hand, the Supreme Court found that the liability limits apply to property damages in cases of baggage loss or delay, but not to moral damages, because such matter was not under discussion in the appeal filed by Air France.

Notwithstanding, when issuing their votes, several of the justices made specific comments in the sense moral damages should not be covered by the Convention. Had the Supreme Court Justices reviewed the moral damage component in details – what, as mentioned, was not possible because this aspect was not under review in the relevant case – their findings would likely be altered, especially considering that moral damages are to a great extent awarded by Brazilian Courts as punitive damages, what is expressly prohibited by article 29 of the Montreal Convention. Along the same lines, pain and suffering components of moral damages should reasonably be encompassed within the limits established by article 22 of the Convention.

We have seen different interpretations from Courts on the effects of the Air France and Air Canada´s judgment – Tema 210 – on pending litigation. Some Judges think the Convention shall apply to all baggage and cargo cases, but others have been voicing that the effects of the Supreme Court decision are limited to baggage cases, and specifically to properly damages.

Regarding cargo cases, we have seen a smaller number of judges refusing to apply Tema 210 under the grounds the Supreme Court decided that the Conventions should prevail over the Consumer Code, not the Civil Code. According to interpretation behind these decisions, cargo cases are governed by the Brazilian Civil Code, not the Consumer Code, so cases involving cargo would not be subject to Tema 210. Most of the judgements on cargo litigation have been following the Supreme Court precedent.

Enforcement of article 19 of the Montreal Convention was not reviewed by the Supreme Court, so the consequences of flight delays under the perspective of potential liability of airlines in such circumstances are still an open issue. According to Brazilian law, carriers undertake strict liability for damages occurred during air carriage and according to existing non-binding judgments – as previously indicated in this article – airlines should compensate passengers even when a delay is caused by mechanical problems, ATC issues or force majeure. Therefore, Tema 210 does not necessarily bring a solution for these situations.

Anyway, applying the concept of liability subject to fault as established in article 19 of the Montreal Convention seems to be admissible since the Supreme Court acknowledged that not applying the Convention would violate article 178 of the Brazilian Constitution.

In light of this scenario, it is likely that more litigation will take place in Brazil until Courts eventually decide that the Convention shall be entirely applied. Other cases discussing moral damages on baggage loss/delay as well as indemnity for flight delays (under the provision of article 19 of the Montreal Convention) will likely be reviewed by the Supreme Court. One may expect that the Supreme Court will find that the moral damages shall be considered as encompassed within the liability limits established in article 22 of the Convention and that air carriers cannot be held liable in case of flight delays, if it proves that it took all measures that could reasonably be required to avoid the damage or that it was impossible for it to take such measures, but this is a chapter to be seen.