A new era for cargo liability claims in Thailand?

Date published

26/09/2018

Services

Sectors

Introduction

In May 2015, the International Carriage by Air Act, B.E. 2558 (ICAA) came into effect in Thailand, applying to international as well as domestic carriage by air from the effective date. Its provisions largely mirror those of the Montreal Convention (MC99), which subsequently came into force on 2 October 2017. These events marked a significant change in Thai law where the economic footprint of aviation sector activities continue to play a substantial role, with Airports of Thailand figures showing that over 1.5 million tonnes of air freight travelled to, from and within the country in 2017. Before this, aviation cargo claims in Thailand had generally been governed by the Civil and Commercial Code where the burden of proof was on the carrier to demonstrate the express consent of a shipper to contractual liability limits, usually printed on the reverse side of the Air Waybill. This burden was usually difficult to overcome so that cargo recoveries were often for the full value of the loss/proportionate invoice value unless settlement was agreed, often at best between 60-70% of the full claimed amount.

Importantly, both the MC99 and the ICAA introduced the concept of an unbreakable weight liability limit of 19 Special Drawing Rights (SDRs) (currently around USD27) per kilogram for the loss of, damage or delay to cargo. Despite this, cargo interests and in particular subrogated cargo insurers have remained largely reluctant to amend their attitudes towards settlement. A recent judgment by a Thai First Instance Court will hopefully pave the way in changing such attitudes and align Thailand with most other jurisdictions in terms of handling cargo liability cases.

A Brief Summary of the Case

The case in question involved the shipment of cargo from Paris to Bangkok in November 2015. The ICAA therefore applied but not the MC99. Upon arrival at Suvarnabhumi International Airport, a portion of the cargo was found damaged. The consignee took delivery and transported the cargo to its premises where, following inspection, it determined the total loss of around 13% of the entire shipment. The Plaintiff was the subrogated insurer of the consignee and filed a recovery action in the Central Intellectual Property and International Trade Court in Bangkok against the carrier, Thai Airways, for the pro-rata invoice value, alleging that the damage was caused by the carrier's wrongful act. In its defence the carrier argued that it complied with international standards for transportation of the type of cargo, inherent vice, improper packaging, that there was no ‘occurrence’ and exclusions of coverage under the Institute Cargo Clauses (Air). In the alternative, if it was held liable, it was entitled to rely on the ICAA weight liability limit as the maximum amount payable.

Having considered the evidence the Court held that the carrier was liable, but it recognised the carrier’s right to rely on the SDR19 per kilogram liability limit. The Court awarded damages in favour of the Plaintiff in accordance with the ICAA, plus interest and costs, which was significantly less than the claimed amount. The parties are still within the deadline to file an appeal.

Comment

The decision is the first of any Court in Thailand upholding the application of the cargo weight liability limit provisions of the ICAA, which is very good news for cargo carriers and their insurers. However, it is only a First Instance decision and judicial precedent in Thailand is not binding, although decisions of the Supreme Court are likely to have significant influence on the lower courts. In this case, the Court provided no detailed reasoning or analysis of the ICAA but it is nevertheless a positive development. It remains to be seen how the higher Courts will decide, and also how the Thai Courts will deal with passenger and baggage cases covered by the ICAA/MC99. It is hoped that this decision heralds a general shift for cases in Thailand to be decided consistently with other jurisdictions to ensure transparency and certainty in handling aviation liability cases, as well as result in more fruitful settlement negotiations with cargo interests.