The Supreme Court recently changed its approach to the interpretation of the commercial relationship between airlines and ground-handling companies, with the main focus being damage suffered by passengers as a consequence of the supply of handling services.
The key point is whether a ground-handling company can be considered to be an auxiliary entity of the airline. Pursuant to Article 30 of the Montreal Convention 1999, if an action is brought against an agent of the carrier, it will be entitled to benefit from the conditions and limits of liability which the carrier is entitled to invoke under the convention.
Until recently, the prevailing trend in Supreme Court case law was based on outdated precedents from the early 1990s, when airport services were provided by monopolies before the introduction of EU Directive 96/67/EC on access to the ground-handling market at EU airports. According to case law, the delivery of luggage, cargo and mail by an airline to a handling company constitutes a contract for a third-party beneficiary (eg, the passenger or the freight forwarder), and the purpose of this contract is the assignment and custody of the freight to the handler until its delivery to the recipient or its representative. Based on this approach, the handler is not considered to be an auxiliary of the airline, as it manages an autonomous organisation and is not chosen by the airline directly (ie, the exclusive access scenario). This assessment means that:
- the limitations of liability set out in Article 30 of the Montreal Convention in favour of "a servant or agent of the carrier" do not apply to ground-handling companies;
- the airline is not liable for loss or damage to freight when it is under the care of the handler; and
- the owner of the freight – being the third-party beneficiary of the contract between the airline and the handler – is entitled to act against the handler for the compensation of damages.
The position outlined above has been replaced by more recent Supreme Court case law which takes the liberalisation of the ground-handling services market into account and is in line with the approach adopted in most other countries, where ground-handling companies are regarded as auxiliaries of airlines, as per Article 30 of the Montreal Convention. This latest trend in case law is also consistent with the provisions of the Civil Code that govern transport contracts. Article 1687 states that "the carrier must render the transported goods available to the passenger in the agreed place, time and according to the terms of the contract". This approach means that:
- the handler is an auxiliary of the airline, because without its support the airline cannot take charge of or redeliver the freight;
- the airline and the handler are jointly liable to passengers for damage or loss (ie, the airline bears a liability in contract and the handler a liability in tort);
- in the event that the Montreal Convention applies, the handlers can avail themselves of the limitations of liability provided for airlines; and
- the limitations of liability are excluded where damage derives from an act or omission of the handlers' employees with the aim of causing damage or with knowledge that damage would probably result, pursuant to Article 30(3) of the Montreal Convention.
Given the nature of the subject matter, the uncertainty regarding case law will be discussed by the joint sections of the Supreme Court.
For further information on this topic please contact Laura Pierallini at Studio Legale Pierallini e Associati by telephone (+39 06 88 41 713) or email ([email protected]). The Studio Legale Pierallini e Associati website can be accessed at www.studiopierallini.it.
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