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The Concorde Air Crash
Settlement Aspects

Introduction

On 25 July 2000, on its way from Paris (Charles de Gaulle - CDG) to New York (John F. Kennedy - JFK), an Air France Concorde aircraft crashed near Gonesse/Paris. It had been chartered by Deilmann, a German shipping company, to offer 97 German and Danish holidaymakers a spectacular trip to the place from where they were going to go on a cruise aboard the “Deutschland” which was to take them from New York via the Caribbean and the Panama Canal to South America.

During the acceleration phase on the ground the left wing of the aircraft caught fire. At that point of time, it was too late to break off the take-off operation; the plane did not attain sufficient altitude and was unable to make an emergency landing. 84 seconds after take-off the plane crashed into a hotel in Gonesse, a few kilometers from CDG, and was completely burnt out. All 97 passengers, the crew of 12, and 4 hotel guests lost their lives.

As early as several days after the accident it was clear that the catastrophe had been caused by a burst tire. A piece of rubber, of 8 kg in weight, had been slung at the wing directly above the landing gear, causing a leak in the tanks. The kerosene leaking out was ignited by the engines, causing the fire which the crew noticed but were unable to extinguish. Also, it became known that comparable incidents – though, fortunately, without any such fatal effects – had occurred in the USA in the early 1980s. However, no engineering modifications had ever been made in reaction.

This immediately led to thorough discussions on the safety of the Concorde. The French Civil Aviation Authority at once interdicted any operation of the remaining Air France [Concorde] aircrafts, and several weeks later the British authorities, too, stopped all Concorde flights of British Airways until such date when the investigations would be completed.


Uncomplicated liability consequences

Some of the liabilities resulting from the accident were settled without any problems.

This is true of the travel contract liabilities: according to § 651 d BGB[1]the party to a travel contract is entitled to claim a travel price markdown if the contracted travel product has not been properly performed. What shipping company Deilmann owed its clients was a several weeks’ cruise, including the flight to the point of departure and the return flight home. Here Deilmann became unable to meet its contractual obligations so that the heirs had a title to have the travel price fully reimbursed. Deilmann fully complied with such obligation in every single instance without (in several complicated inheritance cases) pleading the six months’ statute of limitation pursuant to § 651 g BGB.

As consequence of Regulation No.2027/97 of the European Union Council dated 9 October 1997 the rights of victims of an air crash have been – in comparison to the Warsaw Convention - improved significantly, whenever the carrier has its registered seat in one of the member states of the European Union. Then the carrier is under an obligation to allow for such more favorable provisions in its General Terms and Conditions (Article 6).

It was on the basis of said Regulation that the bereaved families were reimbursed the costs incurred in connection with the funeral. In some cases, a considerable amount of bureaucratism and delays were involved, which in turn led to some embarrassments on the part of the bereaved families when they received demands for payment by the companies that had organized the transportation of the bodies to Germany as well as the funerals.

An additional aspect of said Regulation (Article 5) is the carrier’s obligation to pay an amount of at least 15,000 Special Drawing Rights (approx. 42,000 DM) as immediate aid, which later has to be offset against the final compensation. Such advance payment is not deemed to constitute the acknowledgment of any liability and must later be offset against the amounts actually to be paid.

What remains unclear with respect to this provision, however, is the question as to who shall be eligible to receive such aid: Is it the natural descendants, or the intestate heirs (e.g. in the event of disinherited descendants), or an administrator who, by virtue of his office, has to pay the first bills after the death of the deceased person? This issue has not been clarified yet by the courts. Neither was the European Commission able to provide an unambiguous answer, nor did the lawyers involved the case arrive at any clarification of the issue by mutual agreement by taking recourse to the German Air Traffic Act (LuftVG): Article 5 of the EU Regulation is based on § 50 LuftVG, and case-law of the national courts relating to its interpretation is available. In the end, however, any doubts still existing were settled by mutual consent so that the emergency aid payments could be made – though with considerable delay in several instances.

Liabilities beyond that scope – basic legal questions

In cases of international flights any subsequent legal issues are governed by International Law. First and foremost, the Warsaw Convention (WC) of 1929, including its numerous amendments, is applicable.

The EU Regulation No. 2027/97, though it does not supersede the WC, has priority over it in some major aspects. The focus is on the question of liability and the limits of liability. Pursuant to Article 22 of WC (in the form of the Hague Protocol) the carrier’s liability is limited to approximately 53,500 DM [2] ; beyond that he will not be held liable pursuant to Article 25 WC unless the damage was caused intentionally or “negligently and aware of the likeliness that the damage would occur”[3] , a rather comfortable situation for the carrier. Furthermore, the carrier can be absolved from his liability if he succeeds in rendering evidence to the effect that he “and his staff” (supporting staff and subcontractors) have done everything to avoid the damage.

By contrast, the provisions of Article 3 of Regulation No. 2027/97 are much stricter: the European air carrier is liable up to a limit of approximately 280,000 DM[4]without having the chance to raise the defense that he took all necessary steps to prevent the damage. Relating to any amounts in excess of such limit, the air carrier can attempt to render evidence to that effect, if such attempt fails, the carrier is liable without limitation.

By the way, I should like to mention that, for many years already, the provisions of the Warsaw Convention have been considered unsatisfactory and no longer up-to-date. As a consequence, the contracting (and many additional) parties at the 1999 Montreal Conference entered into a new agreement, which has meanwhile been signed by numerous states but has not been ratified by all of them. This is the reason why, most regrettably, it has not yet entered into force internationally. Accordingly, at present only the IATA Intercarrier Agreement, signed in 1995 by the world’s leading air carriers, is in effect which – like the Montreal Agreement – has significantly improved the position of passengers and/or the bereaved in the event of an accident.

It is self-evident that the amounts mentioned in both the WC and in Regulation No. 2027/97 do not constitute fixed amounts which regularly (or as a minimum) become due for payment in the event a passenger is killed. Rather, these amounts are deemed to constitute liability ceilings for the application of (national) civil damages law.

This applies both to the eligibility of individuals and the quantum of damages for pain and suffering. The decision which law to apply to these questions is governed by the lex loci delicti rule of German International Private Law (Art. 40 EGBGB[5]). Pursuant to that rule, lex loci delicti is applicable in the event of any tort, that is the law of the state where the accident occurred: here the law of the Republic of France. According to several German court decisions[6]the lex loci delicti is applicable both as regards the question whether any liability does exist and as regards the amount of such liability.

In the course of our studies we found out that French law is significantly different from German law in how it treats the bereaved. Under German law a bereaved person will be adjudged damages for the loss of a close relative only in the exceptional event that his mourning reaction attains the quality of a true illness[7]. French law in general acknowledges the title to such damages, with the group of eligible individuals including close and lesser relatives as well as any other persons who – though no relatives – were linked with the victim by exceptionally close bonds of friendship.

Whereas the amounts of damages adjudicated by the French courts to the bereaved families are much higher than those adjudicated under German law in such exceptional cases as referred to above, they are still far below the amounts awarded by the US courts in comparable cases.

The chances of litigation before the US courts

Before entering into negotiations with the defending parties on the issue of damages for pain and suffering pursuant to US standards the question had to be investigated what the chances of success would have been for legal action before US courts. This was also the crucial question for the lawyers of the defending parties.

As such action was never conducted to a decision, though, the considerations relating to the legal appreciation of the risk will remain speculation. However, their fundamental ideas:

There were three aspects suggesting a positive outcome if the claimants took action before the US courts:

(1) The manufacturer of the burst Concorde tire was Goodyear, a US company, the tire had been produced in the USA. Since the early 80s, the construction had never been altered. If the idea were correct that a tire for that particular type of aircraft never ought to have been constructed in a way that would allow a big piece of rubber (in the Concorde catastrophe this piece weighed 8 kg with a puncture power of 1 ton) to detach itself and damage the tank located in the wing directly above it, then this would have been a case of product liability, which – pursuant to the lex loci delicti – would have been governed by US law.

(2) According to the evidence available in autumn last year, a DC 10 of Continental Airlines that had taken off immediately before the Concorde did had lost a metal wear strip from one of its engines. Is is said to have been fitted in a section of the engine that must be hermetically closed during take-off. If this had been proved to be true, then – pursuant to the lex loci delicti – action for incorrect maintenance performed on US territory could have been brought before the US courts against Continental Airlines.

(3) Pursuant to Article 28 WC, the claimant can select the place of destination of the flight as forum. When air travels are round trips this is normally the airport of departure in the claimant’s home country.

In this case the passengers only had the Concorde flight from CDG (Paris) to JFK (New York) on their tickets. From New York, they were to continue their travel by boat and later they were to fly back to Germany with separate tickets from different destination points of their cruise various countries. This strongly suggests that the destination of the Air France flight was New York.

The decisive argument discouraging any attempt to bring an action before the US courts is the “forum non conveniens” principle of US Law. Pursuant to that principle the US Courts refuse to try an action not significantly related to the US. It is a controversial question whether or not an US Court having jurisdiction pursuant to Article 28 WC is entitled, despite this provision, to apply “forum non conveniens”. For the lawyers representing the bereaved this issue constituted an essential risk; against such risk a number of arguments were prepared, for example that the US would have been the only state where action could be brought jointly against the two major co-defendants that may have been responsible for the catastrophe (Goodyear, Continental).

As regards Air France, the US Foreign Sovereignty Immunity Act constituted an additional problem.

Experience has shown that the issue of forum may take two years or more – a period of uncertainty for all parties which none of the lawyers involved in the negotiations, pragmatists by nature, were willing to accept. Instead, they chose to advise their clients to include a realistic “American factor” in the settlement which would duly reflect the chances and risks for either side.

Structure of representation of either side by lawyers

As regards the social status of the passengers, almost all of them were members of the well-off middle-class. Therefore in their families sophisticated questions of company and inheritance law had to be solved immediately. This is, presumably, the reason why most of the families had legal assistance available some weeks after the accident, mostly rendered by the families’ long-standing legal counsels.

However, it soon turned out that questions relating to international air traffic and damages law required the involvement of professionals well experienced in rendering legal assistance in this field. Accordingly, the families and their family lawyers got in touch with lawyers with respective expertise, including the author of this report, who has been concerned with air traffic law since 1988 and who, among other cases, had co-operated with another German lawyer in the settlement of the Birgen Air catastrophe of 6 February 1996 off the coast of the Dominican Republic.

Eventually, all families - except two – were represented by specialized air traffic lawyers all of whom – except one – cooperated closely in the matter. Faced with the complexity of the case with regard to facts and legal problems we solicited cooperation from highly specialized foreign colleagues, which turned out to be extremely helpful as these lawyers had many years of experience in addition to very good personal contacts.

On the side of the defense, five “ potentially responsible parties ” were involved. At a very early stage of the negotiations their insurers jointly decided to first seek an overall settlement agreement with the families and afterwards to internally settle the question which party would have to contribute which proportion of the entire amount of damages paid.

As a consequence, detailed discussions as to what caused the catastrophe were immaterial in their negotiations with us, nor did we have to wait for any (interim) results of the investigations conducted by the French authorities.

Secondly said “ potentially responsible parties ” agreed to join forces by entrusting only two law firms with the entire negotiation work: the company lawyers of Air France and a London law firm which, for decades, has been retained by and been working for many air carriers and their insurers in similar catastrophes.

Doubtless, these preliminary efforts were the key to early negotiation results, and they are owed mainly to those colleagues who achieved such joining of forces on the part of the defense. Only then was it possible that the negotiations – conducted by a small group of active discussion participants - could focus directly on the issue of a fair and reasonable compensation.

Approaching a settlement agreement

Following an initial phase of extremely controversial negotiations, including the preparation of judicial proceedings, serious discussions on the possible dimension of a collective compensation began. Weeks of negotiations on the details followed. One essential task was to develop a system that would permit equal treatment of equal family situations. This was relatively easy as far as moral damages were concerned.

It turned out to be a much more difficult issue to integrate into such system the ideas of the families relating to the compensation of economic losses. Though, under French law, compensation for such damages can be awarded, it was unclear how such damages were to be assessed. Moreover, a few families had suffered extraordinarily high losses the compensation of which would have upset the equilibrium of any collective settlement.

In March/April 2001 the “ potentially responsible parties ” offered the families a settlement agreement according to which they were to waive any future claims for damages in return for a compensation payment. The offers included compensation payments for moral damages, the level of which was very high compared with European standards, thus taking account of the “American risk factor” of chances and risks of proceedings before US courts should the settlement negotiations fail. Certain limits were defined for the payment of compensation for economic damages.

After some discussion, these suggestions were accepted by all families though the figures had to be adapted in a few cases. Essential for that result was that, because of their litigation experience, the international colleagues we had retained considered the offers to be fair and reasonable[8].

Reasons in favor of a settlement agreement

Either side had good reasons to seek a settlement agreement in order to avoid the risk of the only alternative – litigation in the USA.

On the part of the claimants, there were three risks. The “forum non conveniens” principle applied by the US courts has been explained earlier herein. In that respect, the lawyers retained by the claimants had solicited extensive advice by American lawyers and other experts, whose opinion had been positive given the circumstances of the case. But the final decision will always lie with the courts, and hence any expert opinions will just indicate a likeliness but cannot guarantee what the court’s decision would eventually be.

Experience has shown that the dispute about this issue can take several years. Even in the event of an affirmative judgment the families would have had to bear the disadvantage of interest loss.

Thirdly, the decision by the US court on the amount of damages awarded would remain open until any final court decision is reached. In that respect, the plaintiffs’ lawyers can do extensive research into similar cases and solicit the opinions of experts, which has been done. However, such research cannot substitute the jury’s decision. This constituted a certain risk in the families’ special situation[9].

On the part of the “parties possible responsible” the risk – apart from the aggregate amount of any damages adjudged by any US jury – the principal risk was the risk of the costs of litigation. Unlike under German law, the precept that “the losing party has to pay” is unknown under the American law of litigations. Experience has shown that in any litigation of comparable scope – with a great number of defending companies involved – the legal fees for lawyers and experts can easily equal the amounts negotiated in the present settlement agreement.

In addition to that it is obvious that Air France, wishing to be able to soon put the Concorde aircraft into operation again, was interested in reaching an early and final settlement agreement.

The settlement agreement and its implementation

Once the lawyers of either side, after lengthy legal discussions, had agreed on the final text of the settlement agreement the implementation thereof was extremely complicated and at times over-bureaucratic. For instance, to meet the objective of fully discharging the “ potentially responsible parties ” from any further liability the matters of any families that were not party to the settlement agreement had to be severed, and so had to be the subrogated claims of German (social) insurers. Eventually, after lengthy discussions with all parties involved, this objective was met by obtaining a modified discharge of liabilities statement from the claimants[10].

It turned out to be highly expedient that the lawyers of either side had agreed to appoint a “Settlement Documentation Custodian”, a kind of trustee responsible for collecting and checking the vast number of settlement and other supporting documents
[11] and for procuring any corrections thereof etc. so that they would be available in due and correct form at the closing date and could be handed over in return for the checks.

Owing to such strategy it was possible to pay the compensations to the claimants prior to the expiration of twelve months after the catastrophe and to implement the settlement accordingly within one year’s time.

One of the consequences of this agreement has been that an operating license has been issued again for the Air France and British Airways Concorde aircrafts in early September 1002. Owing to the fact that, quite early in the investigations, a tank leakage caused by a burst tire was identified as having caused the disaster, British Airways and, some time later, also Air France could start test flights in order to verify the effectiveness of major modifications made to the landing gear and the tanks. The Concorde is now equipped with tires produced by Michelin, which will decompose into tiny parts as soon as any defect occurs. In addition to that, special fleece mats made of state-of-the-art plastic materials were affixed to the undersurfaces of the tanks in the wings, thus rendering higher stability to the tanks against exposure to external force.

So - as often happens in the event of aircraft disasters - the Concorde catastrophe of 25 July 2000 brought about a higher level of safety of the entire fleet of this aircraft type. However, the tragedy remains that, despite the incidents that occurred in the 1980s, such logical steps to remedy the problem were not taken any earlier and that the price of such higher safety now was the death of 113 men and women.

Result

As far as I know, the Concorde catastrophe is the first case of a mass tort disaster that was settled by agreement within one year’s time. What was needed to achieve this was, first and foremost, confidence - next to the will to arrive at a reasonable solution: the clients’ confidence in the competence of their own lawyers as well as confidence beyond the negotiating table.

It was only during the implementation phase that such mutual confidence was at times missing, which caused unnecessary delays and irritations. Therefore, in any similar future cases, it will be a must for the principal negotiators to agree on the procedural principles at an early stage of their negotiations so that those colleagues who will later deal with the details can go strictly by these principles.

However, the Concorde settlement agreement cannot be misunderstood as an example of how the drawbacks of German civil damages law can be “easily” circumvented by bringing action before the US courts. This spectacular case, with several US companies and a lot of additional criteria involved, is beyond comparison. It seems a thoughtless thing to do if some German colleagues, unfamiliar with American procedural law, are encouraging clients of all kinds of cases to start litigation in the US which, as experience has shown, they are bound to lose.
 

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[1] Bürgerliches Gesetzbuch – German Civil Code
[2] The Warsaw Convention mentions 250,000 (old) French Gold Francs, the (German) currency amount stated here is based on a conversion rate of 21.40 DM per 100  Gold Francs (see forth Regulation on the conversion rate, dated 4 Dec. 1973, BGBl I 1815)
[3] A criterion which practically goes beyond the meaning of the term gross negligence (under German law)
[4] 100,000 Special Drawing Rights
[5] Einführungsgesetz zum BGB = German International Private Law
[6] e.g. OLG Düsseldorf VersR 1997, 193 OLG Frankfurt ZfS 1998, 46
[7] e.g. BGH NJW 1989, 2317; the German Federal Minister of Justice refuses to discuss, or provide new regulations for, these issues in conjunction with the reform of contract law entering into effect next year
[8] According to our information the compensations paid in the Concorde case are the highest damages ever paid in Europe for an air crash.
[9] The passengers killed were mainly people beyond the age of 50 without any relatives that were financially dependant on them.
[10] Due to a strict secrecy agreement entered into by the parties to the agreement, no details about the settlement are available.
[11] According to rough estimates there were about 65,000 pages of paper that had to be correctly prepared, filled out, initialled, signed, and notarised.