Park, Hyun-Jin; (1998) Economic analysis of the legal regime for aviation liability. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

Despite phenomenal scientific and technological advances, statistics show that international carriage by air is still plagued by the risk of passenger, surface and environmental damage. If, as experience has demonstrated, aviation risk is inherent and unavoidable, the law of civil liability needs to be so efficiently formulated as to induce, through its financial incentive, all the parties involved to minimise combined accident and environmental costs plus their avoidance costs. And if international carriage by air is a product of joint activity involving various actors, they must as such be made to shoulder their own share of risk for equitable risk bearing. In this regard, existing international legal regime comprised of the Warsaw and Rome Convention system is piecemeal and far from desirable in terms of both efficient and equitable risk allocation. In the context of passenger damage risk, the air carrier and aircraft manufacturer should be held strictly liable for actual losses (with the defence of contributory negligence in the case of the carrier's liability). Under strict liability carriers and manufacturers will be forced to take all justified risk-reducing steps, reflect the costs in their prices, and/or take out adequate liability insurance. The negligence rule not only creates uncertainty over the due care level but presents victims with substantial difficulty in proving causal link. Although certain safety/security standards do create an incentive for airlines and manufacturers to take due care, nevertheless, courts do not necessarily adduce compliance with regulatory standards as a conclusive evidence of due care under liability rules. Aircraft operators should also be strictly liable for surface damage with the contributory negligence defence, since persons on the surface can affect risk (e.g. by failure to light at night a tall building below the flight path). The requirement of compulsory insurance has been found efficient, since it will protect risk-averse or even 'irrational' operators from catastrophic losses. In determining the law applicable to heads of damages in respect of both passenger and surface damage, courts should apply lex fori for administrative cost reduction. In the case of noise and pollution damage caused at airports, it is both efficient and distributionally desirable for airport operators to tax airlines for noise and pollution damage separately. This is because liability rules are not only imprecise for income distribution but ineffective for a large amount of damage thinly spread over a large population. This is also because airport operators are subsidised from public money for the provision of their services. Alternatively, members of international society may agree to tax international airport operators for pollution damage. The charges payable may be related not only to aircraft movements but to other relevant pollution factors. As to the ATC's passenger damage risk, ATC agencies should be taxed on the basis of their relative accident propensity. If passenger damage were caused concurrently by an ATC agency, carriers and manufacturers, respective liability should be apportioned among them on the basis of their relative accident probability or insurance claims record as evidence of their average level of care exercised. This accords with tort law's deterrence goal and with the insurer's experience-based premium-rating practice.

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