#4997 - British Airways Board V. Laker Airways - Conflict of Laws BCL

British Airways Board v. Laker Airways

Facts

From 1977 the rights of British and American airlines to operate transatlantic air services between the United Kingdom and the United States were regulated and controlled by a treaty between the two governments known as “Bermuda 2” under which each country had the right to designate airlines of its own nationality to fly particular routes. British airlines were subject to control by the United Kingdom Civil Aviation Authority (“C.A.A.”), which regulated their fares. The corresponding body for United States airlines was the United States Civil Aviation Board (“C.A.B.”). Article 12 of Bermuda 2 provided for the fixing of the tariffs of designated airlines, which were to be subject to the approval of the C.A.A. and the C.A.B., who had to try to ensure that the designated airlines conformed to the agreed tariffs. Both the plaintiffs, B.A. and B.C., and the defendants, Laker, were United Kingdom designated airlines licensed on terms that they charged fares approved by the C.A.A. and were only authorised to fly into United States airspace if those fares were approved by the C.A.B. In 1977, Laker obtained permission to operate “Skytrain,” which was a low-cost scheduled transatlantic service. Lakers later encountered financial difficulties and went into liquidation.

The other airlines operating scheduled services (as distinct from charter flights) across the North Atlantic between the United States and the United Kingdom and other destinations in Western Europe, including B.A. and B.C., were members of the International Air Transport Association ("I.A.T.A."). Between airlines that are members of I.A.T.A. ("I.A.T.A. airlines") there exist elaborate arrangements for co-operation, involving through-bookings for carriage by different airlines, interchangeability of tickets, co-ordination of time tables, uniform fares for various classes of travel providing differing standards of amenity and the like, with which air travellers are familiar.

Laker, upon becoming a designated British airline for the New York-London route, did not become a member of I.A.T.A. It did not conform to the I.A.T.A. fare structure or participate in any of its arrangements for collaboration between I.A.T.A. airlines.

Laker was so successful in attracting passengers that by the time of its collapse, in February 1982, Laker was carrying one-seventh of all passengers by air across the Atlantic between the United Kingdom and the United States.

Reduction in prices by IATA airlines: To meet what they regarded as the threat to the maintenance of payloads to which they were exposed by the lower fares charged by Laker under the Skytrain policy, the I.A.T.A. airlines introduced fares substantially lower than their uniform standard fares for the lowest class of travel, and approximately matching those charged by Laker. These new cheap fares were available on "stand-by" terms, depending on the availability of a seat, or were subject to compliance with requirements as to advanced booking; but, it is alleged by Laker, they were inclusive of “in-flight” amenities, for which extra charges were made under Laker's Skytrain policy.

By the beginning of 1982, Laker's finances had become overstretched, and disaster struck. The causes for this are not, in my view, a matter for your Lordships. Attempts at a rescue operation for re-financing Laker were made, but to no avail. The causes for their failure are also not a matter for your Lordships. On 5 February 1982 Laker ceased trading and on 17 February it went into liquidation in Jersey.

Action before American courts: The American action was started by a complaint, dated 24 November 1982, against a number of I.A.T.A. airlines: two of them, T.W.A. and Pan-Am, being U.S. airlines; two of them, B.A. and B.C., being British and the respective plaintiffs in the two English civil actions.

The allegations under the US complaint were two fold: (1) that the IATA Airlines colluded to ensure lower prices which they expected would drive Laker out of business (2) that when Laker was contemplating winding up, there were several entities that were willing to extend financial support – they were forced to withdraw from such scheme by the IATA companies.

Claims under the American Action: it alleges two causes of action ("counts"). The first is brought under section 4 of a United States Act of Congress, the Clayton Act (15 U.S.C. 12), and claims threefold damages for injury caused to Laker by unlawful combination and conspiracy between the defendants in restraint of and to monopolise trade or commerce contrary to sections 1 and 2 of the U.S. Act of Congress, the Sherman Act; the second count, based on the same facts, is described as “intentional tort.”

Holding

Lord Diplock

Two Circumstances when ASI may be granted

This, being said in the context of an application for a Mareva injunction, omitted to mention the type of case that is of comparatively rare occurrence in the English courts in which the plaintiff seeks against a person amenable to the jurisdiction of the English High Court an injunction to restrain the defendant from bringing suit against him in a foreign court upon the ground that the plaintiff is entitled under English law to a legal or equitable right not to be sued in that foreign court by that person upon the cause of action that is the subject of such proceedings. A right not to be sued upon a particular cause of action in a particular foreign court by the person against whom the injunction is sought may be contractual in origin. A common example of this is an exclusive jurisdiction clause in a contract. Furthermore, if under English law a defence would be available to the injunction-seeker, that defence may be given anticipatory effect as a right not to be sued that is enforceable by injunction in an action for a declaration of non-liability. Of such defences it is not difficult to point to a number of examples most of them equitable in historical origin, such as estoppel in pais (which was also a defence at common law), promissory estoppel, election, waiver, standing by, laches, blowing hot and cold - to all of which the generic description of conduct that is "unconscionable" in the eye of English law may be given.

Jurisdiction – Single-Forum Case

Upon the first proposition, that of American law, not only is the expert evidence all one way but it is also common ground between the parties, that if the allegations made against B.A. and B.C. in the complaint in the American action can be proved at the trial they disclose a cause of action by Laker against B.A. and B.C. under the antitrust law of the United States (viz. the Sherman Act and the Clayton Act) which falls within the jurisdiction of the Federal District Court for the District of Columbia within whose territorial area both B.A. and B.C. have premises at which they carry on business.

The second proposition, that of English law, was understood by your Lordships to have been common ground between the parties, at any rate throughout the lengthy hearing of the appeal; no argument casting any doubt upon it was advanced. The proposition is that, even if the allegations against B.A. and B.C. in the complaint in the American action can be proved, they disclose no cause of action on the part of Laker against B.A. or B.C. that is justiciable in an English court. The Clayton Act which creates the civil remedy with threefold damages for criminal offences under the Sherman Act is, under English rules of conflict of laws, purely territorial in its application, while because the predominant purpose of acts of B.A. and B.C. that are complained of was the defence of their own business interests as providers of scheduled airline services on routes on which Laker was seeking to attract customers from them by operating its Skytrain policy, any English cause of action for conspiracy would be ruled out under the now well-established principle of English (as well as Scots) law laid down in a series of cases in this House spanning 50 years of which it suffices to refer only toMogul Steamship Co. Ltd. v. McGregor, Cow & Co.

Single Forum Reasoning

In the result your Lordships are confronted in the civil actions with a case in which there is a single forum only that is of competent jurisdiction to determine the merits of the claim; and the single forum is a foreign court. For an English court to enjoin the claimant from having access to that foreign court is, in effect, to take upon itself a one-sided jurisdiction to determine the claim upon the meritsagainst the claimant but also to prevent its being decided upon the meritsin his favour. This poses a novel problem, different in kind from that involved where there are alternative fora in which a particular civil claim can be pursued: an English court and a court of some foreign country both of which are recognised under English rules of conflict of laws as having jurisdiction to entertain proceedings against a defendant for a remedy for acts or omissions which constitute an actionable wrong under the substantive law of both England and that foreign country…

Cases which have these characteristics can now conveniently be labelled as forum conveniens cases…. In them the High Court has jurisdiction to control how the choice of forum shall be exercised. It does so by the use, as circumstances may require, either of its discretionary power to grant or refuse a stay of the action in the English court by the party who is a plaintiff there, or of its discretionary power to enjoin a party who is, or is...