The case of XX Airlines vs. JinX Company over air cargo transportation contract dispute
The case of XX Airlines vs. JinX Company over air cargo transportation contract dispute
[Basic facts]
In January 2022, XX Airlines and JinX Company signed a Transportation Agreement, in which the two parties agreed that XX Airlines operates flights between Beijing and Los Angeles, JinX Company charters flight and pays fees, the chartered flight price is linked to the fuel price, the Chinese laws shall apply on contract validity, interpretation and performance, and the Montreal Convention shall apply on the carrier’s liability for compensation towards the charterer. The two parties then signed a Supplementary Agreement for price decrease in low seasons and price increase in high seasons. When performing the contract, XX Airlines shipped JinX Company’s cargo to Los Angeles as agreed. Occasionally, some cargo was left unloaded or lost due to insufficient space in cargo hold, runway restriction or weather conditions, but the left-over cargo was all transported in the earliest possible flights thereafter. In July 2022, JinX Company stopped to pay the chartering fees on the grounds that the international fuel price hike had made the charter price too expensive, which constituted a tacit condition, and unilaterally terminated the contract. XX Airlines sued JinX Company, claiming the payment of the default fuel surcharges and charter fees and penalties, and JinX Company counterclaimed the return of the deposits and the compensation for the left-over and lost goods.
[Judgement]
Haikou Maritime Court argues that the litigants are Chinese companies but the flights operated between Beijing and Los Angeles, and according to the Montreal Convention, Article 1 (2), the air transportation concerned in this case is defined as international carriage, and thus the Montreal Convention should apply in priority; as Montreal Convention contained no provisions on contract establishment, validity, interpretation, performance and alteration disputes, the Chinese laws should apply as agreed between the two parties; and JinX Company unilaterally terminated the contract, an act which constitutes a breach of contract, and its defense of tacit condition is unfounded; and thus ordered JinX Company to bear the legal liabilities to pay the fuel surcharges of 4,516,550 yuan, charter fees of 3,125,000 yuan and the overdue payment penalties. According to the Montreal Convention and the ICAO Council provisions on liability limit, in case of cargo loss or damage, the carrier shall make compensations at the price of 22 SDRs per kilogram of cargo, provided that the consignee complained within 14 days after the receipt of the goods, after which, he may not sue the carrier. JinX Company failed to complain before the deadline and has thus lost its claim; with regard to the part of complaint raised before the deadline, for which the compensation, pursuant to the provisions of the Montreal Convention, should be calculated by the weight of the lost or damaged cargo, and as JinX Company did not supply any evidence to prove the weight of the lost goods, its counterclaim of compensation for the left-over and lost cargo cannot be supported. JinX Company refused to accept the first-instance judgment and lodged an appeal and then withdrew it, and Hainan High People’s Court decided to allow the withdrawal of the appeal.
[Significance]
In the Opinions of the Supreme People’s Court on the People’s Courts Providing Judicial Service and Assurance for the Hainan Free Trade Port Development, the Supreme People Court opines that “Haikou Maritime Court expands its case-filing scope of civil and commercial lawsuits, accepts and hears international multimodal transport contract disputes and international air transportation contract disputes, and exerts its advantage in adjudicative specialization to promote the implementation of a highly free, convenient and open transportation policy”. This case, as the first international cargo carriage contract case in which the maritime court applied international treaties, shows the implementation of the spirit of the Opinions above and the expansion of Haikou Maritime Court’s case-filing scope of civil and commercial cases. When handing this case, the court applied international treaties in priority, displayed an open and inclusive judicial image of China in abiding by treaty obligations, and demonstrated the application criteria of cargo loss compensation conditions and tacit conditions as stipulated in the Montreal Convention. This case exhibits the advantage of FTP courts in adjudicative specialization and sets a meaningful example for clarifying the judgement rules for international carriage contract disputes and regulating the right-duty relationship in the international air logistics service.
