Chapter

1 Case Law: France, Germany, Italy

Author(s):
Joseph Gold
Published Date:
December 1989
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The Problem

The interpretation of provisions in treaties that include gold units of account, such as the Poincare franc or the Germinal franc,1 continues to be a problem for the courts because of the abrogation on April 1, 1978 of an official international price of gold by the Second Amendment of the Fund’s Articles of Agreement. It has been shown in earlier discussions2 that the solutions adopted by the courts have fallen into one or the other of two categories: application of the market price of gold, or the rejection of it.

A number of solutions have fallen into the second category: the last par value established under the Articles before the Second Amendment for the currency to be awarded by the court; the last par value adapted according to an index of retail prices; the last “central rate” established under decisions of the Fund after the breakdown of the par value system and before the Second Amendment;3 the present French franc as if it were equivalent to the Poincaré franc; and the SDR solution, as described in the Introduction to this volume, which takes the ratio between the definition of the SDR in terms of gold before the Second Amendment4 and the definition of the gold unit to be applied, so as to arrive at a value for the unit in terms of the SDR. The exchange rate of the currency in terms of the SDR is then applied. This solution has been the basis for the amendment of existing treaties or for new treaties, unless the contracting parties have decided to increase the amounts to which the treaties refer. In that event, parties have defined the amounts in terms of their preferred unit of account, which usually has been the SDR. The SDR is the Fund’s unit of account. The Fund’s method of valuing the SDR will be found in the Appendix to this chapter.

In applying the SDR solution, some courts have found that as a result of the Second Amendment a gap exists in a treaty in place of the prescription of a gold unit of account, but the courts have found it possible under their law to fill the gap. The Supreme Court of the United States has held, in Trans World Airlines, Inc. v. Franklin Mint Corporation et al.5 (referred to hereinafter as the Franklin Mint case), that there is no gap in American law because the law empowers the appropriate governmental authority to express the value in U.S. dollars of the Poincare franc under the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air, October 12, 1929 (“Warsaw Convention”). The Supreme Court rejected the decision of the U.S. Second Circuit Court of Appeals that the limit on liability in the Warsaw Convention was unenforceable because it was expressed in terms of gold.6

The Articles do not deal with the validity of gold units of account in treaties existing at the time of the Second Amendment or in treaties negotiated subsequently. In particular, the Articles do not invalidate the use of such units of account. The Articles say nothing about the way in which gold units of account should be applied. It has been seen in the Introduction to this volume that the Articles provide that members of the Fund must not maintain the external value of their currencies in terms of gold. Furthermore, if the Fund were to call into operation, under Article IV, Section 4, the par value system that is set forth in Schedule C, the common denominator of that system must not be gold, as it was under the Articles before the Second Amendment, or a currency.7 The Fund would be able to choose the common denominator, and it is implied that preference is to be given to the SDR.8 Article VIII, Section 7 and Article XXII, which are quoted and discussed in the Introduction, support this implication. Choice of the SDR, however, is not made mandatory, because the method of valuing the SDR at the time might not be satisfactory and it might not be possible to assemble the special voting majority necessary for a decision to establish another method of valuation.9

The relevance of the Articles to the problem of gold units of account is that each member of the Fund is entitled to choose its exchange arrangement, subject to the one exception of maintaining the external value of the member’s currency by reference to gold. There exists no official price for gold that has international recognition, and such an official price would be contrary to the Articles. Furthermore, Article V, Section 12(a) directs the Fund to be guided in all its policies and decisions when disposing of its holdings of gold by the objective of avoiding management of the price, or the establishment of a fixed price, in the gold market. The SDR has replaced gold as the Fund’s unit of account,10 and the Fund and its members are directed, in convoluted language, to observe the objective of making the SDR the principal reserve asset in the international monetary system.11

France

On May 7, 1986 the Court of Appeal of Paris delivered a further judgment in Société Egyptair v. Chamie,12 a case that has gone through a number of stages and has attracted much attention in France and elsewhere. The plaintiff, a Lebanese, claimed compensation for baggage lost on an Egyptair flight on August 26, 1978 from Damascus, Syria, to Paris via Cairo. Egyptair admitted liability and relied on Article 22 of the Warsaw Convention, as amended by the Hague Protocol, limiting the carrier’s liability. Under Article 22 of the Warsaw Convention:

2. In the carriage of registered luggage and of goods, the liability of the carrier is limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that that sum is greater than the actual value to the consignor at delivery.

4. The sum mentioned above shall be deemed to refer to the French franc consisting of 65½ milligrams gold of millesimal fineness 900. These sums may be converted into any national currency in round figures.

Article XI of the Hague Protocol modified these paragraphs as follows for states accepting the Protocol:

2.(a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of two hundred and fifty francs per kilogramme, unless the passenger or consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that that sum is greater than the passenger’s or consignor’s actual interest in delivery at destination.

5. The sums mentioned in francs in this Article shall be deemed to refer to a currency unit consisting of sixty-five and a half milligrammes of gold of millesimal fineness nine hundred. These sums may be converted into national currencies in round figures. Conversion of the sums into national currencies other than gold shall, in case of judicial proceedings, be made according to the gold value of such currencies at the date of the judgment.

The court of first instance, the Tribunal de Grande Instance of Paris, decided on October 6, 1978 that the Poincaré franc had to be applied with reference to the market price of gold in Paris. On appeal, the carrier argued that the Convention itself rejected the market price, that the Second Amendment of the Articles could not affect the Convention, and that the last par value of the French franc established under the Articles on August 10, 1969 was the basis for calculation of any recovery. The Court of Appeal held on January 31, 1980 that as the market price had no official status and as the par value had been abrogated by the Second Amendment, the only possible solution was recognition of the current French franc as the successor and the equivalent of the Poincaré franc.13

The Cour de Cassation, on March 7, 1983, quashed the decision of the Paris Court of Appeal in Société Egyptair v. Chamie and remitted the case to the Court of Appeal.14 Two grounds were cited for this decision. First, the decision of the Court of Appeal imposed on the parties a method of computation different from the one presented by the Convention. Second, the courts must observe the official interpretation by the appropriate governmental authority of a diplomatic treaty involving monetary public policy as defined by international treaties in force. The courts must apply to the governmental authority for such an interpretation.15 The Court of Appeal decided, on December 5, 1984, to follow this procedure because the issue in this case did involve monetary public policy as defined by treaties in force. The court requested the Government to provide an interpretation of the combined effect of the Convention, as amended by the Hague Protocol, and the Second Amendment of the Fund’s Articles.16 The Minister of External Relations responded on June 19, 1985, and the Court of Appeal of Paris delivered its decision on May 7, 1986, on the basis of that response.17

The Minister replied that because of the development of the international monetary system, involving the First and Second Amendments of the Fund’s Articles, the SDR “has become the unit of account of the new system” and is to serve “henceforth as the standard of value for the definition of parities.”18 The SDR, the Minister continued, is now defined pursuant to Article XV, Section 2 of the Articles, not in terms of gold, but according to a basket of currencies revised from time to time by the competent organs of the Fund.

The Minister provided, in addition, data about the effects of the SDR solution. When the First Amendment took effect on July 28, 1969, the maximum limit fixed by the Convention was equivalent to SDR 16.5837 per kilogram. On June 10, 1985, SDR 1 was equal to 9.3762 French francs, so that, on the same date, the limit of 250 Poincaré francs was equivalent to F 155.43.

The lost baggage weighed 50 kilograms. On this basis and the calculation shown above, Egyptair contended that its liability was limited to F 7,771.50, so that Egyptair was entitled to a refund by Mrs. Chamie of F 4,728.50. The overpayment was the result of Egyptair’s compliance with the judgment of January 31, 1980, which subsequently had been quashed.

Mrs. Chamie challenged the authority of the Minister to impose an interpretation in a case involving a dispute between a Lebanese citizen and an Egyptian company regarding the improper performance of an international contract of carriage entered into in Syria. She challenged also the appropriateness of the SDR solution. She claimed that in accordance with “le droit commun” she was entitled to a further sum of F 14,408.

The court held that as provisions of a diplomatic treaty establishing public policy of a monetary character were involved, interpretation of the provisions was the prerogative of the French Government. It was the exclusive competent authority for the benefit of the French judiciary, because the Government was solely responsible for public international relations, was deemed to express the opinion of the depository of the convention, and handed down uniform interpretations of it.19 Mrs. Chamie, who was seeking reparation in France, was not entitled to base her claim on principles of the so-called droit commun and to set aside the principles of an international settlement procedure that was in effect and mandatory. The court ordered Mrs. Chamie to refund the difference between the amount she had received and the amount of compensation properly owed to her.

An important feature of this case is, of course, the application of the SDR solution. But, in addition, it is noteworthy that the solution was applied in accordance with a governmental interpretation of the meaning of the Warsaw Convention in current conditions. The procedure, which was required by French law, was unlike the procedure followed in some countries in which the appropriate minister issues a decree under statutory authority directing that the SDR solution is the correct method of calculating maximum liability. In some instances, the decree simply states the equivalent in domestic currency of the maximum amount, but bases that equivalent on the SDR solution.

Mr. Jacques Borricand, in commenting on the case, has pointed out that there was some learned opinion in favor of the view that the problem of applying the Poincaré franc could not be solved without an official declaration of its value in French francs or an amendment of the Convention. (This latter view, as noted above, had been reached by the U.S. Second Circuit Court of Appeals in the Franklin Mint case.)

The commentator is critical of the SDR solution. He argues that it is inconsistent with the intent of the Warsaw Convention, because the solution, in contrast to the adoption of a gold unit, is not universal. Although the SDR solution as applied by the court was close to the ceiling of SDR 17 per kilogram included in the Montreal Protocols, those agreements had not yet come into force. To illustrate the diverse and contradictory solutions that had been applied by courts, Mr. Borricand cited the Franklin Mint case, the Italian case Coccia v. Turkish Airlines, and the decision of a Munich court. (The Italian and Munich cases are discussed later in this chapter.) The diversity could provoke forum-shopping because, in accordance with Article 28 of the Warsaw Convention, a claimant has the option of suing in the courts of any one of four specified countries as determined by the facts of the case. It has been calculated that the ceilings on compensation could vary by a factor of 1 to 14.

The commentator draws attention to the sentence of the Convention which declares that “[t]hese sums may be converted into national currencies in round figures,” and he emphasizes the word “may.” He implies that the sentence creates an option for states in determining the amount of the currency of payment, although this amount must respect the value of gold as the “currency” of account. Nevertheless, this line of argument, it will be seen, does not lead him to unequivocal support of the market price of gold as the solution of the problem.

Mr. Borricand thinks there is some question whether the Second Amendment has brought about a mandatory legal modification of international liability conventions, but he concludes that the Second Amendment has not had this effect. His reasoning is that the scope of the two treaties is different, and that the Second Amendment does not contradict Article 22 of the Warsaw Convention. The Articles establish the parity of the national currency for all transactions between the state and its subjects, while the Convention affects only private interests. Even if there were a conflict, the Convention should have legal supremacy. The argument is fallacious: the external values of currencies are not established by or under the Articles, except in the sense that the Articles leave members free to take this action.

He argues also that nonmembers of the Fund cannot be subject to the SDR solution. There is no legal impediment to this solution for nonmembers, however, unless their own law precludes it. Developments in the negotiation of treaties show that, even in such a case, it is feasible for the courts of the nonmember to give judgments in amounts that approximate the amounts that would be awarded by a member’s courts on the basis of direct application of the SDR solution.20

Mr. Borricand wonders whether the Minister’s method results in the undercompensation of victims. The recoveries are not commensurate with those that travelers by land are likely to obtain. The free market price of gold would provide larger recoveries, but he sees shortcomings in this solution. The price of gold is unstable, so that the compensation of victims would be uncertain, and there is the risk of overcompensation. He points out that the value of the SDR also fluctuates. He raises the possibility of negotiating a universal standard, perhaps the SDR combined with an appropriate price index. If, however, the SDR is deemed to fluctuate in value, so too would the standard he recommends for consideration.

Federal Republic of Germany

The solution of the problem of applying the Poincaré franc in the Warsaw Convention under German law has been the subject of differences of opinion among courts and among legal scholars in the Federal Republic. An account of the views of some scholars must be prefaced with a summary of the provisions of German law that have been considered relevant to the problem.

The Warsaw Convention was ratified by the Reichstag and duly published on November 30, 1933. The Convention remains in effect pursuant to Article 123(1) of the Basic Law (embodying the Federal Constitution). The Convention was amended by the Hague Protocol and incorporated into German domestic legislation by a law adopted and published on August 7, 1958. (References hereinafter to the Convention are to the Warsaw Convention as amended by the Hague Protocol.)

In accordance with Article 22 of the Convention, Article 2 of the Reich Government Law on Implementation of the First Convention on Unification of Private Air Law of December 15, 193321 (hereinafter referred to, as amended, as the Implementing Law) provided that, instead of the amounts of Poincaré francs to which liability was limited under the Convention, the corresponding amounts of Reichsmark would be used, and the rate for this purpose would be 100 Poincare francs = 16 Reichsmark. The Reich Minister of Justice was authorized to specify a different rate. Article 2, in translation, read as follows:

(1) The maximum amounts that Article 22 of the Convention expresses in French currency are replaced by corresponding amounts in Reich currency. For conversion, 100 French francs are to be valued at RM 16.

(2) The Reich Minister of Justice can designate a different conversion rate.22

Article 80.(1) of the Basic Law provides that:

The Federal Government, a Federal Minister or the Land Governments may be authorized by a law to issue ordinances having the force of law [Rechtsverordnungen]. The content, purpose, and scope of the powers conferred must be set forth in the law. The legal basis must be stated in the ordinance. If a law provides that a power may be further delegated, an ordinance having the force of law shall be necessary in order to delegate the power.23

The Implementing law was amended by the Law on Measures in the Field of Transport Law and Transport Liability Law of July 16, 1957.24 The amendment eliminated a conversion factor and instead authorized the Federal Minister of Justice to specify the rate for translating Poincare francs into deutsche mark on the basis of the official price of gold, and to do so by means of an order not requiring the assent of the Bundesrat:

By means of an Order, which does not require confirmation by the Bundesrat, the Federal Minister of Justice is authorized to prescribe the conversion rate for French francs into deutsche mark in accordance with the officially determined price of gold.25

The Federal Minister of Justice has exercised this authority by issuing so far a succession of four Conversion Orders, of which the two most recent ones have been the Third and Fourth Conversion Orders. The Third Conversion Order, effective December 22, 1969, declared 100 Poincaré francs to be equal to DM 24.30. The rate reflected the revaluation of the currency that took effect on October 22, 1969. The Fourth Conversion Order on the Exchange Rate for French Francs in Application of the First Convention on Unification of Private Air Law, effective December 4, 1973,26 substituted the rate of 100 Poincaré francs equal to DM 21.40.

This rate reflected the central rate established under decisions of the Fund designed to create a temporary exchange rate regime pending amendment of the Fund’s Articles. Germany expressed the central rate for the deutsche mark in terms, not of gold, but of the SDR, which at that time, however, was still defined in terms of gold.

Solution of the problem of applying the Poincaré franc under the provisions of German law summarized above is said27 to have been further complicated by a decision of Regional Court I of Munich (Landgericht I, Munchen), delivered on February 21, 1984.28 The decision is laconic and not easy to follow. The ratio decidendi seems to have been, first, that the Implementing Law replaced the amount of Poincaré francs with corresponding amounts of German currency. Second, there appeared to the court to be an unexpressed but fundamental intention of the drafters of the Implementing Law, in compliance with the Warsaw Convention, to give claimants the deutsche mark equivalent of the true value of gold, which was to be ascertained in the market. Third, the court found that the Conversion Order deviated from the Implementing Law in this respect because the Order was based on the official price of gold, which was only a fraction of the market price. This analysis seems to be confirmed by the statement that “[a]s a consequence, the value of the liability sums is far lower than the value of the amounts originally deemed appropriate.”29

The court concluded that the Order was invalid and apparently unconstitutional, on the ground that it went beyond the limits of Article 80 of the Basic Law. Why Article 80 of the Basic Law was invoked was not made clear. Perhaps the reason was that the Basic Law preserved the efficacy of the Warsaw Convention; the Implementing Law was intended to make the Convention effective by providing for amounts in German currency that corresponded to the value of Poincaré francs; but the Fourth Conversion Order failed to achieve this objective and therefore was contrary to the Basic Law and the preservation of the Convention under it. If this analysis is correct, it assumes, as suggested already, that the true value of gold is dictated by German law, and that in current conditions the true value is the market price and not the price expressed in the Fourth Conversion Order as the basis for corresponding amounts of deutsche mark.

The case has been discussed by Dr. Jürgen Basedow,30 Mr. Gerhard Turek,31 and Professor Franz Kn?pfle.32 Dr. Basedow welcomed the decision as the first effort by a German court to reduce the harshness of the liability limits of the Convention. He questions the court’s reasoning as incomplete, but on the whole he sets forth an analysis of it, in much greater detail, that does not differ essentially from the reasoning assumed above. He disagrees with the court’s finding that the Fourth Conversion Order is not binding because it was based on the official price of gold. The Implementing Law prescribes this measure of value.

Dr. Basedow argues that the issue is not the link between the Fourth Conversion Order and the Implementing Law, but the purpose of the Law in linking the conversion rate to gold. The link established in 1957 was obvious, because, in the days of the par value system, the link ensured the application of an internationally uniform calculation of the liability limits in the Convention. However, currencies have been floating for some years; the par value system was abrogated by the Second Amendment, and even before that date members of the Fund had agreed not to observe the official valuation of gold;33 the Bundesbank ceased to publish the par value of the deutsche mark and the official price of gold in early 1973. He concludes that the official gold price had lost its character as such in 1973. Therefore, the legality of the Fourth Conversion Order cannot be determined by reference to an official gold price, because that price does not now exist.

There is an inconsistency, however, in Dr. Basedow’s argument that had the official gold price ceased to exist by the time the Fourth Conversion Order was issued, the subsequent abandonment of the par value for the deutsche mark34 would have prevented the conclusion that the Order was invalid. The Order was promulgated on December 4, 1973, but Dr. Basedow argues that the official gold price had ceased to exist by early 1973.

Dr. Basedow arrives at the central element in his argument: the question whether the sense and purpose of the Implementing Law permit or even prescribe recourse to the last official gold price. The question could be answered only by taking account of the broader objective of the Implementing Law, namely, the international uniformity of liability limits. The question then became, in his opinion, the appropriate unit of account in present conditions, in which members are free to determine exchange rates and the price of gold.

In a system of freely determined exchange rates and gold prices, he asks what is the value of the Poincaré franc? To answer this question, an interpretation of the current law is necessary, and it must satisfy two tests. The first test is that the interpretation results in a limit of liability equivalent to the one included in the Warsaw Convention and uniform for all contracting parties, which implies that all parties will apply the solution. The second test is that the interpretation is consistent with national laws.

Dr. Basedow dismisses certain solutions that have had some support, such as the equivalence between the Poincaré franc and the current French franc. He would regard the SDR solution as reasonably satisfactory de lege ferenda, even though the amounts of currencies awarded in recoveries would vary with the changing value of the SDR and even though the value of the SDR would be affected by inflation. The solution would be compatible with: international monetary developments; the amending protocols to liability conventions, especially the Montreal Protocols to the Warsaw Convention, although the Montreal Protocols have not yet taken effect; recommendations of the United Nations Commission on International Trade Law (UNCITRAL);35 the decisions of a number of courts; the adoption by lawmakers in a number of countries of special conversion laws in anticipation of the amendment of conventions containing a gold unit of account.

The Federal Republic has adopted a Gold Conversion Law.36 It applies the SDR solution to conventions in which a gold unit of account appears, until such time as existing conventions are amended or new conventions are substituted for them. The existing conventions to which the Law applies are listed, but the Warsaw Convention is not among them. Dr. Basedow holds that particularly when there is such a recent law, there is reason enough to refrain from applying the SDR solution by judicial action, even though that solution would be in accord with the evolution of judicial opinion. German jurisprudence before 1980 that favored the SDR solution should not be given weight because the cases preceded the Gold Conversion Law.

He holds that German courts would consider the possibility of recourse to the SDR solution only when the overwhelming majority of countries had taken this step, so that the principle of international uniformity would require German law to do likewise. For the time being, however, in the United States, the country with the most important air transportation industry, the Supreme Court in the Franklin Mint case37 had confirmed the legality of applying the last official price of gold in U.S. dollars. Dr. Basedow advances reasons why a uniform calculation of the liability limits in dollars and in deutsche mark would not be achieved if German courts were to apply the Fourth Conversion Order. One reason was the fluctuation of the exchange rate between the two currencies.

Dr. Basedow concludes that the only solution that can be justified at this time is the one based on the current market price of gold. Decisions in other countries were in line with the decision of the Munich court, and this solution adhered closely to the text of the Warsaw Convention. The solution achieved uniformity, which cannot be claimed for the solution based on the last official price of gold in view of the fluctuation of exchange rates. Dr. Basedow is aware of the objection that the unstable price of gold would produce fluctuating recoveries, but he responded by citing the relative flattening of the price for some time before the date of his article. He was untroubled also by the existence of a number of gold markets, because the differences among them cannot be great. He suggests that the solution might be based on the average of prices in the principal markets (London, New York, and Zürich).

Dr. Basedow’s argument leads him to hold that if the Federal Government should wish to apply the SDR solution to the Warsaw Convention, as the Government has done in relation to other conventions, it would not be sufficient to issue a Fifth Conversion Law. Amendment of the Implementing Law would be necessary as well.

A difficulty with Dr. Basedow’s analysis is that it builds a legal argument on contralegal considerations. The analysis is based not on the legal obligations of members, but on the practices of members of the Fund in breach of their obligations. He states that, by March 1973 at the latest, the German authorities as well as the authorities of other members had ceased to respect the official price of gold, by which he means that they were not performing their obligations on exchange rates under the Articles. March 1973 is mentioned because the attempt made by the Smithsonian Agreement of December 18, 1971 and the Fund’s decisions on central rates to maintain fixed exchange relationships among the currencies of all members had failed. After that time, some of the member states of the European Economic Community maintained fixed exchange relationships among their currencies and narrow margins for exchange transactions but not a fixed relationship with the U.S. dollar or with other currencies. Dr. Basedow recognizes that the official (namely, legal) termination of par values and the official gold price occurred only with the Second Amendment.38 If, however, the widespread failure of members to observe their par value obligations under the Articles is necessary to sustain his argument, he should have been aware that these obligations were not observed at any time after August 15, 1971, on which day the President of the United States announced that the United States would not convert foreign official holdings of dollars with gold or take other measures to maintain particular exchange rates for the dollar.39

In the period before the Second Amendment, the Fund adopted decisions on December 18, 1971 and November 7, 1973 setting forth a temporary regime that members might wish to observe as a means of collaboration to preserve order pending the resumption of effective par values and margins for exchange transactions in accordance with the Articles. The decisions contained provisions on central rates, which were not par values, and margins that were wider than those prescribed by the Articles.40 The practices set forth in the decision were designed to control an illegal situation and minimize the disorder that it might produce. But the practices themselves could not eliminate the continuing illegality of the failure by members to perform their obligations based on par values. The Federal Republic notified the Fund of a central rate for its currency against the dollar immediately after, and in accordance with, the Smithsonian Agreement, and notified the Fund of subsequent changes in the central rate. The later central rates were defined in terms of the SDR, which at the time was defined by reference to gold.41

It is not obvious why Dr. Basedow has thought it necessary to demonstrate that the Implementing Law could no longer justify recourse to the official price of gold when the Fourth Conversion Order was adopted. The argument could have been made with greater force on the basis of the Second Amendment. By concentrating on the situation before the Second Amendment, he has to examine the question whether the official gold price had disappeared by March 1973, and he is led to make the incorrect assertion that it had disappeared in law.

Even if the proposition is accepted that the conduct of members in breach of provisions of an international treaty has the effect of setting aside those provisions, the conduct of members did not go as far as Dr. Basedow describes. It is true that members were not observing the parities between currencies that resulted from par values expressed, directly or indirectly, in terms of gold as the common denominator of the par value system. But members were not violating their obligations with respect to gold transactions. Members were not selling gold, because sales in accordance with their obligations would have been unprofitable, and members did not wish to buy and sell gold unless the transactions could be considered valid. The Managing Director, advised by the staff, held the view that transactions at prices not based on par values were not validated because exchange rates were contrary to the Articles. The transactions would simply have been further violations. The Fund did not take a decision contrary to this view. It could be said, therefore, that monetary authorities did not conclude that the official price had disappeared for the purpose of gold transactions.

What were the obligations of members with respect to gold transactions? Members were prohibited from selling gold to anyone (members or private parties) at a discount below the par value of the currency for which the gold was sold, or from buying gold from anyone at a premium above the par value of the currency for which the gold was bought.42 No obligations were laid on members to prevent gold transactions between private parties at prices inconsistent with par values. Nor were members prohibited from selling gold to private parties at a premium or from buying gold from them at a discount. A consequence of the obligations and the limits on them was that so-called private or nonofficial gold markets were legal and that members could engage in certain transactions in these markets. But another consequence of the provision was that a member could not sell gold to another member at a premium, because that other member would then be buying gold at a premium in violation of its obligation. Similarly, a member could not buy gold at a discount from another member, because that other member would be selling gold at a discount in violation of its obligation. In effect, gold transactions between members could be conducted only at prices that respected the official price.

The Fund’s insistence that members had to observe their obligations with respect to gold transactions is illustrated by the terms and conditions of the auctions of 25 million ounces of gold that the Fund began to hold in 1976 on behalf of the Trust Fund of which the Fund was Trustee. One of the terms and conditions was that:

No bid may be submitted by the governmental or monetary authorities of a member of the Fund or by an agent acting on behalf of these authorities at a price inconsistent with the Articles of Agreement of the Fund, but the Bank for International Settlements may submit bids.43

The reason why this term was included in the invitations to bid was the expectation that the gold would be sold at a premium, so that purchases by or on behalf of a member would violate its obligation.44

Mr. Turek has expressed the view that, in accordance with longstanding jurisprudence of the Federal Constitutional Court and the prevailing concept in legal literature, the expiration or subsequent amendment of a criterion in an implementing law has no effect on the continued existence of a decree that was lawfully enacted before the expiration or amendment of the criterion. He concludes, therefore, that under German law the Fourth Conversion Order is still in effect. The doctrine on which Mr. Turek relies may explain why Dr. Basedow holds that by the time the Fourth Conversion Order had been decreed, it had become impossible to apply the criterion of the official price of gold and why the real problem was the meaning, after collapse of the par value system, of the Implementing Law viewed as an instrument for giving effect to the purpose of the Warsaw Convention.

Mr. Turek disagrees with the decision of the Munich court on the ground that the Implementing Law authorizes the Federal Minister of Justice to prescribe the rate of exchange for French francs by reference only to the officially established price of gold in deutsche mark. He agrees, however, that there is now no officially established price. It disappeared with the Second Amendment and not with the developments of 1971. Those developments did not affect the Warsaw Convention, because legally there was still an official price of gold. The SDR was defined in terms of gold. The Fourth Conversion Order was based on this definition, so that when it was decreed the Order was valid and effective. This view implies that the official price of the Poincaré franc in terms of the deutsche mark was based on the central rate and not the par value of the currency. The tie with gold and with the SDR defined in relation to gold has been cut by the Second Amendment, but the Fourth Conversion Order remains in force and must be applied.

Mr. Turek calls for transitional regulations to eliminate the uncertainty the airlines have suffered as a result of the Munich decision and to deal with the huge increase in exposure that was created for them. On the basis of the official price of gold, the maximum liability for loss of baggage would be DM 53.50 per kilogram, while under the Munich decision the corresponding amount would be DM 525.

He makes the point that basing transitional arrangements on the market price of gold would be contrary to the meaning and purpose of the Warsaw Convention. The Munich decision shows that the market price would make the maximum limits of liability obsolete, as shown by the calculation of DM 525 per kilogram. The value of baggage would not reach this amount. The market price, furthermore, was subject to considerable random fluctuations, which the Convention sought to avoid by means of the fictitious gold unit of account. He proposes adoption of the SDR solution, which, on February 4, 1985, the date at which he was writing, would have resulted in a maximum recovery of DM 52.74 per kilogram. The SDR solution, he pointed out, would be consistent with Germany’s Gold Franc Conversion Law and with the proposed Montreal Protocols.

Professor Knöpfle also has expressed the view that the Fourth Conversion Order was valid and constitutional when issued and remained in effect notwithstanding the changes in the world’s monetary arrangements. The officially fixed price of gold referred to in the Implementing Law, as amended, meant the price of gold under the Fund’s Articles. Although the price as determined in this way had ceased to exist by December 1973, when the Fourth Conversion Order was issued, it was still possible at that time to arrive at an exchange rate for the deutsche mark in relation to the SDR and therefore to gold.

This reasoning is incorrect. In December 1973, the par values established under the Articles had not ceased to exist in law, even though members were not making par values effective. The SDR was defined in relation to gold and the value of the SDR in terms of currencies was determined by par values, which were established in terms of gold as the common denominator of the par value system. The Fund had not yet adopted the method of valuing the SDR on the basis of a basket of currencies. The first version of this method became effective on July 1, 1974.45 At that time the value of the SDR as calculated under this decision was deemed by a legal fiction to be consistent with the definition of the SDR in terms of gold, which remained in the Articles until the Second Amendment took effect on April 1, 1978. The central rate for the deutsche mark had been expressed in terms of the SDR, and even if a gold value could be imputed to the currency for this reason, as noted already the Articles did not confer a legal status on central rates as substitutes for par values.46 Dr. Knöpfle, however, approves of the view of another author that “central rates have to be viewed as temporary alternative par values, that is, as stable but adjustable rates.”47

Although the price of gold in Germany was fixed in terms of the SDR and not deutsche mark, Professor Knöpfle maintains that a price based on the central rate of the currency expressed in terms of the SDR meets the requirement of a teleological interpretation of the Implementing Law. This rationale was explained by the Federal Minister of Justice when issuing the Fourth Conversion Order.

Professor Knopfle explains that a legal provision can lose its legal force under German law in the event of a complete change in the circumstances it was intended to regulate, without the necessity for a formal repeal. This condition, he holds, has been fulfilled in regard to Article 2(2) of the Implementing Law as amended, because it was based on the relationship of the deutsche mark to the price of gold as fixed by official action. The dissociation of the international monetary system from gold as the standard for determining the external value of currencies had brought about this result. He alleges that the Federal Minister of Justice shared this view because he had issued no orders subsequent to the Fourth Conversion Order under the authority of the Implementing Law. In accordance with settled doctrine, the present obsolete character of the law had no effect on the validity of the Fourth Conversion Order when issued or on its continuing effectiveness at the present time.

In his opinion, two changes that had occurred deserved consideration in determining whether a complete change of circumstances had taken place in the sphere covered by the Order. One change was the inflation that had emerged since the Order was issued. A certain degree of inflation had been foreseen when the Order was issued, and therefore the inflation that had occurred was not a complete change of circumstances.

The decision whether a change in circumstances has had a substantial legal impact was primarily the responsibility of the legislature. If it has refrained from amending the existing law, then only in extreme cases can the courts assume that a provision has become obsolete. The assumption is defensible only as a last resort for preventing grossly unjustified results.

The second change to be considered was the change in the price of gold. It had been objected, and the Munich court had agreed, that while the Fourth Conversion Order was based on the official price of gold, that price was only a fraction of the market price. Professor Knöpfle rejected this objection, because the negotiators of the Warsaw Convention authorized each contracting party to specify the value of the Poincaré franc in terms of the national currency. The negotiators had been aware that fluctuations in exchange rates would occur, and they had wanted to avoid the effect of these fluctuations on recoveries. In this way, there would be a stable basis for computing insurance premia.

Furthermore, he argued, gold had lost its function as a basis for exchange rates in the international monetary system, so that there was no longer a realistic reason for basing compensation on the price of gold. The market price could not be assimilated to the former official price as a standard. If it was necessary to determine whether the Fourth Conversion Order still produced appropriate compensation, the comparison must be made not with the market price of gold but with the solutions in the Montreal Protocols and the Gold Franc Conversion Law of 1980. According to Professor Knöpfle’s calculations, the carrier’s liability would be less under these instruments than under the Fourth Conversion Order.

The decision of the Munich District Court was followed by the Municipal Court (Amtsgericht) of Düsseldorf on July 11, 1985.48 The ratio decidendi was the same as in the earlier case. The Düsseldorf court held that in view of the unconstitutionality of the Fourth Conversion Order, there was a gap in the law, which the Munich court had filled. Mr. Turek’s views on the desirability of the SDR solution were cited, but the court declared that although this solution would be welcome from the standpoint of legal policy, it was not feasible under existing law. The Düsseldorf court recalled Dr. Basedow’s argument that the Gold Franc Conversion Law had not applied the SDR solution to the Warsaw Convention.

On November 11, 1986, however, the Higher Regional Court of Frankfurt (Oberlandesgericht) came to a different conclusion in another case.49 The Regional Court (Landgericht) had awarded the plaintiff damages for loss of cargo that exceeded the amount calculated according to the Fourth Conversion Order. The Higher Regional Court overruled this decision and dissented from the decisions of the Munich and Düsseldorf courts. The court held the Fourth Conversion Order to be constitutional. The court agreed with Mr. Turek that the Implementing Law had not directed the Minister to base his regulations on the market price of gold. On the contrary, he was directed to observe the official price. A subsequent change in, or expiration of, the basis on which authority was granted does not affect the validity of a regulation that was proper when issued.

The court went on to express its disapproval of the market price of gold as the basis for applying the gold franc, because of the substantial fluctuations in price. While the price had settled down in recent years, the possibility of sharp changes could not be denied. It had to be assumed that the use of the market price would be contrary to the intent of the Warsaw Convention to create uniformity, stability, and predictable liability.

A decision of the Federal Supreme Court (Bundesgerichtshof) of April 9, 198750 has settled the problem of the constitutionality of the Fourth Conversion Order. The plaintiff’s luggage was lost on a flight from Düsseldorf to Teheran. The defendant carrier paid an amount of deutsche mark calculated on the basis of the Fourth Conversion Order. The plaintiff claimed almost ten times as much on the ground that this amount represented his true loss. The court denied the claim, holding that the Fourth Conversion Order was still valid, but added “at least for the time being.” This expression is reminiscent of the caution with which the U.S. Supreme Court expressed its judgment in the Franklin Mint case.

The Federal Supreme Court was aware that when the Fourth Conversion Order was issued on December 4, 1973, an officially determined gold price based on a par value for the deutsche mark under the Fund’s Articles was not being observed. Such a price was established for the last time in 1969. Yet an official gold price was in existence in 1973 because the SDR had a fixed value in terms of gold. Currencies could be related to the SDR within the new central rate system. This system made it as possible to arrive at a conversion rate for currencies as had the old officially determined gold price. Legally granted authorization to issue regulations was subject to appropriate interpretation. With this approach, it could be concluded that changing the conversion rate so that it accorded with the SDR was compatible with the Implementing Law.

The Federal Supreme Court went too far in attributing legal effect under the Articles to the Fund’s decisions on central rates. As explained already, those decisions did not create a valid substitute for the par value system. Par values continued in existence and were the only exchange arrangements that complied with the Articles until the Second Amendment abrogated the par value system on April 1, 1978.

The court mentioned, but left open, the question whether the authorization had become obsolete or ceased to be effective because of events subsequent to December 4, 1973. The court noted that the SDR was defined no longer in relation to gold and that there was no officially determined price of gold at present. Even if the effect of these developments was to eliminate the authorization, the validity of a duly ordered regulation would not be impaired retroactively. (It would seem, however, that two dates would be critical: the date as of which the developments eliminated the authorization and the date as of which a court must give effect to a regulation.)

The Federal Supreme Court recognized that regulations may be invalidated by a complete change in conditions, but found that a change of this character had not occurred. The disappearance of an official gold price had certainly jeopardized the objective of the Warsaw Convention to guarantee a consistent system of liability by means of a uniform method of measurement. But the Fourth Conversion Order was not devoid of function or content. On the contrary, it established a liability limit that was more compatible with the system of the Warsaw Convention than recourse to the market price, which was subject to constant fluctuation.

Much of the argument in favor of the continued effectiveness of the Fourth Convention Order really rested on the unsatisfactory alternative of the market price rather than on the logic of the reasoning in support of the Order. For example, the argument that the Fourth Conversion Order is the better, or the best, method for achieving the objective of uniformity that was inherent in the Warsaw Convention can be persuasive only if the other contracting parties are applying the same solution. They are not.

The court pointed out that the legislature also has assumed that the liability limits under the Fourth Conversion Order do not yet call for a change. The Gold Franc Conversion Law of June 9, 1980 has established rules for applying the gold franc in liability conventions and has done so by substituting the SDR for the gold franc. The law expressly retained application to the Warsaw Convention of the Fourth Conversion Order. A Bundestag document that accompanied the Government’s draft bill stated that the SDR solution was not applied to the Warsaw Convention because the circumstances of that Convention in relation to international law were different. (It is not apparent from the judgment why the circumstances were different, but it may be the fact that the Montreal Protocols had been negotiated and were awaiting ratification.) Furthermore, a calculation based on the SDR solution would reduce the level of damages, which was already extremely low.

Finally, the court elaborated what it meant by holding that, “at least for time being,” there was no reason to treat the Fourth Conversion Order as ineffective. It could be assumed that the legislature, fully aware of the doubts surrounding the calculation of liability limits under the Warsaw Convention, would issue a new regulation in the near future to protect the consumer. Until then, the Fourth Conversion Order had to be applied. The court could not resist a final criticism of the market price of gold. If the Order ceased to apply, linking liability to the market price would lead to substantial legal uncertainties.

Italy

Italian courts have not reached uniform conclusions in applying the Poincaré franc in the Warsaw Convention, sometimes applying the market price of gold and sometimes rejecting it.51 Italy’s Law No. 84 of March 26, 1983,52 published on April 1, 1983,53 provides, in Articles 1 and 2, that the maximum limits of liability expressed in Poincaré francs are to be replaced by specified amounts of SDRs. The amounts are calculated according to the SDR solution. Article 3 declares that the amounts shown in SDRs in the law are deemed to refer to the SDR as defined by the Fund. In the case of judicial action, translation of the amounts into Italian currency is to be effected by applying the official parity fixed by the Fund at the time of the judgment.54

In S.P.A. Alitalia-Linee Aeree Italiane v. S.R.L. Salvati & Santori, the Court of Appeals of Rome decided on June 2, 1981 in favor of the market price of gold in applying Article 22 of the Warsaw Convention. On appeal by Alitalia to the Court of Cassation (Corte di Cassazione), the court decided, on December 4, 1984, after Law No. 84 of March 26, 1983 had taken effect, that the law applied even though the event causing the damage to goods complained of predated the law.55 Conversion is to be calculated at the time the court determines the amount of the carrier’s liability. Alitalia argued that following the unlinking of currencies from gold beginning in 1971, gold had ceased to be the universally recognized unit of account. It was no longer possible, therefore, to relate the monetary unit in the Convention to gold. The petitioner argued that the relevant Montreal Protocol should be applied, because it had been ratified and made enforceable in Italy by Law No. 43 of February 6, 1981. The protocol eliminated gold in favor of the SDR, and based the increased amount of maximum liability on the SDR solution (SDR 17 per kilogram). The petitioner, in oral pleading, relied on Law No. 84 of March 26, 1983 as an additional argument. The case as presented on appeal was one of first impression.

The Court of Cassation held that the decision of the Court of Appeals was correct when delivered. The references to gold value in conventions and laws giving them the force of law had not been deprived of legal effect by the change in the role of gold, as a result of which gold was no longer the common denominator of the value of currencies. It was not impossible to apply these conventions, because gold still had a commercial value, and the conventions could still be applied uniformly by countries on this basis.

Nevertheless, the applicable rules had been changed by Law No. 84 of March 26, 1983, and the decision of the Court of Appeals had to be quashed and remanded for retrial on the basis of the new rules even though the decision was correct when delivered.

The court was unenthusiastic about its decision, as was apparent from the comment that the new rules were inconsistent with the Warsaw Convention:

That the present law conflicts with an international treaty is not in fact pertinent. The national court is bound to apply the national law, and Law 84/1983 has abrogated in pertinent part the law that ratified the Warsaw Convention and the Hague Protocol.56

The court held also that Law No. 84 of March 26, 1983 was not unconstitutional:

Nor does any conflict arise between the above-mentioned Law No. 84 and Art. 10 of the Constitution, as this new Italian law in substance puts into effect in the Italian legal system the same rules provided for the international legal system in the Montreal Protocol, which has yet to come into force because it has not received the required ratifications, but which has already been ratified by Italy.57

Constitutional Court Decision No. 132 of May 2, 1985 (Coccia v. Turkish Airlines Company),58 however, has given vent to the court’s discontent by attacking the method of valuing the gold unit of account in the Warsaw Convention as unconstitutional. On September 20, 1976 the daughter of the plaintiffs perished when a Turkish Airlines airplane crashed in Turkey. Her parents brought suit in Rome against the airline, claiming damages without reference to the liability limits of the Warsaw Convention as amended by the Hague Protocol, to which Italy had adhered. The court found that the airline was liable, so that the only question was the amount of damages.

The plaintiffs asserted that Article 22 of the Convention was inconsistent with Articles 2 and 3 of the Italian Constitution of December 27, 1947:

The Republic recognizes and guarantees the inviolable rights of man, both as an individual and as a member of the social groups in which his personality finds expression, and imposes the performance of unalterable duties of a political, economic and social nature. (Article 2)

All citizens are invested with equal social status and are equal before the law, without distinction as to sex, race, language, religion, political opinions and personal or social conditions.

It is the responsibility of the Republic to remove all obstacles of an economic and social nature which, by limiting the freedom and equality of citizens, prevent the full development of the individual and the participation of all workers in the political, economic and social organization of the country. (Article 3)59

The Court of Rome had held that the question relating to the Constitution was admissible and not unfounded, and could be referred to the Constitutional Court. The limit on liability in relation to accidents affecting the person precluded full compensation for pain and suffering. Inalienable human rights, in particular the right to personal safety and the entitlement to preservation of both the person and personality, were left unprotected, contrary to Article 2 of the Constitution. In addition, the obligations of social and economic solidarity were ignored, because not all victims of accidents received appropriate compensation. The constitutional question arose under Article 3 as well, because the limit on liability disregarded the different socioeconomic circumstances of injured parties, and therefore ignored the principle of equality of treatment. Furthermore, limitations on liability had not been imposed on other forms of transportation, but the original justifications for the special treatment of air carriers were no longer sound.

The Rome Court had held that as the question of the constitutionality of limits on liability had arisen, it was not necessary to consider the way in which liability was to be calculated. The question could be considered without examining Law No. 84 of March 23, 1983, which dealt not with the amount of the limit on liability but with the standard of value according to which the amount was to be calculated. The Government’s legal advisors objected to the referral order before the Constitutional Court on the ground that the Rome Court had not made the calculation that would show whether the limit on liability according to the Law would be disadvantageous to the plaintiffs. The Constitutional Court held that the Rome Court had dealt properly with this issue. Law No. 84 of March 23, 1983 regulated only how an amount corresponding to the liability limit in the Convention should be calculated: the prior question was the constitutionality of that limit. That question was whether Article 2 of the Constitution was violated by anything less than full compensation for death or personal injury.

The Constitutional Court explained that in view of the need to reconcile the conflicting interests of air carriers and passengers, a limitation on the liability of carriers was not automatically unconstitutional. The issue was whether a balanced reconciliation was achieved by the particular limitation in question. One criterion for making this judgment was whether the limitation was necessary to protect the carriers’ economic activity. The Warsaw Convention satisfied this criterion in 1929, because the aviation industry was then in its infancy. The criterion was not satisfied at the present time, because of the steady and dramatic increase in air traffic, the degree of safety achieved, and the reduction in the costs of insurance because of the reduced risk. Evidence for this conclusion existed in the widespread conviction, and in the practices and agreements that gave expression to it,60 that the limits in the Warsaw Convention had to be revised.

The fact that the fairness of compensation had to be adjudged made it all the more necessary to protect recoveries against inflation. This protection was one objective of the revision of liability limits. The Italian legislature had been mindful of these considerations. The Warsaw Convention applied to international flights, the Italian Navigation Code to domestic flights. The Navigation Code imposes limits on liability, expressed in lire, on the model of the Warsaw Convention. However, the Navigation Code requires revision of the limits and entrusts the function to decrees by the President of the Republic, adopted on the proposal of the Minister of Transport, and subject to specified governmental procedures. The revisions must take into account pertinent international conventions, the general consumer price index, the remuneration index developed by the Central Institute of Statistics, and insurance rates in various states in matters concerning liability insurance.

The Constitutional Court drew the conclusion that a limit on the liability of carriers was justified only insofar as provision was made for suitable guarantees of fairness and reliability in regard to compensation. As the limits in the Warsaw Convention did not meet this test and were incompatible with Article 2 of the Constitution, it followed that the legal measures taken by Italy to give effect to Article 22 of the Warsaw Convention and the amendment of the provision by the Hague Protocol were unconstitutional because of Article 2 of the Constitution. The court emphasized that its ruling of unconstitutionality related solely to Article 1 of Law No. 841 of May 19, 1932 and Article 2 of Law No. 1832 of December 3, 1962 insofar as they sought to give effect to Article 22(1) of the Warsaw Convention and Article 11 of the Hague Protocol. These statutes have given the force of law to the treaty provisions. The court did not rule that the treaty provisions themselves were unconstitutional, although this animadversion seems to have been part of the reasoning. Nevertheless, whatever the reasoning may have been, it is clear that the application of Article 22 was impaired. One author has described the decision as unique, because it is the only case in which the application of part of a treaty has been impaired while the rest remains unaffected. The same author points out that the court could not have denounced the treaty as a whole, because that function is reserved to the Government.61 The court, therefore, confined itself to the implementing laws, and did not denounce any part of the treaty.

Professor Tito Ballarino has written a comment on the case, entitled “The Constitutional Court addresses the limits on the air carrier’s liability: Matters are in total disarray.”62 He criticizes the SDR solution in the Montreal Protocols on the ground that when they were negotiated in September 1975 gold had a stable (and extremely low) official price, and the SDR solution was calculated on the basis of that price. As an official price does not exist at the present time, he examines the various solutions, other than the SDR solution, that have emerged. In discussing the last official price of gold, he cites the decision of the Munich court that this solution is unconstitutional in Germany, although not because of a violation of basic human rights. He surmises, however, that the Munich court might have been influenced by the flagrant usurpation of the injured party’s rights by a calculation tied to the Bretton Woods system.

Professor Ballarino objects to the solution of the market price of gold. Some Italian courts have favored this solution, but he dismisses these decisions with the comment that they are perhaps better known abroad than in Italy. Some of these decisions have not even been published in Italy. His objection is that

in an international economy that persistently refuses to let gold have both a pivotal role and a fixed reference value, a solution of this kind has one obvious snag: the loss of certainty as to the law, which was guaranteed under the Warsaw system.63

Professor Ballarino approves of the rejection by the United States Supreme Court in the Franklin Mint case64 of the decision by the Second Circuit Court of Appeals that the limits in the Warsaw Convention could not be applied. To have taken this view would have been equivalent to denunciation of the treaty. He distinguishes the decision of the Italian Constitutional Court, of which he approves, by arguing that the decision did not affect the text of the Convention or its continuing legal vitality, “which remains binding upon Italy and with which the other signatories, under specific circumstances, can still require the State of Italy to comply.”65 What the specific circumstances would be are not explained. Professor Ballarino notes that the decision struck down Italy’s implementing measures and not the treaty itself.

Professor Ballarino makes a practical point about the Constitutional Court’s decision. Litigants will have many opportunities to bring suit in Italian courts under the jurisdictional provisions of the Warsaw Convention. Suit can be brought where the carrier is ordinarily resident, or has his principal place of business, or has an establishment through which the contract of transportation was made, or where the flight was destined to terminate. What, he asks, will be the reactions of foreign airlines and their governments to the prospect of suits in Italian courts if the courts do not apply the Warsaw limitations on liability?

Professor Ballarino points to another anomaly in the law. The implementing legislation was unconstitutional insofar as it related to liability arising from harm to passengers. Delays and losses of goods and baggage are frequent, but Law No. 84 of March 26, 1983 remains in force and applicable to these claims. He asks why the same “desperate treatment” of these claims would not undermine the foundations of the Warsaw system.

Mr. Gregor Brand has written about the problem of constitutionality as a result of the Constitutional Court’s decision in Coccia v. Turkish Airlines Company.66 He draws attention, as authors frequently do, to U.S. law because the United States accounts for the largest proportion of air traffic, namely, one third of all air passenger traffic and 30 percent of air freight. The Warsaw Convention is directly applicable in the United States, which is to say that it applies without the necessity for implementing legislation, but it is necessary for the Convention to be consistent with the Constitution. The constitutionality of the limits in the Convention have been questioned by various courts and authors, but no court has declared the limits unconstitutional. The Supreme Court did not consider the question of constitutionality in the Franklin Mint case67 and treated the limits on liability prescribed by the Convention as valid. He refers to the decision of the Munich court as startling, but he agrees with the criticism that the Fourth Conversion Order is based on monetary values that have been outmoded by both legal and economic developments.

Mr. Brand questions the distinction drawn by the Italian Constitutional Court between a limit on liability (expressed in Poincare francs in the Warsaw Convention) and the amount of liability under implementing measures. Whether a claimant’s interests are adequately protected depends on how the limit expressed in Poincaré francs is converted into lire. The unit of account is supposed to be a means for arriving at a satisfactory system of compensation.

Mr. Brand believes that the market price of gold provides better protection against inflation. Application of the market price of gold would be more satisfactory than application of the former official price of gold or the SDR solution. A difficulty with this view is that the market price is influenced by many other developments as well. Mr. Brand could argue, however, that the Secretary of the U.S. Treasury as Governor of the Fund appointed by the United States has provided implied support for Mr. Brand’s view. At the 1987 Annual Meeting of the Fund’s Board of Governors, the Governor for the United States proposed consideration of a new objective indicator as a technique for exercising surveillance over the efforts of the main industrialized countries to coordinate their policies and achieve the desired stability of exchange rates. The indicator would be the relationship of currencies to a basket of commodities, including gold.68 The proposal implies that increases in the prices of commodities, including gold, may be evidence of the tendency of investors to move from financial assets to commodities because of the expectation of inflation.69 Mr. Brand concludes that the Constitutional Court tacitly accepted the solution of the market price of gold by insisting on the necessity to adapt recoveries to current economic circumstances.

Mr. Brand suggests also that the Constitutional Court regarded the SDR solution as unsatisfactory. He points out that far from resulting in increased recoveries in terms of lire, the solution would have led since 1985 to amounts lower than the amounts that would reflect the rate of inflation in Italy. He emphasizes the changes that the Fund has made in the method of valuing the SDR, but implies that the SDR solution results in unstable recoveries as well as inadequate amounts. The criticism of change in the Fund’s method of valuation is reminiscent of a similar criticism by the U.S. Second Circuit Court of Appeals in the Franklin Mint case.70 The changes, however, have been made by high majorities of the voting power of members of the Fund.71 It must be assumed that most members have regarded the changes as desirable adaptations and improvements in the method of valuation. Furthermore, the proponents of the market price of gold can hardly claim stability for that price.

Mr. Brand acknowledges that the Italian lawmakers have shown their acceptance of the SDR solution. They have ratified the Montreal Protocols, and they have adopted Law No. 84 of March 26, 1983. The Constitutional Court seems to have defied the lawmakers and has rendered the 1983 law obsolete.

This conclusion, viewed realistically, is equivalent to a denunciation pro tanto of the Warsaw Convention. In the Franklin Mint case, the Supreme Court of the United States held that the treaty could be denounced only in accordance with the provisions on denunciation included in the treaty, and that this procedure had not been followed. In addition, when the contracting parties to a treaty continue to assert its validity, a private person who finds the existence of the treaty inconvenient cannot invoke the doctrine of changed circumstances as a basis for arguing that a state’s obligations under the treaty have lapsed.72

The Constitutional Court in Coccia v. Turkish Airlines Company73 and sympathetic commentators on it have been aware of these objections and have sought to forestall them by insisting that the court was not rejecting the Warsaw liability system. The court rejected only Italy’s implementation of the liability limits. It is difficult to conclude, however, that the court did not regard the limits as inadequate. The so-called Warsaw liability system is an abstraction that has no obvious meaning if detached from the liability limits of the system. If liability limits are too low, the function of increasing them can be negotiated only among governments.

Mr. Brand’s final comment is that the decision of the Constitutional Court should not be criticized on the ground that it is contrary to a desirable unification of practice. Adoption of the SDR solution would not produce such a result. This comment may mean that a uniform practice could be based on the market price of gold.

The Italian legislature, however, has acted by adopting Law No. 274 of July 7, 1988. The law raises the liability limit specified in the Warsaw Convention and the Hague Protocol to SDR 100,000 for death or personal injury to each passenger. Liability is to be translated into Italian lire at the exchange rate for the SDR announced by the Fund. This limit is declared by the law to be enacted pending entry into force of Montreal Additional Protocol No. 3. The limit, however, is equal to the limit prescribed by the Montreal Protocol. A condition on which a carrier is entitled to the benefit of limited liability is that the carrier has contracted with an acceptable insurance company for insurance to cover the carrier’s civil liability for loss by death or personal injury of passengers up to an amount at least equal, for each passenger, to SDR 100,000. An insurance company is deemed to be acceptable if its soundness has been certified by a public authority of the country in which its aircraft is registered or of the country in which the insurance company has its head office. In the absence of certification of soundness, an insurance company is deemed to be acceptable if it has obtained reinsurance for the risks for the full amount specified above. The constitutionality of this law has not yet been tested.

APPENDIX Valuation of the SDR (Special Drawing Right)

Article XV, Section 2 authorizes the Fund to determine the method of valuing the SDR:

Valuation of the special drawing right

The method of valuation of the special drawing right shall be determined by the Fund by a seventy percent majority of the total voting power, provided, however, that an eighty-five percent majority of the total voting power shall be required for a change in the principle of valuation or a fundamental change in the application of the principle in effect.

The Fund’s decision of September 17, 1980 (No. 6631-(80/145)G/S) on the second revision of the basket of currencies that determines the value of the SDR and the principles and procedures for subsequent revisions will be found in Selected Decisions, Thirteenth Issue, pp. 324–25. The decision provides that the list of currencies that determines the value of the SDR, and the amounts of these currencies, shall be revised with effect on January 1, 1986, which is to say five years after the effective date of the second revision, and on the first day of each subsequent quinquennial period. Paragraphs 3 and 4 of the decision provide as follows:

3. The list of the currencies that determine the value of the special drawing right, and the amounts of these currencies, shall be revised with effect on January 1, 1986 and on the first day of each subsequent period of five years in accordance with the following principles, unless the Fund decides otherwise in connection with a revision:

a. The currencies determining the value of the special drawing right shall be the currencies of the five members whose exports of goods and services during the five-year period ending 12 months before the effective date of the revision had the largest value, provided that a currency shall not replace another currency included in the list at the time of the determination unless the value of the exports of goods and services of the issuer of the former currency during the relevant period exceeds that of the issuer of the latter currency by at least one per cent.

b. The amounts of the five currencies referred to in a. above shall be determined on the last working day preceding the effective date of the relevant revision in a manner that will ensure that, at the average exchange rates for the three-month period ending on that date, the shares of these currencies in the value of the special drawing right correspond to percentage weights for these currencies, which shall be established for each currency in accordance with c. below.

c. The percentage weights shall reflect the value of the balances of that currency held at the end of each year by the monetary authorities of other members and the value of the exports of goods and services of the issuer of the currency over the relevant five-year period referred to in a. above, in a manner that would maintain broadly the relative significance of the factors that underlie the percentage weights in paragraph 2 above. The percentage weights shall be rounded to the nearest 1 per cent or as may be convenient.

4. The determination of the amounts of the currencies in accordance with 1 and 3 above shall be made in a manner that will ensure that the value of the special drawing right in terms of currencies on the last working day preceding the five-year period for which the determination is made will be the same under the valuation in effect before and after revision.

Rule O-1 of the Fund’s Rules and Regulations, which took effect on January 1, 1986, provides that the amounts of each currency in the basket shall be as set forth below:

The value of the SDR shall be the sum of the values of the following amounts of the following currencies:

U.S. dollar0.452
Deutsche mark0.527
Japanese yen33.4
French franc1.02
Pound sterling0.0893

The weights of each currency in the present basket are as follows:

Weight
Currency(In percent)
U.S. dollar42
Deutsche mark19
French franc13
Japanese yen13
Pound sterling13

The amounts of units of the currencies in the basket, and not percentage weights of currencies, are used in daily calculations involving the SDR. For quinquennial revisions of the basket, paragraphs 3(b) and 4 of the decision of September 17, 1980 require (i) that the amounts of currency correspond to the given agreed weights for a revised basket when applied to the average exchange rates over the reference period of three months before the revision takes effect, and (ii) that the revised basket will have the same value for the SDR in transactions on the first working day on which the revision is in effect as the value of the SDR on the last working day before the revision took effect. The currency amounts are rounded, without prejudice to the requirements of preserving the given percentage shares of currencies and equality of exchange rates for the SDR on the two working days. The guidelines for rounding the units of currency in the basket are governed by a decision of December 23, 1985 (No. 8160-(85/186)GS):

(1) Under all circumstances, the currency units will be determined in a manner which would ensure that the value of the SDR calculated on December 31 on the basis of the new basket will be the same as that actually prevailing on that day.

(2) The currency amounts calculated for the new basket will be expressed in two significant digits provided that the deviation of the percentage share of each currency in the value of the SDR, resulting from the application of the average exchange rates for October–December, from the percentage weight as determined under paragraph 3(c) of Executive Board Decision No. 6631-(80/145) adopted September 17, 1980 is the minimum on average and will not exceed one-half percentage point for any currency.

(3) If a solution cannot be obtained by the application of the principles set forth in (2) above, the calculation shall be made applying the same principles but expressing the amount of each currency in three significant digits, and if no solution is found with three significant digits then the calculation shall be made applying the same principles but expressing the amount of each currency in four significant digits.

(4) If more than one solution is found in the calculation at the level of two, three, or four significant digits, the solution that has the smallest average deviation will be employed.

The valuation of currencies in terms of the SDR is governed by Rule O-2 of the Fund’s Rules and Regulations:

  • (a) The value of the United States dollar in terms of the SDR shall be equal to the reciprocal of the sum of the equivalents in United States dollars of the amounts of the currencies specified in Rule O-1, calculated on the basis of exchange rates established in accordance with procedures decided from time to time by the Fund.

  • (b) The value of a currency other than the United States dollar in terms of the SDR shall be determined on the basis of the value of the United States dollar in terms of the SDR in accordance with (a) above and an exchange rate for that other currency determined as follows:

    • (i) for the currency of a member having an exchange market in which the Fund finds that a representative spot rate for the United States dollar can be readily ascertained, that representative rate;

    • (ii) for the currency of a member having an exchange market in which the Fund finds that a representative spot rate for the United States dollar cannot be readily ascertained but in which a representative spot rate can be readily ascertained for a currency as described in (i), the rate calculated by reference to the representative spot rate for that currency and the rate ascertained pursuant to (i) above for the United States dollar in terms of that currency;

    • (iii) for the currency of any other member, a rate determined by the Fund.

  • (c) Procedures to establish exchange rates under (b) above shall be determined by the Fund in consultation with members.

The method of collecting exchange rates for calculating the value of the SDR for the purposes of Rule O-2(a) is set forth in Decision No. 6709-(80/189)S of December 19, 1980:

1. For the purpose of determining the value of the United States dollar in terms of the special drawing right pursuant to Rule O-2(a), the equivalents in United States dollars of the amounts of currencies specified in Rule O-1 shall be based on spot exchange rates against the United States dollar. For each currency the exchange rate shall be the middle rate between the buying and selling rates at noon in the London exchange market as determined by the Bank of England.

2. If the exchange rate for any currency cannot be obtained from the London exchange market, the rate shall be the middle rate at noon in the New York exchange market determined by the Fund on the basis of the buying and selling rates communicated by the Federal Reserve Bank of New York or, if not available there, the middle rate determined by the Fund on the basis of the buying and selling rates at the fixing in the Frankfurt exchange market communicated by the Deutsche Bundesbank. If the rate for any currency against the United States dollar cannot be obtained directly in any of these markets, the rate shall be calculated indirectly by use of a cross rate against another currency specified in Rule O-1.

3. If on any day the exchange rate for a currency cannot be obtained in accordance with 1 or 2 above, the rate for that day shall be the latest rate determined in accordance with 1 or 2 above, provided that after the second business day the Fund shall determine the rate.

Courts that need to translate the SDR into the currency to be awarded have no need to make their own findings of the value of the SDR in terms of the currency of judgment for the purpose of determining the amounts of judgments. The Fund publishes the equivalent of the SDR in currencies for each business day. The question whether judgments could be expressed in SDRs is discussed in Gold, Volume III, pp. 36–53.

The Poincare franc is defined as 651/2 milligrams of gold, nine-tenths fine; the Germinal franc is defined as 10/31 gram, nine-tenths fine.

Gold, Volume II, pp. 177–88, 439–57; Volume III, pp. 18–36, 119–43.

Gold, Essays, Vol. I, pp. 560–65; Selected Decisions, Eighth Issue, pp. 14–21.

Article XXI, Section 2 (before Second Amendment).

466 U.S. 243 (1984); 80 L Ed 2d 273.

690 F.2d 303 (1982). See Stephen C. Johnson and Lawrence N. Minch, “The Warsaw Convention Before the Supreme Court: Preserving the Integrity of the System,” Journal of Air Law and Commerce (Dallas), Vol. 52(1986), pp. 93–116; R.S.J. Martha, “The Debate on Profound Changes of Circumstances and Interpretation of the Gold Clauses in International Transport Treaties,” Netherlands International Law Review (The Hague), Vol. 32, No. 1 (1985), pp. 48–77, at p. 48.

Article IV, Section 2(b).

Schedule C, paragraph 1.

Article XV, Section 2.

Article V, Section 10:

Computations

“(a) The value of the Fund’s assets held in the accounts of the General Department shall be expressed in terms of the special drawing right.

“(b) All computations relating to currencies of members for the purpose of applying the provisions of this Agreement, except Article IV and Schedule C, shall be at the rates at which the Fund accounts for these currencies in accordance with Section 11 of this Article.”

Article V, Section 11:

Maintenance of value

“(a)The value of the currencies of members held in the General Resources Account shall be maintained in terms of the special drawing right in accordance with exchange rates under Article XIX, Section 7(a).

“(b) An adjustment in the Fund’s holdings of a member’s currency pursuant to this Section shall be made on the occasion of the use of that currency in an operation or transaction between the Fund and another member and at such other times as the Fund may decide or the member may request. Payments to or by the Fund in respect of an adjustment shall be made within a reasonable time, as determined by the Fund, after the date of adjustment, and at any other time requested by the member.”

Article VIII, Section 7; Article XXII.

Recueil Dalloz Sirey, 1987, Jurisprudence, pp. 526–31, with commentary by Jacques Borricand.

For a more detailed discussion of this decision and of Pakistan International Airlines v. Compagnie Air Inter S.A. et al., decided by the Court of Appeal of Aix-en-Provence on October 31, 1980, which reached the same decision but on somewhat different reasoning, see Gold, Volume II, pp. 446–51.

Revue critique de droit international privé (Paris), Vol. 73 (1984), pp. 310–15, with note by Marthe Simon-Depitre. The court to which the case was remitted was of a composition different from the original court.

Gold, Volume III, pp. 130–31. On public policy, see pp. 591–622.

Revue Générale de Droit International Public (Paris), Vol. 90, No. 2 (1986), p. 472. According to a consistent body of jurisprudence, the judicial and administrative courts must refuse to interpret treaties and must suspend judgment until they receive a response to an interlocutory request for a governmental interpretation by the Minister of Foreign Affairs. The request and the Minister’s opinion are published in the Journal Officiel. The opinion is binding on the courts (Revue Générate de Droit International Public (Paris), Vol. 93, No. 1 (1989), p. 153).

See footnote 12 above.

“[L]e droit de tirage spécial (D.T.S.) ‘est devenue l’unité de compte du nouveau système’ et qu’il sert ‘désormais d’étalon de valeur pour la définition des parités’.”—Recueil Dalloz Sirey, 1987, Jurisprudence, pp. 526–27.

“Mais considérant que, en la présente espèce, sont mises en jeu les dispositions d’un traité diplomatique fixant un ordre public monétaire; que l’nterprétation et l’application des règles posées relèvent de l’autorité gouvernementale française seule habile à en connaître l’esprit et la lettre et à en fixer la portée à l’intention du juge interne français, dès lors que cette autorité, seule responsable des relations publiques internationales, est censée exprimer l’avis de l’autorité dépositaire de la convention internationale et en transmettre une interprétation uniforme;” ibid., p. 527.

See, for example, Gold, Pamphlet No. 44, pp. 11–19.

Gesetz zur Durchführung des Ersten Abkommens zur Vereinheitlichung des Luftprivatrechts vom 15.12.1933 (RGB1. I 1079).

“(1) An Stelle der im Artikel 22 des Abkommens in französischer Währung festgesetzten Höchstbeträge treten die entsprechenden Beträge in deutscher Reichswährung. Bei der Umrechnung sind 100 französische Franken mit 16 RM zu bewerten. - (2) Der Reichsminister der Justiz kann einen anderen Umrechnungssatz vorschreiben.”

Amos J. Peaslee, Constitutions of Nations, Vol. III—Europe (The Hague: Martinus Nijhoff, rev. 3rd ed., 1968), p. 379 (translation).

Gesetz über Massnahmen auf dem Gebiete des Verkehrsrechts und Verkehrshaft-pflichtrechts vom 16.7.1957 (BGB1. I 710, Art. 3).

“Der Bundesminister der Justiz wird ermächtigt, durch eine Rechtsverordnung, die der Zustimmung des Bundesrates nicht bedarf, den Umrechnungssatz fur französische Franken entsprechend dem amtlich festgestellten Goldpreis in Deutsche Mark vorzuschreiben.”

Vierte Verordnung über dem Umrechnungskurs fur französische Franken bei Anwendung des Ersten Abkommens zur Vereinheitlichung des Luftprivatrechts vom 4.12.1973 (BGB1. I 1815).

Gerhard Turek, “Die Umrechnung des Goldfrankens nach dem Warshauer Abkommen” (Conversion of the gold franc pursuant to the Warsaw Convention), Neue Juristische Wochenschrift (Munich), Jahrg. 38, Heft 22 (1985), pp. 1263–64.

LG München I, Neue Juristische Wochenschrift (Munich), Jahrg. 37, Heft 48 (1984), pp. 2767–68; VersR 1984, p. 693; Juristenzeitung 41 (1985) p. 141.

Juristenzeitung 41 (1985), p. 141 (translation).

Juristenzeitung 41 (1985), pp. 141–45.

See footnote 27.

“Zum Umrechnung der Haftungshöchstbeträge bei Schäden im internationalen Luftverkehr gemäss Art. 22 des Warschauer Abkommens in Deutsche Mark” (Conversion into deutsche mark of the maximum compensation payable under Article 22 of the Warsaw Convention in respect of injury sustained in international carriage by air), Transportrecht 9 (1986), pp. 260–67.

This conclusion is not correct, but it is not necessary for Dr. Basedow’s argument. The Fund did not agree before the Second Amendment that the official price of gold under the Articles had been abandoned, so that members were released from the obligations to observe the official price in gold transactions to which the Articles applied.

The subsequent abandonment of the par value of the deutsche mark may be a reference to the Second Amendment, but Dr. Basedow does not distinguish between the par value and the official gold price in asserting that termination of them occurred in early 1973.

See Gold, Pamphlet No. 40, pp. 8–11, 97–99.

Goldfrankenumrechnungsgesetz, September 6, 1980 (BGB1. II 721). See Gold, Pamphlet No. 40, p. 88, where it was said:

“An explanatory Bundestag document stated that since the entry into force of the Second Amendment a generally recognized method for translating a gold franc into the national currency had been lacking, and it was advisable, therefore, to make transitional arrangements in order to avoid uncertainty. It was necessary, in order to provide judicial certainty, to make domestic arrangements for the purpose of conventions other than those for which protocols were being approved by the law.

‘In the conventions themselves the manner in which gold francs are to be converted into national currency has not been prescribed. As mentioned earlier, the assumption was that, in the countries that were parties to the conventions, a fixed relationship of value existed between gold and the national currency. Now that this is no longer so, it seems that the resulting gap should be filled by domestic legislation as long as a new international arrangement adapted to the changed circumstances has not entered into force. (Translation)’.”

See footnote 5.

The Second Amendment did not take effect in 1976, as Dr. Basedow states. The proposed Second Amendment was sent to members in 1976 for their acceptance, but the acceptances and other steps necessary to bring it into effect did not occur until April 1, 1978.

The United States, however, did not take the view that it had abandoned the par value of the dollar. In its view, other countries were failing to maintain parities between their currencies and the dollar. The United States, however, was failing in its obligation to make the par value of the dollar effective.

Selected Decisions, Eighth Issue, pp. 14–21.

The initial par value of the currency, established on January 30, 1953, was 0.211588 gram of fine gold per deutsche mark (equivalent to DM 4.2 per U.S. dollar). The par value was increased by 5 percent on March 6, 1961. A second revaluation, effective October 26, 1969, raised the par value to 0.242806 gram of fine gold per deutsche mark (equivalent to DM 3.66 per U.S. dollar). A central rate of DM 3.2225 per U.S. dollar took effect on December 21, 1971. With effect on February 14, 1973, the central rate was changed to DM 2.9003 per U.S. dollar after the announcement of the change in the par value of the dollar. The central rate was changed again, with effect on March 19, 1973, to SDR 0.294389 per deutsche mark (equivalent to DM 3.39687 per SDR); with effect on June 29, 1973, to SDR 0.310580 per deutsche mark (equivalent to DM 3.21979 per SDR); and, effective October 18, 1976, to SDR 0.316792 per deutsche mark.

Plus or minus a small margin prescribed by the Fund.

See IMF Survey (Washington), Vol. 5, No. 10 (May 17, 1976), p. 150.

The Bank for International Settlements (BIS) was mentioned to clarify that it would not be considered a group of countries but as an independent entity; and that it would be assumed that bids of the BIS would be as principal and not as an agent for any country or countries. On gold under the Articles, see Gold, Essays, Vol. II, pp. 723–77.

Professor Knöpfle is under the mistaken impression that the basket method of valuing the SDR has been included in the Articles.

Much of Professor Knöpfle’s account of the legal aspects of monetary developments cannot be accepted. For example, it is not correct that under the First Amendment the SDR was intended to take over the function of gold. (See Gold, Pamphlet No. 15.) Again, it is incorrect to say that the new system of central rates did not become fully operational until the beginning of 1973. The system became fully operational on December 18, 1971.

Transportrecht 9 (1986), p 263 (translation). See also p. 264: “As in 1973 the SDR was defined in terms of gold and the SDR central rate served as a substitute for the gold parity that no longer applied…” (translation).

Versicherungsrecht, Heft 38 (1985), pp. 946–47.

U 240/85, Recht der Internationalen Wirtschaft (RIW), Heft 3 (1987), p. 223.

VII ZR 43/86, Recht der Internationalen Wirtschaft (RIW), Heft 7 (1987), pp. 551–52.

See, for example, Gold, Volume II, pp. 448–49, and Gold, Pamphlet No. 33, pp. 90–91.

“Sostituzione del Franco Oro Poincaré, Adottato dalla Convenzione di Varsavia del 1929 sulla Disciplina del Trasporto Aereo Internazionale e dal Protocollo di Modifica dell’Aja del 28 Settembre 1955, con i Diritti Speciali di Prelievo del Fondo Monetario Internazionale” (Substitution of the Poincaré gold franc, adopted by the 1929 Warsaw Convention on Rules Governing International Carriage by Air and the Hague Protocol of September 28, 1955 amending said Convention, by the special drawing rights of the International Monetary Fund), Rivista di Diritto Internazionale Privato e Processuale (Padua), Vol. 19 (1983), p. 413.

Gazzetta Ufficiale No. 90 of April 1, 1983.

“Le somme indicate in diritti speciali di prelievo nella presente legge sono considerate comme riferentisi ai diritti speciali di prelievo quali definiti dal Fondo monetario internazionale. La conversione di queste somme in valuta nazionale si effettuerà, la caso di azione giudiziale, applicando la parità ufficiale dal Fondo monetario internazionale al momento del giudizio.” The Fund decides the method of valuation of the SDR that it will apply, but the Fund does not exercise a discretion in fixing the value of a currency in terms of the SDR. The Fund applies the method of valuation, mechanically, using for this purpose the exchange rates of currencies in the market. Article 3 of Italy’s Law No. 84 of March 26, 1983 must be understood in this sense.

S.P.A. Alitalia-Linee Aeree Italiane v. S.R.L. Salvati & Santori, II Diritto Marittimo (1985), pp. 328–31. According to other reports, the decision was delivered on December 14 (and not December 4), 1984.

Ibid., p. 331 (translation).

Ibid. (translation).

Foro Padano (1985), p. 157.

Translation. The Constitution of the Republic of Italy in Constitutions of the Countries of the World, ed. by Albert P. Blaustein and Gisbert H. Flanz (Dobbs Ferry, New York: Oceana Publications, 1987), pp. 47–48.

For example, the Hague Protocol to the Warsaw Convention and the so-called Montreal Agreement of 1966 (not the later Montreal Protocols) between the U.S. Civil Aviation Board (CAB) and the world’s major airlines, represented by IATA (International Air Transport Association). Under the latter agreement, the limits of liability were increased, in the case of transportation having an agreed place of departure, place of destination, or stopping place within the United States. The agreement was made in order to keep the United States within the Warsaw system.

Giuseppe Guerreri, Commentary—“The Warsaw System Italian Style: Convention Without Limits,” Air Law (Deventer, Netherlands), Vol. 10, No. 6 (1985), pp. 294–97, at p. 296.

“The result is that in Italy, at present, the Warsaw/The Hague provisions relating to the limits have been repudiated and no longer form part of the national legal system. The statement that all remaining provisions stand valid cannot be considered sufficient to ensure the continued applicability of the Convention so mutilated to the extent that the very existence of the whole treaty can now be questioned. It may however be excluded that—under the present circumstances—the Government may contemplate denouncing the Convention, which would constitute an unmitigated disaster to be avoided.

“Since the decision focused on the implementing legislation which made the treaties effective in Italy, its legal effect will be primarily confined to the Italian legal system and will have a bearing only on litigation which takes place in Italy. At the same time, a proliferation may be expected of claims lodged—in conformity with Article 28 of the Convention—in Italy where full compensation is to be granted based on presumption of fault. One may wonder at this point whether the balance of interests which the Court so eagerly sought to establish with its decision has not gone too far the other way, as principles such as the presumed fault, the venue at the plaintiff’s discretion and others still do stand as opposed to full compensation.”

Translation. (“La corte costituzionale interviene sui limiti della responsabilità del vettore aereo. II disordine diviene totale,” Foro Padano (1985), pp. 158–64.)

Ibid., p. 162 (translation).

See footnotes 5 and 6.

Foro Padano (1985), p. 164.

“Verfassungswidrigkeit der Haftungsbegrenzung im internationalen Lufttransport” (Unconstitutionality of limitation of liability in international air transport), Praxis des Internationalen Privat- und Verfahrensrechts (IPRax), Heft 3 (1987), p. 193.

See footnote 5.

International Monetary Fund, Summary Proceedings of the Forty-Second Annual Meeting of the Board of Governors, September 29-October 1, 1987 (Washington, 1987), p. 108.

Paragraph 6 of the Economic Declaration issued on June 21, 1988 after the Summit Meeting in Toronto included the following statement (IMF Survey (Washington), Vol. 17, No. 13, June 27, 1988, p. 219):

“The policies and performance [of the Group of Seven] are assessed on the basis of economic indicators.

“We welcome the progress made in refining the analytical use of indicators, as well as the addition to the existing indicators of a commodity-price indicator.”

The composition of the commodity price indicator has not been disclosed.

690 F.2d, at pp. 310–11 (1982).

Article XV, Section 2.

Gold, Volume III, pp. 122–23.

See footnote 58.

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