B-114365, JAN. 27, 1965

B-114365, JAN. 27, 1965

TO THE HONORABLE SECRETARY OF DEFENSE:

FURTHER REFERENCE IS MADE TO THE LETTER OF SEPTEMBER 29, 1964, FROM THE HONORABLE CHARLES J. HITCH, ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER) RECOMMENDING A REVISION OF THE INSTRUCTION SET FORTH IN SECTION 5040.22 OF TITLE 5 OF THE GENERAL ACCOUNTING OFFICE POLICY AND PROCEDURES MANUAL, 5 GAO 5040.22, WHICH READS AS FOLLOWS:

"BECAUSE OF LEGAL RESTRICTIONS, ANY AMOUNT DUE FROM AN OCEAN CARRIER ON INTERNATIONAL SHIPMENTS OR AN AMOUNT DUE FOR LOSS OR DAMAGE FROM AN INTERNATIONAL AIR CARRIER MUST NOT BE SET OFF OR WITHHELD FROM AN AMOUNT PAYABLE ON A BILL FOR SEPARATE OR UNRELATED TRANSPORTATION SERVICES UNLESS THE CARRIER HAS CONSENTED TO SUCH ACTION IN WRITING.'

THE LETTER OF SEPTEMBER 29, 1964, SUGGESTS IN EFFECT THAT THE UNDERLINED WORDS BE ELIMINATED SO AS TO PERMIT THE GOVERNMENT AGENCIES TO EXERCISE ITS COMMON LAW RIGHT OF SETOFF AS TO CLAIMS FOR LOSS OR DAMAGE ON INTERNATIONAL AIR SHIPMENTS. THE LETTER STATES---

"IN CASES THAT WARRANT IT--- SUCH AS THOSE IN WHICH THE CARRIER EITHER TACITLY ADMITS OR THERE IS CLEAR AND CONVINCING EVIDENCE OF LIABILITY--- THERE IS NO APPARENT REASON WHY THE GOVERNMENT SHOULD NOT EXERCISE ITS COMMON LAW RIGHT OF SETOFF IN INTERNATIONAL AIR TRANSPORTATION CLAIMS CASES JUST AS IT DOES IN OTHER AIR AND SURFACE TRANSPORTATION CLAIMS CASES. THE FACT THAT ALL SUCH CASES ARE REFERRED TO THE GENERAL ACCOUNTING OFFICE WOULD LEAVE TO THAT OFFICE THE DECISION IN EACH CASE WHETHER TO FILE SUIT TO TOLL THE STATUTE OF LIMITATIONS OR WHETHER, IN THE CASE OF SMALL CLAIMS, TO TAKE THE CALCULATED RISK THAT THE CARRIER WOULD NOT CONSIDER THE AMOUNT INVOLVED GREAT ENOUGH TO WARRANT THE TIME AND EXPENSE OF FILING A SUIT FOR ITS RECOVERY AT A LATER DATE.'

AS POINTED OUT IN MR. HITCH'S LETTER, SECTION 5040.22 OF TITLE 5 OF OUR MANUAL AND THE RELATED SECTIONS 5040.21 AND 5040.25/2) WERE BASED UPON CERTAIN COURT DECISIONS REFERRED TO IN OUR CIRCULAR LETTER OF AUGUST 4, 1960, B-139598, B-139994, AND B-114365, WHICH WAS ISSUED IN CONSULTATION WITH AND APPROVED BY REPRESENTATIVES OF THE DEPARTMENT OF JUSTICE. SUCH LETTER, SO FAR AS CLAIMS FOR LOSS AND DAMAGE AGAINST AN INTERNATIONAL AIR CARRIER ARE SPECIFICALLY CONCERNED, REFERRED TO THE COURT OF CLAIMS DECISION IN FLYING TIGER LINE, INC. V. UNITED STATES, 170 F.SUPP. 422, CONSTRUING CERTAIN PROVISIONS OF THE CONVENTION FOR THE UNIFICATION OF CERTAIN RULES RELATING TO INTERNATIONAL TRANSPORTATION BY AIR BETWEEN THE WORLD POWERS SOMETIMES REFERRED TO AS THE ,WARSAW CONVENTION.'

PROVISIONS OF THE CONVENTION FOR THE UNIFICATION OF CERTAIN RULES RELATING TO INTERNATIONAL TRANSPORTATION BY AIR, 49 STAT., PART 2, 3000, 3013, AND 3014, COMMONLY CALLED THE WARSAW CONVENTION, REGULATE AND APPLY TO ALL INTERNATIONAL TRANSPORTATION OF PERSONS, BAGGAGE OR GOODS PERFORMED BY AIRCRAFT FOR HIRE. SEE ARTICLE I. THE WARSAW CONVENTION WAS SUBMITTED BY THE PRESIDENT OF THE UNITED STATES TO THE SENATE OF THE 73RD CONGRESS FOR APPROVAL. FINAL ADHERENCE TO THE RULES OF THE WARSAW CONVENTION WAS PROCLAIMED BY THE PRESIDENT ON OCTOBER 29, 1934. THIS ACTION RESULTED IN A TREATY BETWEEN THE UNITED STATES AND THE SUBSCRIBING NATIONS. PIERRE V. EASTERN AIR LINES, 152 F.SUPP. 486; IDEMNITY INSURANCE CO. OF NO. AMERICAN V. PAN AMERICAN AIRWAYS, 58 F.SUPP. 338.

THE CONSTITUTION OF THE UNITED STATES IN ARTICLE VI, PARAGRAPH 2, PROVIDES,

"THIS CONSTITUTION, AND THE LAWS OF THE UNITED STATES WHICH SHALL BE MADE IN PURSUANCE THEREOF; AND ALL TREATIES MADE, OR WHICH SHALL BE MADE, UNDER THE AUTHORITY OF THE UNITED STATES, SHALL BE THE SUPREME LAW OF THE LAND; AND THE JUDGES IN EVERY STATES HALL BE BOUND THEREBY, ANY THING IN THE CONSTITUTION OR LAWS OF ANY STATE TO THE CONTRARY NOTWITHSTANDING.'

ARTICLES 28, 29, AND 32 OF THE ABOVE-DESCRIBED TREATY PROVIDE:

ARTICLE 28

"/1) AN ACTION FOR DAMAGES MUST BE BROUGHT, AT THE OPTION OF THE PLAINTIFF, IN THE TERRITORY OF ONE OF THE HIGH CONTRACTING PARTIES, EITHER BEFORE THE COURT OF THE DOMICILE OF THE CARRIER OR OF HIS PRINCIPAL PLACE OF BUSINESS, OR WHERE HE HAS A PLACE OF BUSINESS THROUGH WHICH THE CONTRACT HAS BEEN MADE, OR BEFORE THE COURT AT THE PLACE OF DESTINATION.

"/2) QUESTIONS OF PROCEDURE SHALL BE GOVERNED BY THE LAW OF THE COURT TO WHICH THE CASE IS SUBMITTED.'

ARTICLE 29

"/1) THE RIGHT TO DAMAGES SHALL BE EXTINGUISHED IF AN ACTION IS NOT BROUGHT WITHIN 2 YEARS, RECKONED FROM THE DATE OF ARRIVAL AT THE DESTINATION, OR FROM THE DATE ON WHICH THE AIRCRAFT OUGHT TO HAVE ARRIVED OR FROM THE DATE ON WHICH THE TRANSPORTATION STOPPED.

"/2) THE METHOD OF CALCULATING THE PERIOD OF LIMITATION SHALL BE DETERMINED BY THE LAW OF THE COURT TO WHICH THE CASE IS SUBMITTED.'

ARTICLE 32

"ANY CLAUSE CONTAINED IN THE CONTRACT AND ALL SPECIAL AGREEMENTS ENTERED INTO BEFORE THE DAMAGE OCCURRED BY WHICH THE PARTIES PURPORT TO INFRINGE THE RULES LAID DOWN BY THIS CONVENTION, WHETHER BY DECIDING THE LAW TO BE APPLIED, OR BY ALTERING THE RULES AS TO JURISDICTION SHALL BE NULL AND VOID. * * *.'

IN THE CASE OF THE FLYING TIGER LINES, INC. V. UNITED STATES, 170 F.SUPP. 422, THE COURT OF CLAIMS HELD THAT A UNILATERAL WITHHOLDING OR A SETOFF BY THE UNITED STATES OF THE AMOUNT OF A CLAIM FOR LOSS OR DAMAGE INCURRED IN AN INTERNATIONAL AIR SHIPMENT DOES NOT STOP THE RUNNING OF THE STATUTE OF LIMITATIONS OR CONSTITUTE AN EFFECTIVE COLLECTION OF THE CLAIM, SINCE THESE ACTIONS ARE NOT SUBSTANTIALLY EQUIVALENT TO THE INSTITUTION OF A LAWSUIT PRESCRIBED BY THE TREATY. THUS, SHOULD A UNILATERAL OFFSET BE MADE ON ACCOUNT OF AN INTERNATIONAL AIR LOSS OR DAMAGE CLAIM, IT IS OUR VIEW THAT THE CARRIER, AFTER WAITING TWO YEARS FROM THE TIME THE AIRCRAFT ARRIVED AT DESTINATION OR THE DATE THE AIRCRAFT OUGHT TO HAVE ARRIVED THERE--- AND SUCH CLAIM THUS BE EXTINGUISHED--- COULD SUCCESSFULLY RECLAIM THE AMOUNT OFFSET.

RELIANCE ON SUCH AN OFFSET, WHERE THE CARRIER COULD SUCCESSFULLY COMPEL REFUND THEREOF, WOULD NOT IN OUR OPINION BE IN THE BEST INTEREST OF THE UNITED STATES AND CONSEQUENTLY THE REVISION SUGGESTED IN MR. HITCH'S LETTER MAY NOT PROPERLY BE ADOPTED.

SO FAR AS WE ARE AWARE THE PROCEDURES SET OUT IN 5 GAO 5040.22 AS TO LOSS AND DAMAGE CLAIMS AGAINST AIR CARRIERS ON INTERNATIONAL SHIPMENTS HAVE NOT OCCASIONED SUBSTANTIAL BURDENS ON THE GOVERNMENT AGENCIES CONCERNED WITH IT NOR UPON OUR TRANSPORTATION DIVISION AND WE SEE NO NECESSITY AT PRESENT FOR ANY CHANGE THEREIN.