Blogs

Posted: April 11, 2018

Judge Garaufis Denies Motion to Dismiss and Holds that Taiwan is Not bound to Warsaw Convention despite China’s Accession to the Treaty

Posted by Solomon N. Klein, Litigation Partner

In a case of first impression in the Second Circuit, District Judge Nicholas G. Garaufis held that China’s agreement to join the Warsaw Convention does not apply to a dispute involving spoiled cherries shipped from Chile to Taiwan. Allianz Global Risks US Ins. Co. v. Latam Cargo USA, LLC, et al., (E.D.N.Y Mar. 31, 2018) 16-CV-6217 (NGG) (ST).

The lawsuit was brought against a number of cargo transporters, alleging that a shipment of fresh cherries arrived spoiled in Taiwan. The fresh cherries were allegedly delayed in transit after taking a circuitous route and “‘stored for a substantial period of time to the detriment of the fruit.’”

The Warsaw Convention, as amended by the Hague Protocol, governs, among other things, the international carriage by air of cargo. The Court explained that if the Warsaw Convention applied to the dispute then there would be no subject matter jurisdiction. This is because the Warsaw Convention has specific requirements where a suit could be brought based on the carriers’ locations and destination of the shipment – none of which were in the United States.

However, the parties disputed whether Taiwan is bound to Warsaw Convention in the first instance:

Defendants contend that because China acceded to the Warsaw Convention, so did Taiwan. (Cathay Mem. at 6; LAN-Latam. Mem. at 2.) China’s instrument of accession to the Warsaw Convention states “The Government of the People’s Republic of China is the sole legal government representing the Chinese People. The [Warsaw] Convention to which the Government of the People’s Republic of China adhere shall of course apply to the entire Chinese territory including Taiwan.” Warsaw Convention, Reference 10. Defendants thus argue that, as a result of China’s accession to the Warsaw Convention, Taiwan is a signatory to the Convention, and thus that the shipment in question falls within the scope of the Convention.

Defendants are mistaken, however, about Taiwan being bound by the Warsaw convention. Although the Second Circuit does not appear to have ruled on the issue, the majority of case law supports the position that Taiwan is not bound by the Warsaw Convention.

In Atlantic Mutual Insurance Co. v. Northwest Airlines, 796 F. Supp. 1188 (E.D. Wis. 1992), the District Court for the Eastern District of Wisconsin held that Taiwan was part of China, and thus that China’s status as a High Contracting Party to the Convention rendered Taiwan bound by the Convention. Id. at 1190-91. This ruling, however, was questioned by the Bankruptcy Court for the Northern District of Illinois, which stated that “[t]he reasoning in Atlantic Mutual was flawed …. The United States’s recognition of mainland China and derecognition of Taiwan has not had the effect in any legal or practical sense of accepting the PRC’s territorial claim to Taiwan.” Schwinn Plan Comm. v. AFS Cycle & Co., Ltd. (In re Schwinn Bicycle Co.) . 190 B.R. 599,611 (Bankr. N.D. Ill. 1995). Further, the Schwinn Plan Committee court held that “the question of what government is representative of a foreign state is one to be determined by the Executive Branch and is beyond the purview of judicial review. By analogy, it would be beyond a court’s authority to decide … that Taiwan has tacitly been recognized by the United States as a party to any treaty signed by the PRC.” Id. at 612.

Taiwan’s status with regard to the Warsaw Convention then was brought before the Ninth Circuit, which in Mingtai Fire & Marine Insurance Co. v. UPS, 177 F .3d 1142 (9th Cir. 1999) (“Mingtai Fire”), followed in the footsteps of Schwinn Plan Committee. The Ninth Circuit stated that “the Constitution commits to the Executive Branch alone the authority to recognize, and to withdraw recognition from, foreign regimes.” Id. at 1145. The court also then addressed the Taiwan Relations Act, and stated that “despite the absence of official relations, the United States continues to deal separately with Taiwan,” and the Taiwan Relations Act “gave no indication that existing or future agreements with the newly recognized China would be binding upon Taiwan.” Id. at 1146. Indeed, the Executive Branch had expressly stated its position, which was entitled to substantial deference, that the Warsaw Convention did not bind Taiwan. Id. at 1146- 47. Thus, the Ninth Circuit concluded that the Warsaw Convention does not apply to Taiwan.

Other courts in the Ninth Circuit have followed Mingtai Fire without criticism. See, e.g., Am. IC Exch., Inc. v. Fed. Express Corp., 185 F.3d 865, 1999 WL 391000, at *l (9th Cir. 1999) (memorandum disposition) (“Taiwan is not bound by the Warsaw Convention …. “); In re Extradition of Coe, 261 F. Supp. 2d 1203, 1209 (C.D. Cal. 2003); In re Air Crash at Taipei, 211 F.R.D. 374, 380 (C.D. Cal 2002) (holding that Taiwan is not party to the International Civil Aviation Organization, and citing Mingtai Fire’s holding on the Warsaw Convention as precedent).

Because the Second Circuit has not addressed Taiwan’s status under the Warsaw Convention, this court is guided by the reasoning of other courts that have addressed the issue. The court finds persuasive the Ninth Circuit’s thorough discussion and explanation of why Taiwan is not bound by the Warsaw Convention. Mingtai Fire, 177 F.3d at 1145-47. The court knows of no reason to believe that the Executive Branch has changed its position that Taiwan is not bound by China’s accession to the Warsaw Convention. See Br. for the United States as Amicus Curiae, Mingtai Fire, 177 F.3d at 142 (No. 98-15088), available at https://www.state.gov/documents/organization/65731.pdf. In addition, the court notes that Taiwan has not considered itself bound by the Warsaw convention. See Coordination Council for N. Am. Affairs v. Nw. Airlines, 891 F. Supp. 4, 8 (D.D.C. 1995).

For the foregoing reasons, in this court’s view, Taiwan is not bound by the Warsaw Convention.

Allianz Global Risks US Ins. Co. v. Latam Cargo USA, LLC, et al., (E.D.N.Y Mar. 31, 2018) 16-CV-6217 (NGG) (ST).

Posted by Solomon N. Klein, Litigation Partner

View posts