Interdependence and the judges: civil aviation and antitrust

Abstract

Air service agreements are a major and continuing source of friction between governments. Yet it is by air service agreements negotiated bilaterally between governments under the 1944 Chicago Convention that international civil aviation is regulated.1 Another major source of friction is the application of American antitrust legislation to foreign companies.2 When these two generators of friction-an air service agreement and US antitrust-come together, we have the raw material for a display of international economic relationships at their worst. On 24 November 1982, Laker Airways commenced, through its liquidator, Christopher Morris, a civil action in the US District Court under the US antitrust acts. Thus was initiated one more in a long line of disputes between the American and British governments about civil aviation and US antitrust. But this time the two elements of dispute had, for once, come together in one incident. The purpose of the Laker action was to recover for injuries claimed to have been sustained by the airline, first, as a result of alleged predatory pricing3 by certain competitors which was designed to put it out of business, and, secondly, as a result of alleged unlawful interference by certain airlines, in that they had exercised pressure on McDonnell Douglas, the suppliers of a major part of Laker's airline fleet, to withdraw from the refinancing arrangements which were under discussion before Laker Airways went into liquidation early in February 1982. The defendants named at the time were British Airways, British Caledonian, Lufthansa, Swissair, Pan American Airways, Trans World Airlines, McDonnell Douglas Corporation and McDonnell Douglas Finance Corporation. Other defendants were named later. Then in spring 1983, the US Department of Justice commenced, under the American antitrust laws, a criminal investigation of essentially the same allegations. The situation so described raised two important issues, neither of them new but now presented in perhaps their starkest form. The first issue concerns the status of international agreements entered into with the United States and in this case, specifically, the status of the Bermuda 2 air services agreement between the United States and the United Kingdom, signed in Bermuda in July 1977. The second issue concerns the impact on international trade of civil and criminal action taken under the US antitrust acts.