I INTRODUCTION

The main pieces of legislation in relation to civil aviation in Malaysia are the Civil Aviation Act 1969 (the CAA 1969), the subsidiary legislation made thereunder (i.e., the Civil Aviation Regulations 2016 (the CAR 20162)), and the Malaysian Aviation Commission Act 2015 (the MACA), which came into force on 1 March 2016.3 The Civil Aviation Authority of Malaysia Act 2017 (the CAAMA) was gazetted on 27 February 2017, but has yet to come into force at the time of writing.

With the establishment of the Malaysian Aviation Commission (MAVCOM), the area of civil aviation is now under the joint purview of MAVCOM and the Department of Civil Aviation (DCA), both of which are under the supervision of the Ministry of Transport (the Ministry). The Aviation Division4 of the Ministry was previously responsible for all civil aviation affairs in Malaysia and the DCA was established to help achieve and administer the objects and policies of the Ministry. The objectives of the Division are to develop an efficient, economical and safe air transport system for passengers and cargo, and to plan and implement infrastructural projects to meet the demands of air transport.

With the establishment of MAVCOM, the responsibilities of the DCA have become more streamlined, and the DCA is now essentially the technical regulator in the areas of security, safety and airline and airport supervision. The Director General of the DCA (DGCA) is empowered under Section 2B of the CAA 1969 to:

    • a exercise regulatory functions in respect of civil aviation and airport and aviation services including the establishment of standards and their enforcement;
    • b represent the government of Malaysia in respect of civil aviation matters and to do all things necessary for this purpose;
    • c ensure the safe and orderly growth of civil aviation throughout Malaysia;
    • d encourage the development of airways and airport and air navigation facilities for civil aviation;
    • e promote the provision of efficient airport and aviation services by licensees; and
    • f promote the interests of users of airport and aviation services in Malaysia in respect of the prices charged for, and the quality and variety of, services provided by licensees.

Once the CAAMA comes into force, all the duties and functions of DCA will be conferred on the new Civil Aviation Authority of Malaysia (CAAM). Section 16 of the CAAMA sets out the functions of the CAAM, which covers the current duties and functions of the DGCA, and further expands upon these to include, among others, safeguarding the civil aviation industry against unlawful interference, co-operating with any authority in charge of investigating aircraft accidents and serious incidents, and providing technical and consultancy services relating to civil aviation. The CAAM will be headed by a chief executive officer, who shall be appointed on the advice of the Minister of Transport. Further, the Civil Aviation Authority of Malaysia Fund will be established and shall be administered and controlled by the CAAM. The decision to set up the CAAM was in line with the International Civil Aviation Organisation's (ICAO) call for each contracting state of the Chicago Convention to establish and maintain an autonomous civil aviation authority to ensure that civil aviation safety is efficiently managed. The Civil Aviation (Amendment) Act 2017 has been passed to make the necessary amendments to the CAA 1969 when the CAAMA eventually comes into force.

MAVCOM meanwhile serves as the economic regulator in relation to civil aviation in Malaysia, with the goal of promoting a commercially viable, consumer-oriented and resilient civil aviation industry which supports the nation's economic growth. Section 19 of the MACA provides that MAVCOM shall consult the DGCA on technical, safety and security or other related issues. The functions of MAVCOM as set out in Section 17 of the MACA are to:

  • a regulate economic matters relating to the civil aviation industry;
  • b provide a mechanism for the protection of consumers;
  • c provide a mechanism for dispute resolution between the providers of aviation services;
  • d administer, allocate and manage air traffic rights;
  • e monitor slot allocation for airlines or other aircraft operators;
  • f administer and manage public service obligations;
  • g facilitate and coordinate matters of interest to the Malaysian civil aviation services and government agencies, locally and internationally; and
  • h perform any other functions that are incidental or consequential to any of its functions under the MACA.

Under the MACA, MAVCOM is responsible for the issuance and renewal of air service licences and permits, ground handling licences and aerodrome operator licences. Applications for such licences are processed and approved by MAVCOM (provided all the requirements and necessary payments are fulfilled).

There is no express restriction under Malaysian laws in relation to investments in or the setting up of aircraft operators, airport operators, public air transportation providers, aircraft maintenance companies and the like. Nonetheless, because their activities require licences that are granted at the discretion of the DGCA and MAVCOM, the DGCA and MAVCOM effectively control investments in licensees.

Similarly, in relation to aircraft operators, while there is no express provision as to their ownership structure under Malaysian law, for an airline to enjoy the traffic rights and privileges agreed by the government of Malaysia with another member state of the Chicago Convention (as defined below), it must be ‘substantially owned and effectively controlled by the party designated by Malaysia or its nationals'.5

On 7 April 1958, Malaysia ratified the Convention on International Civil Aviation 1944 (the Chicago Convention) and became a party to the International Air Services Transit Agreement in relation to transit and traffic rights with effect from 31 May 1945.

With respect to interests in aircraft equipment, Malaysia has acceded to the Convention on International Interests in Mobile Equipment (the Cape Town Convention) and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment in 2005, and the Cape Town Convention and the said Protocol came into force in Malaysia on 1 March 2006.

With regard to labour and employment issues in the aviation sector, there are no specific provisions addressing these under the CAA 1969; hence the general labour law will be applicable.

II LEGAL FRAMEWORK FOR LIABILITY

i International carriage

Malaysia has ratified four conventions in relation to the international carriage of passengers, baggage and cargo by air:

  • a the Warsaw Convention 1929, as amended at The Hague 1955 (the Warsaw-Hague Convention), which is given the force of law by virtue of the First Schedule to the Carriage by Air Act 1974 (the CAA 1974);
  • b the Warsaw-Hague Convention further amended by Montreal Protocol No. 4, which is given the force of law by virtue of the Fifth Schedule to the CAA 1974 (the Amended Convention);
  • c the Guadalajara Convention 1961, which is given the force of law by virtue of the Second Schedule to the CAA 1974 (the Supplementary Convention); and
  • d the Montreal Convention 1999, which is given the force of law by virtue of the Sixth Schedule to the CAA 1974 (the Montreal Convention).

The aforesaid conventions are hereinafter referred to as the ‘Carriage by Air Conventions'.

The Carriage by Air Conventions are self-contained regimes whereby any claim against a carrier falling within the ambit of the conventions will be subject to the conditions and limitations of liability as provided in Article 22 of the Warsaw-Hague Convention, Article 22 of the Amended Convention and Articles 21, 22 and 44 of the Montreal Convention, regardless of the nature of the proceedings by which the claim may be enforced. For the conventions to apply, inter alia, the carriage in question must fall squarely within the special definition provided for international carriage under the Carriage by Air Conventions (Convention Carriage).

Note that pursuant to Section 9 of the CAA 1974, the Yang di-Pertuan Agong6 may, by order, direct that the Carriage by Air Conventions shall apply to or shall cease to apply to any carriage of persons, baggage or cargo for the military authorities of a state to which this section applies in aircraft registered in that state if the whole capacity of the aircraft has been reserved by or on behalf of those authorities. However, no such order has been issued by the Yang di-Pertuan Agong thus far.

As at the time of writing, Malaysia has yet to accede to any international convention that regulates the liability of air carriers to third parties on the ground, such as the Rome Convention 1952 on Damage Caused by Foreign Aircraft to Third Parties on the Surface as amended at Montreal in 1978 and the Montreal Convention 2009 on Compensation for Damage to Third Parties, Resulting from Acts of Unlawful Interference Involving Aircraft.

ii Internal and other non-convention carriage

The Carriage by Air (Application of Provisions) Order 1975 (the 1975 Order) governs carriage by air not within the ambit of the Warsaw-Hague Convention (1975 Order Carriage). This order, in essence, adopts the provisions of the Warsaw-Hague Convention as supplemented by the Guadalajara Convention to govern such non-convention carriage with certain minor exceptions and amendments to facilitate the adaptation of these conventions.

The 1975 Order is applicable to (1) non-convention carriage of persons, baggage or cargo performed by aircraft for reward, (2) non-convention gratuitous carriage by aircraft performed by an air transport undertaking, the state or by legally constituted public bodies, and (3) carriage of mail and postal packages.

Other notable exceptions or amendments include the omissions of Chapter II in relation to ‘passenger tickets', Article 28 in relation to the jurisdiction in which a claim must be made and Article 40A in relation to deemed territory.

Further, the Minister is empowered under the 1975 Order to exempt, subject to such conditions as he thinks fit, any carriage or any person from any of the requirements imposed by the 1975 Order.

It should be highlighted that the provisions of the 1975 Order relating to the carriage of passengers, baggage or cargo are similar to those set out in the Warsaw-Hague Convention; thus the liability of the carrier for the death or injury of passengers, delay, loss or destruction of baggage or cargo and the limitations thereto are the same as under the Warsaw-Hague Convention.

While it may appear that all non-convention carriages would fall within the 1975 Order, this is certainly not the case. There are certain special categories of carriage that do not fall within the Carriage by Air Conventions or the 1975 Order (Other Carriage). An example would be gratuitous carriage not performed by an air transport undertaking (i.e., by an individual). Such carriage is subject to the ordinary law with regard to carriers. There are a few Malaysian cases in which the application of common law rules to aircraft operation has been discussed,7 but it seems likely that the courts will proceed by analogy with cases relating to the operation of the various forms of land and water transport.

iii General aviation regulation

In Malaysia, liability in the operation of civil aviation aircraft is governed by the CAA 1969 and the CAR 2016. The CAR 2016 regulates various aspects of civil aviation, including but not limited to, registration of aircraft, licensing of aircraft operators, crew and engineers, detention and sale of aircraft, investigations of aircraft accidents, operation of aircraft and mortgage of aircraft. Non-compliance with these requirements may attract criminal liability. Further, the CAA 1969 also imposes civil liability on owners or lessees, as the case may be, for any material damage that is caused by an aircraft in flight, taking off or landing, or by any person in any such aircraft, or by any article falling from any such aircraft on to any person or property whether on land or water.

It is to be noted that the definition of the term ‘aircraft' under the CAR 2016 is very wide and includes any machine that can derive support in the atmosphere from reactions of the air, other than reactions of the air against the surface of the earth. This definition covers non-power driven objects such as a free balloon, a captive balloon and a glider, as well as any power-driven flying machine such as an airship, an aeroplane, a rotorcraft, a helicopter or gyroplane, an ornitophter, and a microlight aeroplane. Accordingly, the CAA 1969 and the CAR 2016 are equally applicable to these air objects though the requirements may differ from commercial aircraft.

iv Passenger rights

Where the carriage by air is Convention Carriage, the liability provisions for delay, damage or destruction of baggage and cargo under the Warsaw-Hague Convention or the Montreal Convention (if this has been adopted by the states) would be applicable subject to the limitations therein.

Where the carriage by air is a 1975 Order Carriage, the liability for delay, damage or destruction of baggage and cargo is governed by the 1975 Order. As noted above, the 1975 Order in essence adopts the Warsaw-Hague Convention with a few modifications. In this regard, the liability provision for delay and the limitation provisions under Articles 19 and 22 of the Schedule to the 1975 Order are the same as Articles 19 and 22 of the Warsaw-Hague Convention.

Notwithstanding the aforesaid, however, in the case of Malaysian Airline System Bhd v. Malini Nathan & Anor [1986] 1 MLJ 330, the court held that Article 19 of the Montreal Convention only applies in a case where, under the contract of carriage, the time for the carriage is fixed. In this case, there was a condition in the contract of carriage providing that the ‘times shown in the timetables or elsewhere are not guaranteed and form no part of this contract'. The judge, on the basis of Article 3(2) of the Montreal Convention, interpreted this condition to be part of the condition of carriage and hence found that there was no delay occasioned. Accordingly, until the aforesaid case is overruled, notwithstanding the adoption of the Carriage by Air Conventions or the 1975 Order, passengers of commercial airlines who experience flight delays would not seem to be able to claim relief other than the remedies set out in the conditions of carriage, which usually involves a seat on the next available flight and some compensation for meals or accommodation, where applicable.

With effect from 1 July 2016, all airlines operating into or out of Malaysia and all airports in Malaysia are required by law to comply with the Malaysian Aviation Consumer Protection Code 2016 (the Code). The Code addresses, among others, minimum service levels and standards of performance for airlines and aerodrome operators, air passengers' rights covering denied boarding, flight delays, and compensation for lost, damaged or delayed baggage, and the handling of complaints. MAVCOM has the power to investigate any consumer complaints that it receives and to assist consumers and aviation service providers in the resolution of complaints. Under Paragraph 22 of the Code, MAVCOM may impose a financial penalty of up to 200,000 ringgit for non-compliance with certain provisions of the Code, and in the case of a second or subsequent non-compliance, an amount 10 times the financial penalty imposed for the first non-compliance. While MAVCOM has deferred the implementation of the penalty to afford airlines time to make any necessary changes, the penalty is expected to come into force in the third quarter of 2017.8 With regard to the rights of disabled passengers, Sections 26 and 27 of the Persons with Disabilities Act 2008 require the providers of public facilities and public transport facilities to give appropriate consideration and take necessary measures to ensure that the facilities, amenities and services provided conform to universal designs to facilitate access and use by disabled persons. In conjunction with this, the airport operators should ensure that equipment such as aerobridges and wheelchairs are always made available to assist passengers with reduced mobility. Until recently, Malaysia had not passed any legislation to cater for the rights of disabled persons and persons with reduced mobility when travelling by air. With the recent coming into force of the Code, the non-discrimination of persons with disabilities has been addressed in paragraph 9 and the second Schedule of the Code. Among others, an airline shall ensure that all of its personnel providing direct assistance to persons with disability have knowledge of how to meet the needs of persons having various disabilities, and shall provide disability-equality training to personnel working at the aerodrome who deal directly with the travelling public. The Second Schedule of the Code sets out the assistance and arrangements that all airlines are required to provide to persons with disabilities during every step of their journey. This includes making all reasonable efforts to arrange seating to meet the needs of individuals with disability or reduced mobility, and where a person with disability is assisted by an accompanying person, making all reasonable efforts to give such a person a seat next to the person with disability.

III LICENSING OF OPERATIONS

i Licensed activities

An aircraft operator in Malaysia would be required to obtain an air operator certificate from the DCA to operate Malaysian-registered aircraft for the purpose of commercial air transport. Pursuant to the CAR 2016, a person holding an air operator certificate shall be subject to the terms and conditions as may be imposed by the DGCA and shall comply with the terms as specified in the operations specifications. An aircraft operator would also be required to submit an operations manual to the DGCA for approval, establish a ground and flight training programme and include a flight data analysis programme as part of its safety management system. The DGCA may issue a certificate of validation for any foreign air operator certificate granted under the law of any foreign state.

An air service licence or permit is also required from MAVCOM for the provision of air service (i.e., the carriage of passengers, mail or cargo for hire or reward, whether scheduled or non-scheduled, but not including flights carried on under the terms of any agreement or arrangement entered into by the government). The applicant would need to complete the form prescribed by MAVCOM and submit, inter alia, details or information relating to its organisation structure, shareholding structure, financial status and projection, proposed business plan for the next five years, proposed aircraft, aircraft insurance, leasing and financing of the aircraft, complaints management procedure and aircraft maintenance. MAVCOM, in exercising its discretion to grant or to refuse an air service licence or permit may impose any conditions and shall have regard to, among others: whether the applicant is a company incorporated in Malaysia and is directly under the control of a Malaysian company, as well as the ownership structure of the applicant; demand for air transport in the proposed areas of operation; the experience and competency of the management team of the company; the feasibility of the proposed business plan; the financial viability of the business; and the existence of other similar services, their efficiency and regularity in the industry.

The MACA contains provisions to facilitate the transition from the CAA 1969 or the CAR 2016 to the MACA in respect of licences and permits. Section 100 of the MACA provides that a person who holds a valid licence or permit issued to him or her under the CAA 1969 or the CAR 2016, or any air traffic right allocated to him or her for domestic or international service by the Ministry before 1 March 2016 shall continue to be authorised under the MACA until the expiry date of the licence, permit or right, and subject to the terms and conditions attached to the licence, permit or right.

Other than the aforesaid activities, flight crews (i.e., pilot and flight engineers) and aircraft maintenance engineers are also required to be licensed by the DCA.

Lastly, while not specifically a licence, every aircraft9 (other than aircraft registered with the registry of a member state of the Chicago Convention) is required to be registered with the DCA and maintain an airworthiness certificate from the DCA to fly into or over Malaysia.

ii Ownership rules

As stated above, there is no express law enacted or rule issued that prescribes or imposes any ownership rules in relation to an air operator. However, because of bilateral air service agreements signed by Malaysia with other countries, for a local air operator to enjoy the rights under such agreements, the air operator is required to be ‘substantially owned and effectively controlled by the party designated by Malaysia or its nationals'. Based on recent experience, the percentage of foreign ownership in an air operator10 allowed by DCA can go as high as 49 per cent.11

Aircraft owned by foreigners can be registered with the DCA in Malaysia if the aircraft is leased to a Malaysian entity or individual, or to the government of Malaysia. Except as stated, only aircraft owned by the government of Malaysia, a citizen of Malaysia or a body corporate incorporated and having its principal place of business in Malaysia can be registered with the DCA in Malaysia.

iii Foreign carriers

A foreign carrier must obtain an air service licence12 from MAVCOM. Generally, however, such a licence is issued only where the country of registration of the foreign carrier has entered into a bilateral or multilateral air service agreement with Malaysia.

IV SAFETY

The general rules relating to matters such as the airworthiness of aircraft, maintenance of aircraft, aircraft crew and licensing, operation of aircraft, conduct of operations, air traffic control and investigation of accidents are prescribed in the CAR 2016.

Further to this, airworthiness notices have been published by the DGCA from time to time pursuant to the CAA 1969 to prescribe or supplement the requirements relating to maintenance of aircraft and components, certification or airworthiness of types of aircraft and components, training organisations, licences for maintenance engineers and so on.

For example, in respect of the airworthiness of an aircraft, a certificate of airworthiness is required to be obtained from the DCA before the import or export of an aircraft. The certificate of airworthiness (whether issued by the DCA or another state) is also a necessity for the operation of the aircraft.

In relation to maintenance, an aircraft registered in Malaysia must be maintained in accordance with the maintenance programme approved by the DGCA and there must be in force a maintenance release issued by a person who holds a certificate of approval or a person who holds an aircraft maintenance licence under the CAR 2016, confirming that the maintenance work to which the document relates has been completed in a satisfactory manner, either in accordance with the approved data and the procedures described in the maintenance organisation's procedures manual, or under an equivalent system.

Other than safety requirements imposed on operators as set out above, certain international conventions in relation to the safety of passengers have also been given the force of law by virtue of the Aviation Offences Act 1984 (the AOA 1984). In essence, Part IV of the AOA 1984 gives effect to: the Montreal Convention 1971 for the Suppression of Unlawful Acts Against the Safety of Civil Aviation; and the Montreal Protocol 1988 for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation.

V INSURANCE

Article 50 of the Montreal Convention provides that state parties shall require their carriers to maintain adequate insurance covering their liability under the Convention and a carrier may be required by the state party in which it operates to furnish evidence that it maintains adequate insurance covering its liability under the Convention.

There is no other express Malaysian legislation or regulation prescribing the requirements on insurance for carriers, but an applicant for an air service permit or air service licence (i.e., an air operator) will have to provide to MAVCOM, as part of its application, details of the proposed insurance to be taken out by the applicant for liability to passengers, liability to third parties, liability in respect of cargo and baggage, and injury and loss as a result of active hostilities or civil unrest.

VI COMPETITION

In Malaysia, competition law is generally governed by the Competition Act 2010 (the CA 2010). However, with the MACA coming into force on 1 March 2016, competition matters relating to commercial activity, agreements and mergers within the aviation industry are now specifically regulated under the MACA. The three key prohibitions under the MACA are the prohibitions against:

  • a horizontal and vertical agreements that have the object or effect of significantly preventing, restricting or distorting competition in any aviation service market;
  • b the abuse of a dominant position by an enterprise having a dominant position in any aviation service market; and
  • c mergers that have the effect of substantially lessening the competition in any aviation service market.

While the first and second prohibitions reflect existing provisions in the CA 2010, the provisions on merger control are new and have been introduced into Malaysian legislation on competition for the first time. Under the MACA, a merger occurs if any of the following occurs:

  • a two or more previously-independent enterprises merge into one;
  • b one or more individuals or enterprises acquire control of another enterprise;
  • c an enterprise acquires assets of another enterprise that results in the former enterprise replacing the latter in the business; or
  • d a joint venture is created to perform, on a lasting basis, all the functions of an autonomous economic entity.

The regulator of the MACA is MAVCOM, which also acts as the enforcement agency under the MACA. The various enforcement remedies available to MAVCOM under the MACA include a financial penalty of up to 10 per cent of worldwide turnover, interim measures and compliance orders. There is a leniency regime in place and MAVCOM may offer leniency to enterprises that have admitted involvement in an infringement and have significantly assisted MAVCOM in other infringement investigations. MAVCOM also has the power to accept undertakings in lieu of penalties. Any person aggrieved by the decision (which includes an act, omission, refusal, direction or order) of MAVCOM has the right to appeal to the High Court within the period of three months beginning from the date on which the decision was communicated to the person aggrieved.

Since the MACA is a relatively recent legislation,13 there has not been any infringement case to date. However, prior to MAVCOM taking over from the Malaysian Competition Commission (MyCC), which is the regulator under the CA 2010, there was in fact an aviation case under the CA 2010. The MyCC took action against Malaysian Airline System Berhad (MAS), Air Asia Berhad and Air Asia X Sdn Bhd for a collaboration agreement that was purported to have anticompetitive elements. The agreement was alleged to have been entered into among the parties to allow them to operate freely within separate market segments in the airline industry and to impose higher prices to maximise profitability. The MyCC concluded that such an agreement infringed Section 4(2)(b) of the CA 2010, which prohibits horizontal agreements between competitors with the object of sharing markets. In response to MAS's contention that the MyCC had failed to conduct any ‘anticompetitive effects' analysis in arriving at the proposed decision, the MyCC relied on Paragraph 2.14 of the Guidelines on Anti-Competitive Agreements that provided that the anticompetitive effect of the agreement need not be examined once the anticompetitive object is shown. In February 2016, the Competition Appeals Tribunal unanimously overturned the MyCC's ruling and ordered a refund of the 10 million ringgit fines levied against MAS and Air Asia, stating that they had reviewed the case and determined that the collaboration agreement had not infringed Section 4(2) of the CA 2010.

VII WRONGFUL DEATH

Section 7 and Section 8 of the Civil Law Act 1956 (CLA 1956) provide for damages that may be claimed for causing wrongful death. The two claims that arise from wrongful death are namely, the dependency claim under Section 7 of the CLA 1956 and the estate claim under Section 8 of the CLA 1956. As the name suggests, the dependency claim is brought for the benefit of the deceased's statutory dependants and such action is brought to compensate the dependants for the loss of support they have suffered, together with expenses reasonably incurred. Generally, the damages claimed under Section 7 may be divided into: general damages, special damages and bereavement. General damages are the damages awarded for the financial loss sustained by the dependant occasioned by the deceased's death, which is, in essence, the loss of dependency. Special damages are the damages awarded for expenses reasonably incurred by the dependants as a result of the defendant's tort, including, but not limited to, the funeral expenses. As for bereavement, Section 7(3A) of the CLA 1956 has specified the sum to be awarded as bereavement is 10,000 ringgit and Section 7(3B) clarifies that it can only be claimed by a spouse in respect of the other spouse's death; or by the parents of the deceased where he or she is an unmarried child (minor).

In addition to the aforesaid claim for the loss of dependency, the other type of damages that may be awarded arising from wrongful death is the estate claim under Section 8 of the CLA 1956. Different from the dependency claim, the estate claim is brought for the benefit of the estate of the deceased. There are two heads of damages, being special damages and general damages. Special damages awarded under Section 8 are similar to those awarded under Section 7. However, general damages awarded under Section 8 are different from the general damages awarded under Section 7. As explained above, Section 7 addresses the issue of compensation to the dependants of the deceased for loss occasioned by his or her death, which is essentially for the benefit of the dependants. Section 8, however, is a claim brought for the benefit of the deceased. General damages claimed under Section 8 are not a claim for the loss of dependency but for the pain and suffering or loss of amenities of the deceased. To successfully claim for the pain and suffering or the loss of amenities, the claimant must be able to prove that, there was a lapse between the accident and the death of the deceased, and in respect of the claim for the pain and suffering, the claimant must additionally show that the deceased was conscious so as to be able to have felt the pain.

VIII ESTABLISHING LIABILITY AND SETTLEMENT

i Procedure

The forum for an action is dependent on whether the carriage is a Convention Carriage (as defined in Section II.i, supra), 1975 Order Carriage or Other Carriage (as defined in Section II.ii, supra).

Action in relation to a Convention Carriage or 1975 Order Carriage

The forum for an action claiming for damages is as provided in Article 33 of the Montreal Convention, which generally provides that an action must be brought, at the option of the plaintiff, at: the place where the carrier is ordinarily resident (i.e., its place of business); the place where the carrier has its principal place of business; the place where the carrier maintains an establishment through which the contract has been made; or the place of destination. The parties to the contract may, however, stipulate that any dispute relating to the liability of the carrier under the Montreal Convention shall be settled by arbitration with the proceedings taking place within one of the jurisdictions stated above.

If the claim is for damages resulting from death or injury of a passenger, in addition to the aforesaid fora, the action may also be brought in the country of the passenger's principal and permanent residence, so long as the carrier provides service to that country.14

The question of procedures shall be governed by the law of the court seized of the case.

The right to claim damages is extinguished if an action against the carrier is not brought within two years, reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived or on which the carriage stopped.15 However, such a limitation does not apply to any proceedings for contribution between tortfeasors.16

Pursuant to Order 22B of the Malaysian Rules of Court 2012, a party may serve an offer to settle to the other party in a prescribed form. The offer to settle is on a without-prejudice basis except as to costs. The offer can be made open for acceptance within a specific period or open ended in that it may be accepted at any time before the court disposes the matter. If the offer is accepted, the court may incorporate any of the terms into a judgment. Failure to comply with the terms of the offer will entitle the other party to make an application to a judge for judgment in the terms of the accepted offer, or to continue the proceedings as if there had been no accepted offer to settle.

Action in relation to Other Carriage

As these actions are not governed by convention, the action may be filed in the High Court of Malaya if (1) the cause of action arose in Malaysia, (2) the defendant or one of several defendants resides or has his or her place of business in Malaysia, or (3) the facts on which the proceedings are based exist or are alleged to have occurred in Malaysia.17 The limitation period whether the claim is based on contract or tort is six years from the date of breach or the date the cause of action arose. Order 22B of the Rules of Court 2012 is equally applicable.

ii Carriers' liability towards passengers and third parties

An operator's liability to passengers is on a strict liability basis whether the carriage is a Convention Carriage, 1975 Order Carriage or Other Carriage.

In relation to Convention Carriage and 1975 Order Carriage, damage sustained in case of death or bodily injury of a passenger whereby the incident that caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking, the carrier is liable for proven damages up to 113,100 special drawing rights (SDR)18 or 250,000 francs19 for each passenger and such liability shall not be excluded or limited. Further, a carrier could be liable for an amount that is more than the stipulated amount if it fails to prove that such damage was not due to negligence or other wrongful act or omission of the carrier or its servants or agents; or such damage was solely due to the negligence or other wrongful act or omission of a third party. In relation to Convention Carriage, for damage caused by delay in the carriage of persons; destruction, loss, damage or delay to baggage; and destruction, loss, damage or delay to cargo, the liability of the carrier is limited to 4,694 SDR, 1,131 SDR and 19 SDR per kilogram respectively. In relation to 1975 Order Carriage, damage caused by delay in the carriage of persons; and destruction, loss, damage or delay to baggage or cargo, the liability of the carrier is limited to generally 250,000 francs and 250 francs per kilogramme, respectively.

If the carrier proves that the damage was caused or contributed to by the negligence or other wrongful act or omission of the claimant, the carrier shall be wholly or partly exonerated from its liabilities to the claimant to the extent of the claimant's fault.20 For Convention Carriage, where an aircraft accident results in death or injury to passengers, the carrier shall make advance payments without delay to persons who are entitled to claim compensation to meet the immediate economic needs of such persons, but such advance payments shall not constitute a recognition of liability and may be offset against any amount payable subsequently as damages.21

In relation to the issue of whether damages in respect of mental injury is claimable, it is likely that Malaysian courts would turn down such a claim, taking into consideration a series of foreign cases that reached the same conclusion of not including purely psychological injury as bodily injury under Article 17 of the Montreal Convention or the Schedule to the 1975 Order, as the case may be.22

Claims for death or personal injury, damages for delay or destruction, loss, damage or delay to baggage or cargo in respect of Other Carriage are generally only subject to limitations expressed in the contract between the parties.

With regard to information regarding the carrier's liability towards third parties, this can be found above (see Section II.iii, supra). The carrier has strict and unlimited liability for damage to property or injury to third parties on the ground unless such damage or injury was caused by the victim.

iii Product liability

There are three main areas that cover product liabilities, namely contract, tort and the Consumer Protection Act 1999 (the CPA).

In a contract for the sale of goods, terms may be express or implied through statutes such as Section 16 of the Sale of Goods Act 1957, which provides for the implied condition as to the merchantable quality or fitness for the purpose of the goods. Hence, a manufacturer would attract liabilities if it is in breach of any of the terms. Nonetheless, because of the doctrine of privity of contract, contractual remedies are generally enforceable only by the other party or parties to the contract, namely, in this case, the purchasers of the goods. A manufacturer of goods would, therefore, not be liable to a passenger in contract.

A manufacturer of defective goods may be liable to an operator or a passenger in tort (e.g., in negligence). To establish liability for the tort of negligence, the claimant must establish that the defendant owed a duty of care to the claimant that was breached by the defendant, and that breach caused the damage or injury complained of. In proving his or her case, if the claimant is able to show that the defect in the goods was the cause of the damage or injury suffered, the onus will be shifted to the manufacturer to show that it had exercised reasonable care, failing which the manufacturer will be made liable.

As for product liability under the CPA, if a product (whether it be the aircraft or any part thereof) is purchased by a consumer for personal use and not for commercial use, the producer of the product (which includes the manufacturer), the importer of the product into Malaysia, and the person who has held himself or herself out to be the producer of the product may be liable for damages caused by defects in the product. The term ‘damage' in the CPA refers to death or personal injury, or any loss of or damage to any property, including land, as the case may require. The CPA has also provided statutory defences for the producer and the burden of proof lies with him or her. One of the defences that is worth highlighting is that a producer shall not be liable if the state of scientific and technical knowledge at the relevant time was not such that a producer may reasonably be expected to discover the defect if it had existed in his or her product while it was under his or her control.

iv Compensation

Generally, damages awards for a cause of action whether under Carriage by Air Conventions, the 1975 Order or otherwise, consist of two limbs that are, firstly, general damages for pain and suffering and loss of amenities and, secondly, special damages in respect of the financial expenses incurred or that may be incurred as a result of the incident.

For the assessment of general damages, the courts will look at previous judgments to determine the upper and lower limits of the award and take into account the nature, extent and duration of the injuries to decide how much to award. It should be noted that loss of expectation of life is statutorily barred in Malaysia and the claimant can only recover damages for pain and suffering if he or she was conscious, sentient and able to feel the pain and suffering. On the other hand, special damages would include medical expenses, cost of care, loss of future earnings and loss of earning capacity.

As for dependency claims, the statutory dependants are entitled to claim for loss of support from the deceased victim's earnings; and loss of support in the form of services rendered by the deceased victim to the dependants. In this regard, the calculation for the former will be contributions made by the deceased through his or her earnings, which are exclusive of personal expenses (multiplicand) multiplied by the fixed statutory multiplier that is according to the age of the deceased at the time of death. In addition, the law also provides a sum of 10,000 ringgit to be granted to the spouse of the deceased victim, or to his or her parents if he or she was unmarried.

IX VOLUNTARY REPORTING

With Malaysia being one of the ICAO Member States, the DCA is responsible for ensuring that the safety and security of flights are consistently maintained at the highest level possible, and, at the same time, for ensuring that the safety of the Malaysian airspace for aircraft operations conforms to the requirements of ICAO in all aspect of policies, regulations and Standards and Recommended Practices. Pursuant to Chapter 8 of Annex 13 to the Chicago Convention, it is recommended that Member States establish a voluntary incident reporting to facilitate the collection of information that may not be captured by a mandatory incident reporting system. A voluntary incident reporting system shall be non-punitive and shall afford protection to the sources of the information. In this regard, the Ministry has, pursuant to Regulation 186 under Part XXVI of the CAR 2016, issued a directive on 9 May 2016 on ‘Investigation of Aircraft Accident and Incident' (the Directive) that provides for, among other things, a voluntary incident reporting system that is not captured by the Mandatory Occurrences Reporting System under Part XXII of the CAR 2016. Pursuant to this Directive, where a voluntary report is made to the investigator-in-charge (IIC) pursuant to the voluntary reporting system, no person shall release the identity of the person making the report or any information that could reasonably be expected to reveal that person's identity, unless the person making the report authorises, in writing, its release. Further, a report made to the IIC under a voluntary reporting system shall also not be used against the person who made the report in any disciplinary, civil, administrative and criminal proceedings. The aforesaid protections regarding the identity of the person making the voluntary report shall, however, not apply to situations involving unlawful acts or gross negligence by that person, unless an appropriate authority determines that the value of its disclosure or use in any particular instance outweighs the adverse impact that such action may have on aviation safety.

It is interesting to note that Part XXVI of the CAR 2016, which initially dealt with the investigation of aircraft accidents and incidents, has been amended pursuant to the Civil Aviation (Amendment) Regulations 2016 (CAAR)23 to apply only to accidents and ‘serious incidents', as opposed to ‘incidents' in general. The definition of ‘serious incidents' mirrors that found in Annex 13 of the Chicago Convention,24 meaning an incident involving circumstances indicating that there was a high probability of an accident and associated with the operation of an aircraft, and includes a list of examples adapted from the non-exhaustive list found in Annex 13.

X THE YEAR IN REVIEW

i The Malaysian Airline System Bhd's Recovery Plan

Despite Christoph Mueller's surprise resignation, 2016 has seen the Malaysian flagship carrier, MAS, well on its way in the implementation of the five-year 12-point recovery plan entitled ‘Rebuilding a National Icon: The MAS Recovery Plan' (the Recovery Plan). Pursuant to the Malaysian Airlines System (Administration) Act 2015 (MAS (Administration) Act), the operations, assets and liabilities of MAS have been transferred to Malaysia Airlines Bhd (MAB), the new company that was incorporated to take over the business of MAS. Peter Bellew has been appointed as group managing director and CEO of Malaysia Airlines Bhd (MAB) effective 1 July 2016.25 Bellew joined MAB from Ryanair Ltd where he had last served as the director of flight operations, and had been serving as the chief operating officer of MAB immediately prior to his appointment as managing director. The national carrier hopes to make a profit in 2018, and float on the stock market once again in 2019.26

On a separate note, MAS was successful in striking out the judicial review brought about by Malaysian Airline System Employees' Union Peninsular Malaysia (Maseu) against the administrator of MAS, MAB, Khazanah and the government of Malaysia, which contended, among others, that the immunity provision in the MAS (Administration) Act preventing any action from being brought against the Administrator is unconstitutional and therefore void.27 However, during the first quarter of 2017, the family members of three passengers on board the ill-fated flight MH370 succeeded in getting leave from the Federal Court to allow their appeal against the High Court ruling removing MAB as a defendant. The family members had sued both MAS and MAB. MAB was previously successful in its application in the High Court and the Court of Appeal respectively to remove MAB as a defendant. The appeal will be heard sometime in the later part of this year. The single question to be considered by the Federal Court is:

The question is whether the non-vesting of the contingent liability of the defendant, Malaysian Airline System Berhad (MAS), to MAB under the Malaysia Airlines System Bhd 2015 Act to satisfy any judgment entered against MAS after all its assets are vested in MAB would constitute asset-stripping of MAS, and carried out in order to defeat the satisfaction of such judgment against MAS; in consequence, whether it is an unlawful exercise of discretion under the Act.28

It remains to be seen if the Federal Court will eventually decide in favour of the claimants, noting that the panel that will hear and decide on the question may not be the same as the panel that granted leave to appeal. If the Federal Court were to decide in favour of the claimants, then this will certainly open a floodgate of actions against the administrator or MAB.

ii MAVCOM

Since its inception on 1 March 2016, we have seen MAVCOM steadily and robustly executing its functions and taking steps to ensure that airlines operating in and out of Malaysia are in compliance with aviation laws and regulations. Enforcement action taken includes the revocation of the air service permit of Eaglexpress Air Charter Sdn Bhd (Eaglexpress) on 20 December 2016. Eaglexpress is a global umrah and hajj charter operator that operated flights to Saudi Arabia from North Africa, the Middle East, Indonesia, Bangladesh and Malaysia, and is Malaysia's second charter airline after Berjaya Air Sdn Bhd. Although Eaglexpress' air service permit had initially been granted for the period from 1 September 2016 to 31 August 2017, MAVCOM found that Eaglexpress had failed to comply with the specific conditions imposed within the stipulated time frames.29 Separately, MAVCOM had also launched investigations and taken action against Suasa Airlines Sdn Bhd for operating a commercial flight from Kuala Lumpur to Langkawi on 22 July 2016 without a valid air service permit. This has resulted in a 380,000 ringgit fine being imposed on the airline.30

iii Aviation consumer rights

On the consumer rights and awareness front, MAVCOM has acknowledged the need to develop awareness among air travel passengers of their rights, and has taken active steps to raise awareness and introduce consumer initiatives. This includes the introduction of the Malaysian Aviation Consumer Protection Code 2016, the establishment of the Complaints Management System and the collaboration with parties in the financial services industry to facilitate refunds to Rayani Air passengers who had booked their travels using credit cards. Rayani Air had been a full service sharia-compliant airline launched in 2015. However, after being plagued by a series of issues and incidents, including frequent cancellation and rescheduling of flights, a broken cockpit windshield and a pilot strike over unpaid wages, the airline was suspended from operating by the DCA on 11 April 2016, and on 13 June 2016, its air operator certificate and air service licence were revoked.31

MAVCOM has also released its inaugural Consumer Report on 18 April 2017 with the aim of providing a transparent and deeper understanding of the state of the industry in terms of aviation consumerism.32 MAVCOM's efforts thus far are a positive indication of its commitment towards addressing issues, improving service levels and protecting consumer rights in the long run.

iv New flight operation directives for foreign pilots

On 5 May 2016, a helicopter carrying six people crashed shortly after take off. The six people killed include a Deputy Minister, a Member of Parliament and a secretary general of a Ministry. The helicopter was flown by a foreign pilot. Following the safety recommendations made by the Air Accident Investigation Bureau, Malaysia in its final report on the investigation of the accident, the DCA issued new flight operation directives (FODs) on 15 June 2017, which regulate foreign pilots flying helicopters in Malaysia for the purpose of commercial air transport.33 Under the new FODs, among others, no operator of a Malaysian or non-Malaysian helicopter shall cause or permit a foreign pilot to fly its helicopter in Malaysia for the purpose of commercial air transport unless the pilot possesses a minimum 1,000 hours on any type of helicopter.

XI OUTLOOK

The aviation industry in Malaysia is expected to be more robust in 2017. There will be strong competition among the local players with the revival of the national carrier, MAB, and the aggressive expansion of Malindo Airways Sdn Bhd.34 Meanwhile, AirAsia Berhad is getting closer towards the sale of its aircraft leasing business with final bids received towards the end of the first quarter of 2017 and the completion of the sale being targeted for sometime in the second half of 2017.35 On the regulatory side, MAVCOM intends to impose penalties against airlines and airports that fail to comply with the Malaysian Aviation Consumer Protection Code 2016,36 while the DCA will transition into a statutory body known as the Civil Aviation Authority of Malaysia once the CAAMA 2017 comes into force.

1 Chong Kok Seng is a partner and Chew Phye Keat is a senior partner at Raja, Darryl & Loh.

2 The Civil Aviation Regulations 2016 came into force on 31 March 2016.

3 The Malaysian Aviation Commission Act 2015 came into force on 1 March 2016. Please refer to the following sections of this chapter for a further look at the MACA.

4 The Aviation Division is made up of six units: Air Transport, Airport Services, Hubbing & Aerospace Industry, Licensing & Regional Cooperation, Rural Air Services, and Safety & Convention.

5 International Air Services Transit Agreement, Art. I, Section 5

6 The head of state of Malaysia.

7 Etonic Garment Manufacturing Sdn Bhd v. Kunn-G Freight Systems (M) Sdn Bhd (Malaysian Airline System Bhd, third party) [2011] 3 MLJ 98.

8 ‘Airlines that breach consumer protection code face RM200,000 fine' The Sun 13 June 2017.

9 Does not include gliders, kites, captive balloons, small balloons, meteorological pilot balloons used exclusively for meteorological purposes, free balloons without payloads, small unmanned aircraft or small unmanned surveillance aircraft, as per paragraph 4(3) of the CAR 2016.

10 Malindo Air is a joint venture between National Aerospace and Defence Industries of Malaysia and Lion Air of Indonesia.

11 Presenna Nambiar. ‘Shareholders of Malindo Air to meet', The Sun, 23 May 2014, Sun Biz section.

12 For the requirements to obtain an air service licence, see Section III.i, supra.

13 The MACA came into force on 1 March 2016.

14 This additional forum is not available for a claim under the 1975 Order.

15 Carriage by Air Act 1974 Sch 6 Section 2 Chap III Article 35. See also Carriage by Air (Application of Provisions) Order 1975 Sch Part II Chap III Article 29.

16 Section 7(2) of the Carriage by Air Act 1974.

17 Section 23 of the Courts of Judicature Act 1964.

18 In relation to international carriage within the Carriage by Air Conventions.

19 In relation to carriage governed by the 1975 Order.

20 Article 20 of Montreal Convention and Article 21 of the Schedule to the 1975 Order, as the case may be.

21 Article 28 of Montreal Convention.

22 King v. Bristow Helicopters Ltd [2001] 1 Lloyd's Rep 95. See also El Al Israel Airlines Ltd v. Tseng 525 US 155 (1999) and Kotsambasis v. Singapore Airlines Ltd [1997] 42 NCWCR 110.

23 The Civil Aviation (Amendment) Regulations 2016 came into force on 12 September 2016.

24 Annex 13 to the Convention on International Civil Aviation - Aircraft Accident and Incident Investigation.

25 ‘Bellew new group MD and CEO of Malaysia Airlines' The Star 30 June 2016.

26 ‘MAS targets profit by 2018, brand improvement' New Straits Times 17 January 2017.

27 ‘Maseu's judicial review bid thrown out' The Star 7 October 2016.

28 ‘MH370: Next-of-kin's appeal to retain MAB as defendants allowed' The Star 1 March 2017.

29 ‘Mavcom revokes permit of umrah charter operator Eaglexpress Air' The Star 20 December 2016.

30 ‘Suasa Airlines fined RM380,000 after guilty plea' The Star 19 January 2017.

31 ‘End of the road for Rayani Air as DCA revokes its "wings"' New Straits Times 13 June 2016.

32 ‘Over 1,600 Complaints Lodged Against Airlines - MAVCOM Releases Inaugural Consumer Report' MAVCOM 18 April 2017.

33 ‘DCA issues new FOD for foreign pilots flying helicopter in Malaysia' The Sun Daily 15 June 2017.

34 ‘Mixed forecast for aviation sector, lower fares seen' The Star 29 March 2017.

35 ‘Final bidding for AirAsia unit ends' New Straits Times 3 April 2017.

36 ‘Airlines that breach consumer protection code face RM200,000 fine' The Sun 13 June 2017.