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MH370 families and advance compensation payments

(Please note, this matter is not currently being litigated in Australia)

On 3 May 2014, Malaysia Airlines released a statement confirming that the airline would begin processing advance compensation payments to the next of kin of those on board flight MH370. This announcement was made shortly before Malaysia Airlines closed all of its Family Assistance Centres around the world and advised families to wait for news ‘in the comfort of their own homes’.

Such advance payments are made under Article 28 of the Montreal Convention which provides that the air carrier shall make such payments in order to meet the immediate economic needs of those who are entitled to compensation. The airline did not state the amount but media reports confirm these will be a uniform $50,000.00 USD per family/next of kin regardless of the nationality of the passenger.

Unlike the $5,000.00 USD family assistance/advance ex gratia payments which were initially made to families, each of the present advance payments will be offset against any amounts subsequently paid by the airline to families as compensation for the loss of their loved ones. As such these payments have greater legal significance.

The prospect of these substantial advance payments only arose around 39 days after the disappearance of the aircraft during a family briefing on 20 April 2014 with the Deputy Foreign Minister, Datuk Hamzah Zainuddin, and Malaysian family members in Kuala Lumpur. The Minister leads the official investigation’s “Next of Kin” committee. The announcement also appeared to align with first indications that investigators would commence a new chapter of the search operation. On 30 April 2014, the Joint Agency Coordination Centre (JACC) advised that the search was commencing a new phase which would focus on an intensified undersea search. The new phase, dubbed Mission 17 involves the relaunch of Bluefin-21 (a robotic underwater search device) from Australian Defence Vessel Ocean Shield. All other vessels and aircraft that were engaged in conducting air and debris searches have been returned to their original national postings.

In addition, this approximate period coincided with the period after which US lawyers were permitted to solicit families’ cases under restrictive US federal laws (the Aviation Disaster Family Assistance Act of 1996). The law commenced after inappropriate solicitation of potential clients reached crisis levels in the late 1980s, and it states that US lawyers are prohibited from unsolicited communication with airline crash victims or their relatives for 45 days following an accident. The announcement of advance payments in late April/early May 2014 could indicate that the airline’s insurers are preparing themselves for potentially large legal claims against Malaysia Airlines. Insurers’ interests are typically in settling claims as quickly and as cost effectively as possible. However, claims which are settled with the benefit of legal assistance are typically higher than settlements reached by family members alone.

At present there is no indication that any involvement of US lawyers is necessary in the MH370 cases, as there are no indications that the case against the airline has a connection to the US (except for American resident passengers’ families). Families should remember there is no hurry in deciding on whether or not to take an advance payment, or indeed to settle their claim with the airline. The only deadline is 8 March 2016 - by which time a legal claim must be made in an appropriate court or the right to compensation will be lost under the Montreal Convention.

What is certain right now is that families who are offered an advance payment should seek legal advice before accepting such sums to ensure that the payments do not impede future legal entitlements. Families are encouraged to seek out independent advice regarding their rights under international law in order to protect themselves.

It would be especially important for families to understand the contents of any release document before signing it, to ensure they are not signing away rights inconsistent with advance payments and prejudicial to their right to compensation.

What are MH370 families’ rights regarding advance payments?

  • There is no obligation to accept an advance payment.
  • Only certain family members would be entitled to claim an advance payment, and this is worked out based on the law of the country where the legal claim for compensation will eventually be brought. Thus, a relative who will eventually claim compensation from Malaysia Airlines in China would look to the law of China to determine who is eligible to receive such a payment; likewise, a relative who will eventually claim compensation from the airline in Australia would look to the law of Australia to determine who is eligible to receive the payment.
  • Family members have the right to their own independent legal advice before considering any advance payment. Shine Lawyers Aviation Department will provide general advice at no charge for families of MH370 as part of our ongoing advocacy efforts.
  • Family members have the right to have their lawyer attend any signing ceremonies or meetings with the airline. This will help ensure the careful examination of all documents the family member is asked to sign.
  • If a family member accepts an advance payment, it is acceptable for this to be deducted from the final compensation awarded, whether by way of an out of court settlement or by court verdict.
  • There should be no other substantive conditions (e.g. preventing the family member from taking action in court against the airline under the Montreal Convention, or against other potentially responsible entities).
  • The family member should not feel constrained by time when thinking about whether to accept an advance payment.
For information on advance payments or other aspects of the law applicable to international air accidents and incidents, please contact the Shine Lawyers Aviation Department.

Accompanying image from Russavia, used under the following license. Image modified from its original state.

Written by Shine Lawyers. Last modified: May 14, 2014.

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