CASE ANALYSIS: LAKER AIRWAYS

VS.

SABENA

SUBMITTED BY

SHIKHAR RAWAT
Division- D. PRN-170102203108 Batch-2017-2022

OF
Symbiosis Law School, NOIDA

In
September 2020

Under The Guidance Of

Dr. Shashi Bhushan Ojha (Course In-charge)

And

Prof. (Dr.) C.J. Rawandale (Co-Faculty)

Symbiosis Law School, NOIDA

(Symbiosis International (DEEMED) University, PUNE)

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 CERTIFICATE
The project titled “Laker Airways vs. Sabena” submitted to the Symbiosis Law School, NOIDA for Public
International Law as part of Internal Assessment is based on my original work carried out under the
guidance of Dr. Shashi Bhushan Ojha (Course In-charge) And Prof. (Dr.) C.J. Rawandale (Co-Faculty)
from July 2020 to September 2020. The Research work has not been submitted elsewhere for award of any
degree.

The material borrowed from other sources and incorporated in the research paper has been duly
acknowledged.

I understand that I myself would be held responsible and accountable for plagiarism, if any, detected later
on.

Signature of the Candidate

Date: 14th September, 2020

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 S.No. TITLE PAGE No.
01. FACTS 04
02. ISSUES 05
03. ANALYSIS 05
Prescriptive Jurisdiction 05
The Antisuit Injunction 07
08
Comity
04. CONCLUSION 09

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 01. CASE NAME Laker Airways v. Sabena
02. CITATION MANU/UDCC/0218/1984, 731 F.2d 909
03. CORAM WILKEY, STARR, Circuit Judges and MacKINNON, Senior Circuit
Judge.
04. DECIDED ON 06.03.1984
05. CASE CATEGORY Extraterritorial Jurisdiction
08. DECISION The Court of Appeals upheld the exercise of jurisdiction by district
court.

FACTS:1

Transatlantic air travel is largely regulated by the International Air Transport Association (I.A.T.A.). The
I.A.T.A. is composed of many air carriers, and it provides arrangements among the member airlines for
through-booking of tickets, interchange of tickets, coordination of timetables, and the structure of uniform
air fares on certain routes. Scheduled air transportation service between the United States and the United
Kingdom is controlled by the Bermuda II Treaty. In conformity with that agreement, each government is
entitled to designate up to two airlines for each transnational route. The United States-designated airlines are
Pan American World Airways Inc. (Pan Am) and Trans World Airways Inc. (TWA). “The United Kingdom
designated” British Airways Board, and later, Laker Airways Ltd. (Laker), “which Sir Freddie Laker
founded in the United Kingdom in 1966.” “The fares to be charged by the designated airlines must be
submitted to the aeronautical authorities of each government for approval. If the proposed fares are
disapproved by either government, they cannot take effect. ” “In 1981, Laker began to suffer financial
difficulties. It was not a member of the I.A.T.A., whose members had begun to offer fares competitive to
Laker's” "Skytrain" fares, “but with the advantages of the I.A.T.A.'s collaborative arrangements. ” During
the same period, the British pound fell precipitously against the United States dollar. Most of Laker's
obligations were denominated in dollars, while much of its revenue was in pounds. Because of these
developments, Laker was in desperate financial straits by early 1982. Laker attempted to refinance its large
debt, but failed, and on February 5, 1982, the company ceased trading and entered receivership.

On November 24, 1982, Laker filed an antitrust suit against Pan Am, TWA, McDonnell Douglas Corp.
(MD), McDonnell Douglas Finance Corp. (MDFC), British Airways Board (British Airways), Deutsche
Lufthansa Aktiengesellschaft (Lufthansa), Swiss Air Transport Company Ltd. (Swissair), and British
Caledonian Airways Ltd. (British Caledonian). Laker's complaint, filed in the U.S. District Court for the

1
Conflict of Laws: Comity: Extraterritorial Effect of Laws. (1905). Michigan Law Review, 3(4), 317.
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District of Columbia (Hereafter as, District Court), alleged that the defendants had conspired to set
predatory air fares for transatlantic travel, and that the defendants had interfered in Laker's attempts to
secure refinancing just prior to going into receivership.

After this, the British defendants like British Airways, British Caledonian, Lufthansa, and Swissair, filed a
declaratory action before the High Court of Justice in the United Kingdom, seeking a declaration of non-
liability towards Laker and an injunction restraining Laker from proceeding in the pending American
antitrust suit against any of the plaintiffs in the British action. “The High Court of Justice granted them an ex
parte temporary injunction enjoining Laker the same day.”

Later, The District Court had enjoined Pan Am, TWA, MD, MDFC, Sabena, and KLM from joining
British Airways, British Caledonian, Lufthansa, and Swissair in the English proceedings seeking to enjoin
Laker from prosecuting its U.S. action. By invoked the broad powers under the Protection of Trading
Interests Act 1980, the British Secretary of State for Trade and Industry had prohibited Laker, British
Airways, British Caledonia, and prohibits any “person in the United Kingdom who carries on business there”
“from complying with any” “requirement or prohibition imposed on that person pursuant to the US antitrust
measures,” arising from any “agreements, communications, or acts to which a United Kingdom designated
airline is a party, concerning” “the tariffs charged or to be charged by any such airline...”. “In addition, the
British Court of Appeal had enjoined Laker from proceeding against British Airways and British
Caledonian in the United States because the court grounded its decision on the Secretary’s Direction, saying
that it would amount to a total denial of Justice. After this, Laker's appeal to the House of Lords from the
Court of Appeal judgment was heard and granted Laker leave on November 10, 1983.”

This, then, was the posture of the case when Sabena and KLM's appeal came before the U.S. Court of
Appeals for the District of Columbia Circuit for argument on November 14, 1983.

ISSUES:

The courts “of two nations had, in effect, attempted to prevent the other from exercising jurisdiction over
certain parties, and had created something of an international incident. Now, the stage was set for decision
by the U.S. Court of Appeals. The Court found for Laker on the three fundamental issues presented:”

1) “Whether the exercise of prescriptive jurisdiction by U.S District Court is appropriate?”

2) “Whether the issuing of an antisuit injunction by the U.S District Court is proper? And”
3) “Whether the rejection of a claimed made, need to refrain from issuing an injunction on grounds of
comity?”

ANALYSIS OF THE DECISION:

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 1) Prescriptive jurisdiction:
The “court upheld the United States exercise of prescriptive jurisdiction over Sabena and KLM with
respect to the alleged conspiracy as” “entirely consistent with nationally and internationally
recognized limits on sovereign authority.” “These limits are closely intertwined with the two basic
types of jurisdiction: jurisdiction to prescribe and jurisdiction to enforce.”
a. Prescriptive jurisdiction “refers to the power of a sovereign under international law to
establish a rule.”
b. Jurisdiction to enforce refers to the capacity of a sovereign to enforce a rule.

A “state may not, consistent with international law, exercise jurisdiction to enforce a rule of law
unless the state also has jurisdiction to prescribe that rule.2”

It “has long been accepted in the United States that a sovereign state has jurisdiction to prescribe an
act if that act has” “effects” “within the sovereign's territory. 3” “However, the United States has
chosen not to exercise prescriptive jurisdiction over” “all whom its courts can catch, for conduct
which has no consequences in the United States.” 4 “Rather, the courts have ascribed to Congress an
intent to catch only those whose conduct outside U.S. boundaries is intended to and does affect U.S.
commerce.5 In Laker, the court upheld the exercise of prescriptive jurisdiction based on ” “effects”.6
“Indeed, the jurisdiction of the American court was never seriously questioned. However, the Laker
court took great pains to establish jurisdiction. Concentrating on its territorial jurisdiction base, the
court held that” “significant” “American interests were at stake in Laker's claim, and that Laker's
antitrust suit, if successful, would” “vindicate” “those interests.7” “The Court reasoned that the effect
of the alleged predatory pricing of trans-Atlantic airfares would be to raise such fares for American
passengers.8 The American consumer's interest in lower fares set by competitive pricing would thus
benefit from the application of the antitrust laws.9 Additionally, in the event Laker was successful on
the merits, Laker's American creditors would benefit from recovery of treble damages.10”
Finally, “the court found a more generalized interest of the United States in regulating the conduct of
business within its borders. To the extent that foreign corporations doing business in the United

“See, United States: Judicial Proceedings in Antitrust Action of Laker Airways Limited (Jurisdiction in Antitrust Action; British
2

Injunctions). (1984). International Legal Materials, 23(3), 517-601.”

“United States v. Aluminum Co. of America, 148 F.2d 416, 443-44 (2d Cir. 1945)
3

4
Aluminum Co. of America, 148 F.2d at 443
5
American Banana Co. v. United Fruit Co., 213 U.S. 347, 357 (1909); Blackmer v. United States, 284 U.S. 421, 437 (1932).
6
Laker Airways, 731 F.2d at 925”
“Laker Airways, 731 F.2d at 924-26. It is not clear why the court spent so much effort on establishing its jurisdictional base,
7

when that base was essentially unchallenged. Perhaps, in my opinion, the court may have thought itself writing for an English
audience.”
“Laker Airways, 731 F.2d at 924-26.”
8

“Laker Airways, 731 F.2d at 924.”

9

“Laker Airways, 731 F.2d at 945.” “About two-thirds of Laker's debt was held by American creditors.”
10

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 States have implicitly or explicitly agreed to adhere to United States law, prosecution of violations of
that law advances United States interests. 11 The court found that the acts alleged in the complaint, if
proven, were intended to affect United States commerce, and therefore, the United States exercise of
prescriptive jurisdiction was proper.12 Moreover, even Laker's complaint alleged the substantial
realization of those effects. In the court's view, this was all that was required for prescriptive
jurisdiction to exist.”
2) Antisuit Injunction:
“After holding that the exercise of prescriptive jurisdiction was proper, the Court of Appeals then
considered the propriety of restraining Sabena and KLM from joining the British proceedings. 13
Traditionally, a court will not enjoin parallel proceedings in another forum. 14 Deference and comity
demand that both forums be allowed to proceed until a judgment is reached in one that may be pled
as res judicata in the other.15 Federal courts have often been confronted with parallel proceedings
subject to the concurrent jurisdiction of state and federal courts. American courts have drawn
principles from this lot of experience to apply to the case of parallel proceedings in the United States
and a foreign country.16”
“Sabena argued that it should have been allowed to go before an English court and obtain an
injunction forbidding Laker from proceeding in America.17 It contended that whether Laker should be
allowed to proceed with its suit was a question of British policy, and therefore, Sabena should not be
restrained” “from obtaining a ruling on that question of British law in Britain.” 18 “This appeal to
British policy did not move the court, as it preferred to see the English proceedings as merely an
attempt to evade U.S. law.19 While re-affirming the general rule that a court will not enjoin parallel
proceedings in another forum, the Laker court found an exception before it. The court held that
antisuit injunctions may properly issue to restrain a party from attempting to evade important public
policies of the forum.20 In the court's view, the English proceedings were not truly ” “parallel
proceedings”21 intended “to adjudicate Laker's claims.22 Rather, the court regarded them as instituted

“Laker
Airways, 731 F.2d at 924-25.”
11

“Laker
Airways, 731 F.2d at 925.”
12

“Laker Airways, 731 F.2d at 926-34.”

13

“Princess Lida v. Thompson, 305 U.S. 456, 466 (1939). This case is cited in the following article: THE COURT OF APPEALS
14

DECISION. (1940). Journal Of The American Medical Association, 114(11), 962. doi: 10.1001/jama.1940.02810110028013.

15
THE COURT OF APPEALS DECISION. (1940). Journal Of The American Medical Association, 114(11), 962. doi:
10.1001/jama.1940.02810110028013.”
“Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974)”
16

“Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984) ”
17

“Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984) at 18.”
18

“Laker Airways, 731 F.2d at 932-33. This case was cited in the following article: Goldsworth, J. (2007). Conflict from
19

comity. Trusts & Trustees, 13(10) doi: 10.1093/tandt/ttm112”

“Laker Airways, 731 F.2d at 931”
20

“Laker Airways, 731 F.2d at 930.”

21

“Laker Airways, 731 F.2d at 938.”

22

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 solely to end the American action.23 Thus the court found, drawing on much precedent from both
state and federal court experience, that the district court not only had the power to issue the antisuit
injunction, but also that its issuance was proper to prevent Sabena and KLM from evading the
important public policies of the forum.24”
3) Comity:

Finally, “the Court of Appeals considered whether the district court should have declined to issue the
injunction on grounds of international comity.25” International comity “is an elusive, judicially
created doctrine that determines the amount of deference a domestic court should give to the decrees
and actions of a foreign state. Its original purpose and function was to encourage reciprocity, so that
decrees and actions of the nations might be recognized abroad. Comity acts as a kind of non-
binding, discretionary” “full faith and credit clause”26 “among nations recognizing it.” “In
discussing international comity, the Laker court considered the well known British animosity to the
United States antitrust laws.” The Protection of Trading Interests Act 1980, “passed by Parliament in
that year, gave the British executives broad powers to combat the application of U.S. antitrust laws to
British interests. The Act authorized the Secretary of State to issue orders prohibiting ” “a person in
the United Kingdom who carries on business there” “from complying with orders of foreign courts.27”
“The Act also granted a right of recovery of penal damages in the English courts ” “where a court of
an overseas country has given a judgment for multiple damages.....” 28. “Such explicit hostility to the
United States laws clearly indicates a British public policy at odds with that of the United States. ”
Sabena and KLM argued that given a British public policy “at odds with the application of U.S.
antitrust laws to British interests, a suit by a British subject invoking American antitrust law against
British interests may be violative of British public policy. The power of a sovereign, whether
expressed by a court order or by legislation, ought to include the authority to prevent nationals from
undermining domestic public policies in foreign proceedings. 29” Furthermore, “whether Laker's suit
violated British public policy was clearly a question for the British courts to ” decide. Thus, “Sabena
and KLM claimed that, as a matter of comity, the U.S. District Court should have allowed them to
participate in the British proceedings to help determine whether Laker's U.S. suit contravened British

“LakerAirways, 731 F.2d at 938.”

23

“LakerAirways, 731 F.2d at 931-32. See United States: Judicial Proceedings in Antitrust Action of Laker Airways Limited
24

(Jurisdiction in Antitrust Action; British Injunctions). (1984). International Legal Materials, 23(3), 517-601.”

“Laker Airways, 731 F.2d at 937-45.”
25

“Foreign-country judgments do not benefit from the Full Faith and Credit Clause but are recognized as a matter of comity. Most
26

states consider foreign judgments essentially the same as sister-state judgments. See, United States: Judicial Proceedings in
Antitrust Action of Laker Airways Limited (Jurisdiction in Antitrust Action; British Injunctions). (1984). International Legal
Materials, 23(3), 517-601.”
27
British Protection of Trading Interests Act 1980.
“Section 6 allows for recovery of multiple damage awards for” “qualifying defendants.”
28

“see Cole v. Cunningham, 133 U.S. 107 (1890).”

29

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 public policy. The Laker court successfully sidestepped this argument, and turned it on its head. In its
view, the English proceedings were trying to regulate the gates to the American court system. The
court noted that if Laker, a British subject, wanted access to that system, it was up to the United
States, and not Britain, to decide whether the United States courts should be open to him. Putting
British policy aside, the court stressed” the United States “public policy of allowing foreign
corporations to sue in the U.S. under the antitrust laws.30”

Thus, “the court held, whatever the British public policy may be, comity does not require a
nation to vindicate the policies of a foreign state at the expense of its own. 31 The court also
questioned whether the British court proceedings and the orders of the British executive were even
designed to vindicate legitimate British interests.32 The court found that the purpose of the British
executive's order was” solely to “frustrate the enforcement of American law in American courts
against companies doing business in America.” “Viewing the whole purpose of the British order as
intending to frustrate U.S. policy, the court held that the order was not entitled to comity and the
district court's injunction ought to be upheld.33”

CONCLUSION:
In Laker, “the court re-affirmed the vitality of prescriptive jurisdiction based” upon the "effects" doctrine.34
The “court found ample territorial contacts with the United States to justify the exercise of jurisdiction.
Prescriptive jurisdiction in Laker over the antitrust claims is clear and received no serious opposition.”

“Also, strongly supported by precedent is the authority of a court to grant an antisuit injunction in a proper
case.35 Without trying to lay down a general rule, the Laker court found such an extraordinary injunction
proper where the foreign proceedings were not” "parallel" proceedings; that is, “where (1) the foreign
proceedings sought to undermine the jurisdiction of the domestic forum, and (2) the foreign proceedings
would frustrate important public policies of that forum. Finding such a case before it, the court upheld the
district court's grant of such an injunction. ” The two-part test implicitly “adopted by the Laker court to
determine whether such an extraordinary injunction should issue serves as a true guide to the issuance of
such injunctions. The requirement that the foreign proceedings not be parallel proceedings is a better test
than whether the other proceedings undermine the jurisdiction of the first forum. For to the extent that, in the
case of parallel proceedings, one forum is proceeding at a brisker pace than the other, the first forum is
30
See Pfizer, Inc. v. India, 434 U.S. 308, 314-15 (1978) (to deny a foreign plaintiff in jured by an antitrust violation the right to
sue would defeat the purposes of the antitrust laws - depriving violators any benefit of their illegality and compensating those
victimized by antitrust violations);
“Laker Airways, 731 F.2d at 934.”
31

“Laker Airways, 731 F.2d at 938”

32

“Laker Airways, 731 F.2d at 940-41.”

33

“Shaw, M. (2011). International law (p. 688). Cambridge: Cambridge Univ. Press.”

34

“Philp v. Macri, 261 F.2d 945, 947 (9th Cir. 1958)”

35

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undermining the second forum's jurisdiction since the first judgment may be pled as res judicata in the other
proceeding.”

The “second prong of the Laker antisuit injunction test provides that foreign proceedings will not be entitled
to comity if they frustrate important public policies of the domestic forum. Thus, a foreign court order is not ”
entitled “to comity if it violates important public policies of the forum nation. This requirement limits the
availability of the antisuit injunction, and acts to preserve the delicate thread of international comity. Finally,
the court held that the principles of international comity did not prevent an antisuit injunction in this case.
The court reasoned that the English proceedings and orders were not entitled to comity since they sought to
frustrate important U.S. policies. United States courts exist to champion and vindicate the laws and policies
of the United States. It is not their function to exalt the policies of any foreign power over those of the
United States. It is often in the interests of the United States, in the name of international comity, to
subordinate its policies to those of a foreign state when the contribution to international cooperation and
goodwill outweighs the domestic considerations. However, when the domestic interests are sufficiently
important, comity must appropriately yield to the public policies of the United States. Where the important
public policies of two sovereigns collide, there does not seem to be much room for judicial resolution of the
conflict in the absence of explicit guidance from legislative or executive sources. Courts are not well
equipped to engage in the negotiations that such situations often require. Thus, in my opinion if an
international incident should arise from a court's attempt to enforce the laws and important policies of its
sovereign, then the responsibility should not be placed on the court's misapplication of international comity,
but rather on the legislative or executive acts establishing the nation's policies. The task of avoiding such
severe clashes of jurisdiction in the future rests more with the cooperative efforts of each sovereign's
executive and with the coordination of their interests, rather than with the development of complicated
judicial standards.”

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