On 17th April 1984 the United States Supreme Court handed down the final appellate decision in a case that has been a prime focus of attention for the aviation Bar both within the U.S. and elsewhere.

In Franklin Mint v. TWA 1 the Supreme Court was called upon to review the ruling of the Second Circuit Court of Appeals that while on the actual facts of the case—the loss in transit of a valuable cargo of numismatic materials—TWA was entitled to limit liability under the provisions of the Warsaw Convention to a money sum calculated on the basis of the old official price of gold of $9.07 to the pound, henceforth the limits of liability prescribed by the Convention for cargo loss or damage should be treated as unenforceable. Although the dispute concerned exclusively a cargo claim the logic of the Second Circuit ruling had applied with equal force to passenger liability under the Convention given that limits of liability for injury were also expressed in the gold Poincare franc unit of account. Indeed, the District Court for the Central District of California in Re Aircrash at Kimpo International Airport, Korea, on November 18, 1980 2 had followed the Second Circuit argument and found with immediate, not merely prospective, effect that the defendant air carrier was liable for unlimited damages. This finding necessarily involved not only the effective truncation of the Convention but also a side-stepping of the terms of Civil Aeronautics Board (CAB) Order 18 900 giving effect to the Montreal Agreement by which in 1966 air carriers engaged in the international transportation of the U.S. agreed to adopt a special contract limit of $75,000 inclusive of costs with respect to passengers carried subject to the terms of the Convention. (On the basis of the old official price of gold the Convention limit per passenger then stood at approximately $10,000.)

The Second Circuit ruling had been based on the proposition that following the abandonment by governments of an international official price structure for gold it was no longer possible for the court to construe and thereafter to convert into U.S. dollars the Convention limits of liability expressed in Poincare gold francs. The court concluded that the last official price existing when the official price structure was abandoned on 1st April 1978 could not be justified as the basis for conversion, since this would be tantamount to a judicial fiction. On the other hand, it would not be appropriate to employ the floating price of gold on world commodity markets since this price was no more than a speculator’s barometer of political instability. The market price of a commodity was in no sense a unit of account. Although the International Monetary Fund had elected to replace gold with the Special Drawing Right based upon a basket of currencies as the medium for inter-governmental financial transactions, the court felt unable to adopt this new unit as a basis for the