AGENDA
06/01/2013 - 00:00

Montreal Convention 1999 - A Roll of the Dice

Signing up to the Montreal Convention 1999 would help to bring an end to the liability lottery that passengers currently face

The Montreal Convention 1999 (MC99) was created as a solution to the patchwork of liability regimes that have grown haphazardly since the Warsaw Convention of 1929.

Recognizing its obligation to its customers, especially in the case of an accident, the air transport industry has supported MC99 as a universal regime since inception. But 46% of ICAO’s 191 member states have yet to adopt the agreement. And this has led to a liability lottery for passengers.

Hans Ephraimson of the Air Crash Victims Families Group pushed for the adoption of a new Convention to replace the existing Warsaw-Hague regime alongside IATA in the late 1980s. He makes the point that while passengers benefit through an improved compensation package, MC99 is not just about the liability limit.

“It is also the ease with which the compensation process happens under MC99,” Ephraimson says. “One case took 17 years from the date of the accident to reach final resolution by the courts. Under MC99, the process can be completed in less than 12 months without any additional legal action.”

Old rules for new business

The concept of a liability limit dates back to 1929. Commercial aviation was in its infancy and the Warsaw Convention introduced a liability limit that allowed airlines to pay a reasonable insurance premium and thereby operate at a cost-effective level. What amounted to a $12,000 limit became obsolete over time, however, and in 1955 the Hague Protocol amended the limit to the equivalent of $24,000.

Incredibly, in many countries these limits still apply. Airlines operate highly sophisticated world-spanning aircraft, but often are subject to liability rules originally created in a pre-jet engine age. 
MC99 was introduced to bring the liability limit into the modern era and it is currently set at 113,110 Special Drawing Rights, equivalent to about $174,000, for death and injury to passengers, below which carriers cannot assert any defences to claims. Crucially, MC99 contains an “escalator clause”, which allows ICAO to adjust this limit every five years so states are not tied to an outdated limit.

Political inertia

Although MC99 came into force in 2003, countries yet to adopt the agreement include Russia, Thailand, Vietnam, Indonesia, Philippines, and Sri Lanka. Non-MC99 countries could be signed up to the Warsaw Convention, the Hague Protocol, the Guadalajara Convention 196, the Montreal Additional Protocols 1975, or any combination of the above. Some, like Thailand, have not adopted any convention.

The passenger, the airline, and the country are affected by this bewildering mix. “Take a Singapore-Jakarta trip, for example,” explains Michael Gill, IATA Senior Legal Counsel. “Singapore is a signatory to MC99 while Indonesia is still only party to the Warsaw Convention. If a passenger has a one-way ticket in either direction then Warsaw applies. But on the outbound leg of a SIN-JKT-SIN return ticket MC99 applies. Different passengers on the same flight are covered by different rules.”

Most often, countries have failed to adopt MC99 because of political inertia or political volatility. By and large, MC99 is non-controversial, but can easily slip off the agenda if there are more pressing issues or an election looming.

MC99 can also necessitate changing local or national laws, a time-consuming activity that many governments fail to prioritize. Other governments simply never get the chance. Africa is a case in point. Few countries on the continent have adopted it, despite Africa’s higher than average accident rate.

It should also be noted that airlines based in countries that haven’t adopted MC99 may still have to insure to MC99 levels anyway. European Union (EU) law would require airlines operating to the EU to be insured at levels akin to the liability rules of MC99, even if not all of their operations are governed by MC99 itself.

A call for action

Ensuring MC99 becomes universal may seem like a dry, technical argument, but it is a very human story. Without it passengers do not have certainty or a level of liability coverage that is globally accepted.

IATA submitted a working paper on MC99 to the ICAO  Air Transport Conference earlier this year. It was co-signed by Canada, Germany, Singapore, the United States, the United Arab Emirates, and the International Air Cargo Association.

“At the ICAO Assembly in 2010, Resolution A37-24 urged all states that have not done so to become parties to the Montreal Convention of 1999 as soon as possible,” stresses John Augustin, Acting Director of the ICAO Legal Affairs and External Relations Bureau. “This call for universal adoption was highlighted again at the ICAO Sixth Worldwide Air Transport Conference held in Montreal (March 2013), as the convention would deliver or facilitate important benefits for all parties. These include less time-consuming recovery of proven damages for claimants, the use of electronic transportation documents by airlines, as well as more certainty in the claims handling process. In the absence of the Montreal Convention’s universal acceptance, several earlier air law instruments will continue to co-exist with it, resulting in a confusing patchwork of potentially applicable liability regimes.”

IATA’s goal is to get five more countries to adopt MC99 in 2013 and there is a focus on the major players such as Russia and Thailand. An awareness campaign will ensure MC99 remains front and center in the industry. “The industry is behind MC99 and we urge all states to adopt it,” concludes Gill.

MC99 and air cargo

MC99 not only brings protection, clarity and fairness to passengers, it opens the door for e-freight, which in turn brings efficiency to the cargo chain and economic benefits for the country. MC99 provides the legal framework that permits the use of e-air waybills (e-AWB) and electronic forms of other cargo documents.

The Warsaw Convention doesn’t prevent e-freight, but does say that if there is no paper confirmation of a shipment then an airline can’t rely on the liability limit. MC99 allows the liability limit to apply as long as there is some form of record, including electronic information. “So it is not a case of Warsaw preventing e-freight and MC99 allowing it,” explains Michael Gill, IATA Senior Legal Counsel. “But clearly e-freight would be a risk under Warsaw as there is potentially no liability limit.”

For cargo, both origin and destination countries must have ratified MC99. If this is not the case, a shipment operates under the lowest common denominator.

The IATA e-AWB multilateral agreement has added pressure for the adoption of MC99. The agreement allows airlines and freight forwarders to sign once with IATA and in effect enter into e-AWB agreements with all other parties to the agreement. By speeding up e-freight implementation it will force states to consider adopting MC99 sooner rather than later.

THOUGHT LEADERSHIP

Airlines must match the speed of innovation in the retail world, writes Ornagh Hoban, VP Marketing & Strategy, Datalex.

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