Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EC) N°2027/97 on air carrier liability in the event of accidents

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Purpose of the proposal

1. The Commission is hereby proposing an adjustment of Community legislation to ensure full and simultaneous compliance by EC air carriers with the provisions of the new Convention for the Unification of Certain Rules for International Carriage by Air signed on 28 May 1999 - the "Montreal Convention" [1].

[1] The Commission is proposing in parallel a Council Decision authorising the Community to approve that Convention.

2. The Montreal Convention establishes a modernised and uniform legal framework to govern the liability of airlines for damage to passengers, baggage and cargo incurred during international journeys. It represents a considerable improvement over the current international regime in this area - the system based on the Warsaw Convention of 1929 - and will completely replace that regime over time.

3. Council Regulation (EC) No 2027/97 was adopted to set up a modern liability regime for European Community airlines in the event of death and injury of their passengers. Its amendment will ensure full alignment between the new international rules and the Community regime. It will also guarantee a uniform application of the Montreal rules on all carriage performed by EC air carriers. Without such a regulation, there would be a danger that intra-Community traffic would be subject to a patchwork of rules since the Montreal Convention covers international air carriage, while Regulation 2027/97 covers all passenger transport carried out by European airlines, including domestic routes within Member States. The proposed changes to the Regulation would ensure that liability limits and legal defences are harmonised on Montreal standards for all transport carried out by European carriers, regardless of the route on which the accident occurred. This will ensure a high degree of uniformity within the Community.

4. The only substantial addition to the existing Community regime is proposed in the fields of baggage and delay. Under the proposed amendment, the provisions of the Montreal Convention relating to loss of, damage to and destruction of baggage and damage occasioned by delay, would be incorporated into the Community regime. This will ensure that Community legislation deals with all the key liability issues of relevance and concern to passengers.

5. For baggage, Community carriers' liability would be subject to a universal limit of 1000 Special Drawing Rights [2] (or approximately EUR1440). As provided for in the Montreal Convention, this limit would not apply if passengers made a special declaration at the time of check-in indicating a special interest in delivery at destination, although they might be asked to pay an additional sum to the airline to cover the additional risk.

[2] The Special Drawing Right or SDR is an international currency unit defined by the International Monetary Fund. 1 SDR = EUR 1.44 as of 26 April 2000.

6. Loss of and damage to baggage is more frequent than any other type of mishap or accident. Accordingly, it is opportune to ensure that European travellers and airlines can rely on a uniform system of liability based on Montreal Convention principles. However, given that the liability limit of SDR 1000 established in Montreal is relatively low, the proposal also requires EC air carriers to ensure that their schemes for accepting baggage with a value in excess of the limit are fair and transparent.

7. As far as damage occasioned by delay is concerned, the proposal would extend the application of the Montreal liability limit of SDR 4150 (or approximately EUR 6000) per passenger to cover all carriage by Community air carriers. As in the Montreal Convention, EC carriers will not be liable for such damage if they can prove that they did all they could to avoid the damage or that it was impossible to take any action.

2. Background

8. International rules to govern the liability of air carriers for injury or death of their passengers and for loss or damage to baggage and cargo were first agreed in the Warsaw Convention of 1929. Drafted at a time when aviation was a fledgling industry with a dubious safety record and in need of protection from excessive claims for compensation, the Warsaw Convention imposed a series of limits on the liability of air carriers for damages. By today's standards, these limits are now very low and even those laid down in the various amending agreements which comprise the so-called Warsaw System offer largely inadequate compensation to accident victims and their dependants.

9. In the 1980s, in reaction to the increasingly outdated Warsaw System limits for liability in the case of death or injury to passengers, a number of countries, some EC Member States among them, began to require either their own national air carriers or, in some cases, any air carrier serving their national market to observe much higher limits. In the 1990s, the aviation industry itself began to recognise the inadequacy of Warsaw for passenger liability and the International Air Transport Association (IATA) established a voluntary scheme by which individual airlines could opt for a system of unlimited liability.

10. Against this background and in order to ensure a uniform system for European Community air carriers (including charter carriers which are not covered by the IATA scheme) the Community adopted Regulation (EC) No 2027/97 on air carrier liability in the event of accidents. Since the entry into force of the Regulation on 9 October 1998, Community air carriers have been required to abandon the low liability limits set out in the Warsaw System when their passengers are killed or suffer injury in an accident. Instead, the Regulation has established a system of unlimited liability for such cases and, in addition, required Community carriers to make advance payments to accident victims and their families in order to meet immediate economic needs. In addition, for claims up to 100,000 Special Drawing Rights, the Regulation prevents Community carriers from using the legal defence that they took all possible measures to avoid the accident. This is designed to facilitate the resolution of smaller claims where legal fees could otherwise be a high proportion of the compensation paid. Air carriers from outside the Community are not obliged to follow this regime. However, if these carriers choose not to follow the regime, they are obliged to inform their European customers at the time the ticket is purchased. This is to ensure that consumers are properly informed of their rights.

11. With the Warsaw System rapidly being overtaken by different initiatives, it was decided to develop a new global instrument to replace the 1929 agreement and its various amendments. This work culminated on 28 May 1999 at an international Diplomatic Conference in Montreal where agreement was reached on a new Convention for the Unification of Certain Rules for International Carriage by Air.

12. The new agreement establishes a new global legal framework for air carrier liability for damage sustained in the course of international air travel. It will be known as the "Montreal Convention" and will, in time, completely replace the seventy year old Warsaw System. In particular, it establishes unlimited liability for death and injury to passengers and higher liability limits for baggage and cargo. In respect of unlimited liability, it is comparable with the system already operating in the Community by virtue of Regulation 2027/97. Also comparable with the Community system is its creation of a first tier of liability for claims of SDR100,000 and below, within which airlines cannot limit or exclude their liability. Moreover, the Montreal Convention specifically permits individual parties to the Convention to require their carriers to pay advance compensation to victims or their dependants in order to meet pressing economic needs in the period immediately after the accident. This will permit the Community to continue to make such a requirement of its own airlines.

3. Revision of Council Regulation (EC) No 2027/97 on air carrier liability in the event of Accidents

13. The adoption of Regulation (EC) No 2027/97 established a standard of protection for passengers on EC air carriers that is much higher than that offered by the Warsaw System. At the time it was adopted, there was no immediate prospect of improvements to the Warsaw System and it was felt that it was necessary to ensure as soon as possible that European passengers would be properly compensated in the event of an accident. Since the Regulation is binding upon all European Community carriers, regardless of which route is being operated, the rules apply to domestic, intra-European and international transport of passengers. This is an important feature of the Regulation since, within the internal aviation market, there should be no distinction between international routes within the EU and domestic routes within individual Member States. The Regulation ensures uniformity on routes within the Community. The Regulation also introduced the idea of advance compensatory payments to be paid by air carriers to meet the immediate economic needs of accident victims and their dependants.

14. The Montreal Convention and Regulation (EC) No 2027/97 provide for the same basic system of liability for death or injury of passengers. Both establish a general rule of unlimited liability. That is to say, a carrier is liable to pay whatever amount of money is awarded in damages to a person who is entitled to compensation. For claims up to 100,000 SDR, the carrier cannot exclude or limit its liability except by proving that the passenger concerned caused or contributed to the damage incurred. Therefore, an adoption of the Montreal Convention provisions inside the Community will not have adverse effects for European standards. At a detailed level, however, a revision of the Community rules is needed in order to make the following changes:

i) Make a reference to the Montreal Convention in addition to the existing reference to the Warsaw Convention so that the new Convention becomes a point of reference and the Regulation keeps pace with developments.

ii) Align the provisions on liability, exoneration and compensation in case of death or injury exactly on the texts of the equivalent provisions in the Montreal Convention, so that the regime applicable to Community carriers, regardless of whether the route flown is international, intra-Community or domestic, is uniform. The method selected to ensure exact alignment is a cross-reference to the relevant Article of the Montreal Convention.

iii) Update the provision on advance compensatory payments, bringing the wording into line with Montreal and updating the amount payable upon death of a passenger to take account of inflation since the adoption of Regulation (EC) No 2027/97.

iv) Improve and simplify the provisions on passenger information in order to focus on areas of real interest to passengers. All passengers buying tickets in the EC should be properly informed about liability limits where they exist. The objective of information is, after all, to give passengers advance warning and the opportunity to make alternative insurance arrangements if necessary. The profusion of passenger information notices currently attached to airline tickets tends to confuse rather than inform and the drafting of the proposed Regulation is intended to contribute to a general simplification. Under the proposal, the passenger should be notified only of the key limitations, but the information he or she receives should be wholly accurate and relevant to the flight concerned. The passenger should not be left uncertain as to which limits apply.

15. Liability for baggage and for damage occasioned by delay which are included in the Montreal Convention are not covered in Regulation 2027/97. Bringing about a uniform system for all liability towards passengers and their belongings on all flights carried out by European carriers, both internal and external, requires that the scope of that regulation is extended to include such items. This will give passengers a greater degree of certainty about their rights and ensure that the Community regime fits seamlessly with the new global rules provided for by the Montreal Convention.

16. In the view of the Commission such extension is fully compatible with the subsidiarity principle:

- There is an internal aviation market within the Community in which air carriers provide their services on the basis of harmonised rules. Rules on the airline's liability for its passengers are an essential element in the contract between consumer and air carrier and were harmonised by Regulation (EC) No 2027/97. This Regulation established a uniform system for all European air carriers, for all intra-EC and international routes. The current proposal provides for the full alignment of the existing Community system with the new global system established by the Montreal Convention of 1999 and for Community accession to that agreement.

- Since no distinction is made between domestic and international traffic within the Community and since air carriers operate without barriers across the entire Community, the issue can be most effectively addressed at Community level.

- Community action in this field will guarantee a uniform set of rules governing liability for passengers and their baggage for all air journeys provided by European Community carriers, including international, intra-Community and domestic routes, on both scheduled and charter services.

17. As for the entry into force of the revised regulation, the Commission would certainly privilege the earliest date compatible with the Community legislative process and the necessary adaptation of the industry. It has however to recognise that such entry into force before that of the Montreal Convention could create some confusion as to the obligations of Community carriers. It suggests therefore that efforts are done to ensure simultaneity as much as feasible.

2000/0145 (COD)

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EC) N°2027/97 on air carrier liability in the event of accidents

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 80 (2) thereof,

Having regard to the proposal from the Commission [3],

[3] OJ C , , p.

Having regard to the opinion of the Economic and Social Committee [4],

[4] OJ C , , p.

Having regard to the opinion of the Committee of the Regions [5],

[5] OJ C , , p.

Acting in accordance with the procedure laid down in Article 251 of the Treaty [6],

[6] OJ C , , p.

Whereas:

(1) In the framework of the common transport policy, it is desirable to ensure a proper level of compensation for passengers involved in air accidents.

(2) A new Convention for the Unification of Certain Rules Relating to International Carriage by Air was agreed at Montreal on 28 May 1999 setting new global rules on liability in the event of accidents for international air transport replacing those in the Warsaw Convention of 1929 and its subsequent amendments.

(3) The aforementioned Montreal Convention provides for a regime of unlimited liability in the case of death or injury of air passengers.

(4) The Community has signed the Montreal Convention indicating its intention to become a party to the agreement.

(5) It is necessary to amend Council Regulation (EC) 2027/97 on air carrier liability in the event of accidents [7] in order to align it with the provisions of the Montreal Convention, thereby creating a uniform system of liability for international air transport.

[7] OJ N° L 285, 17.10.1997, p. 1.

(6) In the internal aviation market, the distinction between national and international transport has been eliminated and it is therefore appropriate to have the same level and nature of liability in both international and national transport within the European Community.

(7) In compliance with the principle of subsidiarity, action at Community level is desirable in order to create a single set of rules for all Community air carriers.

(8) A system of unlimited liability in case of death or injury to passengers is appropriate in the context of a safe and modern air transport system.

(9) Uniform liability limits for loss of, damage to or destruction of baggage and for damage occasioned by delay, which apply to all travel on Community carriers, will ensure simple rules for both passengers and airlines and enable passengers to recognise when additional insurance is necessary.

(10) It would be impractical for Community air carriers and confusing for their passengers if they were to apply different liability regimes on different routes across their networks.

(11) It is desirable to relieve accident victims and their dependants of short-term financial concerns in the period immediately after an accident.

(12) Article 50 of the Montreal Convention requires parties to ensure that air carriers are adequately insured and it is necessary to take account of Article 7 of Council Regulation (EEC) No 2407/92 of 23 July 1992 on licensing of air carriers [8] in complying with this provision.

[8] OJ N° L 240, 24.8.1992, p. 1.

(13) The applicable rules on liability in the event of an accident should be included in every airlines' conditions of carriage and it is appropriate to make this information easily available to passengers.

(14) It is desirable to provide basic information on the liability rules applicable to every passenger so that they can make additional insurance arrangements in advance of travel if necessary.

(15) It will be necessary to review the monetary amounts set down in this Regulation in order to take account of inflation and any review of the liability limits in the Montreal Convention,

HAVE ADOPTED THIS REGULATION:

Article 1

Regulation (EC) No 2027/97 is hereby amended as follows:

1. The Title shall be replaced by the following:

"Regulation (EC) No. 2027/97 on air carrier liability".

2. Article 1 shall be replaced by the following:

"Article 1

1. This Regulation lays down the obligations of Community air carriers in relation to liability for damage sustained in case of death or bodily injury of a passenger where the accident, which caused the death or injury, took place on board the aircraft or in the course of any of the operations of embarking or disembarking.

2. This Regulation extends certain provisions of the Montreal Convention for the Unification of Certain Rules for International Carriage by Air to cover all carriage of persons and their baggage performed by Community air carriers for reward, including carriage between points within a single Member State. It applies equally to all gratuitous carriage by aircraft of persons and baggage performed by Community air carriers."

3. Article 2 shall be amended as follows:

i) Point (c) shall be replaced by the following:

"(c) 'person entitled to compensation' shall mean a passenger or any natural person entitled to claim in respect of that passenger, in accordance with applicable law;"

ii) Point (d) shall be deleted.

iii) Point (f) shall be replaced by the following:

"(f) 'Warsaw Convention' shall mean the Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed at Warsaw on 12 October 1929, or the Warsaw Convention as amended at the Hague on 28 September 1955 and the Convention supplementary to the Warsaw Convention done at Guadalajara on 18 September 1961;"

iv) The following point (g) shall be inserted:

"(g) 'Montreal Convention' shall mean the Convention for the Unification of Certain Rules Relating to International Carriage by Air" signed at Montreal on 28 May 1999."

v) Paragraph 2 shall be replaced by the following:

"2. Concepts contained in this Regulation which are not defined in paragraph 1 shall be equivalent to those used in the Montreal Convention."

4. Article 3 shall be replaced by the following:

"Article 3

1. The liability of a Community air carrier for damage sustained in case of death or bodily injury of a passenger shall be governed by the provisions set out in Articles 17, 20 and 21 of the Montreal Convention.

2. The obligation of insurance set out in Article 7 of Regulation (EEC) No 2407/92 shall be understood as requiring that a Community carrier shall be insured up to a level that is adequate to ensure that all natural persons entitled to compensation receive the full amount to which they are entitled in accordance with this Regulation."

5. The following Article 3a shall be inserted:

"Article 3a

1. The liability of a Community air carrier for damage caused by delay and in the case of destruction, loss, damage or delay in the carriage of baggage shall be governed by the provisions set out in Articles 19, 20, 22 (1), (2), (5) and (6) and 31 of the Montreal Convention.

2. The supplementary sum which, in accordance with Article 22 (2) of the Montreal Convention, may be demanded by a Community carrier when a passenger makes a special declaration of interest in delivery of their baggage at destination, shall be based on a tariff which is related to the additional costs involved in transporting and insuring the baggage concerned over and above those for baggage valued at or below the liability limit. The tariff shall be made available to passengers on request.

3. Within fourteen days of receiving a complaint made in relation to the provisions of this Article, a Community air carrier shall notify the passenger concerned, that the complaint has been received and is being assessed."

6. Article 4 shall be replaced by the following:

"Article 4

Nothing in this Regulation shall:

- imply that a Community air carrier is the sole party liable to pay damages.

- prejudice the question whether a person liable for damage in accordance with its provisions has a right of recourse against any other person."

7. Article 5 (2) shall be replaced by the following:

"2. Without prejudice to paragraph 1, an advance payment shall not be less than the equivalent in Euro of 16 000 Special Drawing Rights per passenger in the event of death."

8. Article 6 shall be replaced by the following:

"Article 6

1. The provisions contained in Articles 3, 3a and 5 shall be reflected in the Community air carrier's conditions of carriage.

2. Air carriers shall ensure that adequate information on the provisions contained in Articles 3, 3a and 5 is, on request, made available to passengers at the Community air carrier's agencies, travel agencies and check-in counters and at points of sale.

3. In addition to the information requirements set out in the Warsaw and Montreal Conventions, carriers shall give all consumers in the Community who purchase air transport services a written notice explaining in simple and easily understood terms:

- the applicable limit for that flight on the carrier's liability in respect of death or injury, if such a limit exists;

- the applicable limit for that flight on the carrier's liability in respect of destruction, loss of or damage to baggage and a warning that baggage greater in value than this figure should be brought to the airline's attention at check-in or fully insured by the passenger prior to travel;

- the applicable limit for that flight on the carrier's liability for damage occasioned by delay.

4. In the case of all carriage performed by Community carriers, the limits indicated in the written notice shall be those established by this Regulation.

5. Non-compliance with the provisions of paragraph 3 shall not affect the existence or the validity of the contract of carriage, which shall, nonetheless, be subject to the rules of this Regulation."

9. Article 7 shall be replaced by the following:

"Article 7

No later than six years after the entry into force of this Regulation, the Commission shall draw up a report on the application of the Regulation. In particular, the Commission shall examine the need to revise the amounts mentioned in the relevant Articles of the Montreal Convention in the light of economic developments."

Article 2

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Communities. It shall apply from the date of its entry into force or from the date of entry into force of the Montreal Convention, whatever is the latest.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, [.....]

For the European Parliament For the Council

The President The President

THE IMPACT OF THE PROPOSAL ON BUSINESS WITH SPECIAL REFERENCE TO SMALL AND MEDIUM-SIZED ENTERPRISES( SMEs)

Title of proposal

Proposal for a Regulation of the European Parliament and of the Council amending and consolidating Regulation 2027/97 on the liability of air carriers in the event of accidents.

Document reference number

The proposal

1. Regulation 2027/97 on air carrier liability in the case of accidents establishes a uniform liability regime for European Community air carriers. Passengers and EC air carriers alike benefit from the existence of a uniform system that creates certainty. This proposal provides for the revision of this system in order to take account of recent developments in international law.

The impact on business

2. All Community air carriers will need to comply with the new Regulation. The air transport sector is characterised by a small number of large companies which carry the majority of passengers.

3. Community air carriers will need to change their conditions of carriage to ensure that they are in line with the details of the new regime. There will be few cost implications since Community air carriers must already be insured up to a level commensurate with the central provisions of the proposals. All air carriers selling their services to consumers in the Community will need to provide their passengers with accurate information on the limits of liability applicable. Since they are already required to provide ticket notices to their customers, this does not represent a significant additional burden.

4. There should be no detrimental effects on employment, operations or competitiveness.

5. No special provision has been made for small and medium-sized enterprises. Passengers have the right to the same level of protection regardless of the size of the company transporting them.

Consultation

6. List the organisations which have been consulted about the proposal and outline their main views.

N/A