Select Committee on European Scrutiny Thirty-Sixth Report

7 Maritime safety: accident liability



COM(05) 592

Draft Regulation on the liability of carriers of passengers by sea and inland waterways in the event of accidents

Legal baseArticles 71(1) and 80 (2) EC; co-decision; QMV
Document originated23 November 2005
Deposited in Parliament2 March 2006
Basis of considerationEM of 28 March 2006 (corrected 12 July 2006)
Previous Committee ReportNone
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information awaited


7.1 In November 2002 the Athens Protocol (known as Athens 2002) was adopted by the International Maritime Organization (IMO) to amend the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974 so as to increase the compensation level for passengers being carried internationally on sea-going vessels for death or personal injury claims. The liability limits are increased from 46,666 SDR[24] (£38,150) to a minimum limit of 250,000 SDR (£204,300) and fault-based liability up to 400,000 SDR (£327,000) per person. Under the Protocol shipowners are required to maintain state verified insurance and imposes strict liability for certain types of incident.

7.2 The Protocol has a provision allowing Regional Economic Integration Organizations, such as the Community, to become Contracting Parties to the Protocol. In July 2003 the previous Committee cleared a draft Decision allowing the Community to become a Contracting Party and requiring Member States also to become Contracting Parties.[25] This proposal has not progressed in the Council.

The document

7.3 This draft Regulation would incorporate Athens 2002 into Community law. It also sets out the means by which it would extend the international instrument to domestic seagoing voyages and domestic and international inland waterway voyages and introduce measures to provide advance payments to claimants.

7.4 This proposal is part of what the Commission refers to as the "Third Maritime Safety Package".[26] This comprises seven discrete measures which are being taken forward separately, rather than as a package, by the Council. The draft Regulation did not feature on the Austrian Presidency's agenda (only two of the measures did). It is not likely at the moment that it will be taken forward by the Finnish and German Presidencies either. (We already have the proposals on classification societies, port state control, vessel traffic monitoring, civil liability, accident investigations and flag state requirements under scrutiny.)[27]

The Government's view

7.5 The Minister of State, Department of Transport (Dr Stephen Ladyman) first comments on subsidiarity saying that the proposal conforms to the principle in so far as it covers carriage of passengers on international voyages by sea. But he notes that:

  • in relation to domestic voyages by sea, and international or domestic voyages by inland waterway, the objectives of compensating passengers could be sufficiently achieved by the Member States acting without the intervention of the Community and so the proposed extension does not conform to the principle; and
  • the proposal to remove the Protocol provision for Member States to fix higher national limits of liability for death or injury does not conform to that principle.

7.6 As for the policy implications the Minister says that whilst the Government wishes to see early implementation of Athens 2002, subject to agreement at international level of some crucial outstanding matters, it has concerns about the proposals that go beyond Athens 2002 and it believes the proposed Regulation to be premature. He comments that the Protocol is a relatively complex instrument. It provides for different limits of liability according to whether a claim is for loss of life or personal injury or damage to, or loss of, baggage or vehicles. There is a mix of strict and fault based liability, a choice of jurisdiction and contract law aspects that do not feature in other maritime liability conventions. Implementation of Athens 2002 would increase the limit of compensation available to claimants, improve the protection of passengers by way of compulsory insurance verified by State certification and, for certain types of incident, introduce a right of direct action against the insurer.

7.7 The Minister, noting that Athens 2002 introduces the means to improve the liability and compensation arrangements that are now common in other maritime liability conventions, says that the Government has reservations about some, but not all, measures contained in the proposed Regulation:

  • extending the measures to domestic traffic by sea. The Government supports the concept that Member States should have measures for domestic seagoing voyages. However, the UK already has a national regime for such voyages and if there were Community legislation it would need to be repealed in so far as it duplicated or conflicted with the Community regime. The Government would prefer Member States to be required to have measures in place for domestic seagoing voyages, but not necessarily Community measures;
  • extending international and domestic voyages on inland waterways. The Government has concerns about extension of the draft Regulation to inland waterways. Compensation arrangements for passengers on inland waterways (rivers and lakes) are governed in the UK by a different international instrument — the Limitation of Liability for Maritime Claims Convention 1996. Protection and Indemnity (P&I) Clubs (mutual clubs allowing shipowners to share individual losses among the membership and covering most third-party risks) do not provide cover for inland waterway vessels nor can they be compelled to do so. Capacity within the inland waterway vessel insurance market is highly unlikely to be able to meet the limits of liability under Athens 2002 and insurers cannot be compelled to accept a risk against their will;
  • removing the Protocol provision for Member States to fix national limits of liability for death and injury to passengers. Whilst a matter of subsidiarity the Government agrees that there should be a minimum limit of liability but hold that Member States should be permitted to implement higher limits, as prescribed in the Convention, in their national law; and
  • introducing advance payments to passengers within 15 days of an incident to cover immediate economic needs. The Government is concerned that this proposal, contrary to its intention, could lead to unnecessary litigation if carriers or their insurers challenge the right of claimants to claim. And the P&I Clubs have shown in the past that they will act quickly to ensure that compensation is made available to victims in the event of a maritime disaster.

7.8 In relation to outstanding matters at the international level the Minister says that there are some important and complex strands that need to come together before IMO Contracting States can ratify Athens 2002:

  • insurance market capacity. Carriers may be liable under Athens 2002 for damage arising from an act of terrorism, where that damage is not wholly attributable to a third party. P&I Clubs provide cover for maritime third-party claims — in the context of Athens 2002 and the proposed Regulation this amounts to claims for death and injury to passengers and for loss or damage to their luggage and vehicles. Of the Athens 2002 liability of 400,000 SDR per passenger on each distinct occasion at least 250,000 SDR must be covered by insurance. P&I Club boards have not yet agreed to provide cover up to the Athens 2002 limit, but there is an expectation within the industry that they will do so once the situation in respect of liability and cover for terrorism is clearer; and
  • insurance market capacity for acts of terrorism. P&I Clubs do not provide third-party cover for acts of terrorism — such cover is provided by different underwriters operating in the marine war risk reinsurance market. The current limits within that market are US$100 million for hull insurance and US$500 million for other claims. War risk underwriters have indicated that cover for terrorism could be made available on a sustainable basis at US$400 million (plus US$100 million for hull cover) per incident, subject to existing war-risk insurance clauses. But, as an example, the loss of 3,500 passengers on a large cruise ship caused by a terrorist incident would mean that claimants could not claim the full amount of the per passenger limit as prescribed in Athens 2002. Instead they would be exposed to lower limits of compensation, that is a share of the US$400 million per incident provided by war risk insurers. Shipowners believe that Contracting States should exempt incidents caused by terrorism from the Convention altogether But the Government holds that if at least some insurance cover for such incidents is available it should be pursued with like minded Contracting States and other interested parties at the IMO's Legal Committee.

The Minister says it will be vital to resolve these problems under the aegis of the IMO before seeking to apply the regime through the proposed Regulation.

7.9 On the financial implications of the Commission proposal the Minister says that the cost burden to Government would fall on the Maritime and Coastguard Agency, who would have the responsibility of issuing to UK flagged ships state certificates attesting that insurance is in place. As for the industry cost burden this would be met by shipowners and insurers and introduction of a compulsory insurance regime together with increased limits of liability is likely to result in increased insurance costs for shipowners.

7.10 However, the Minister continues that such costs contribute to an extremely low percentage of shipowners' running costs, estimated by the International Group of P&I Clubs to be less than 2% overall — that percentage might change in the event of a catastrophic shipping incident with massive loss of life or severe injury to thousands of passengers. Both shipowners and insurers have argued that the limits of liability under Athens 2002 will expose the shipowner and insurer to limits that cannot be covered. The Minister adds that at the moment there is insufficient information to prepare a Regulatory Impact Assessment, but one will be produced, which will be influenced by the outcome of continuing negotiations in the IMO, when the impact on the Maritime and Coastguard Agency, owners of passenger ships and insurance providers becomes clearer.

7.11 Finally, the Minister tells us that the proposed Regulation has not received wide support among Member States because of the magnitude of the problems still to be resolved at international level.


7.12 This proposal, if adopted, clearly could have significant consequences for shipowners and insurers. We recognise that it may be some time before international negotiations allow the Minister to report back to us on developments in relation to the concerns he has mentioned. Equally, we understand that a Regulatory Impact Assessment may not be possible for some time. We shall also wish to hear in due course about resolution of the issues related to extending the international instrument to domestic seagoing voyages and domestic and international inland waterway voyages, the Protocol provision for Member States to fix national limits of liability and advance payments to claimants.

7.13 Meanwhile we do not clear the document.

24   The unit of account in the Protocol is the International Monetary Fund's Standard Drawing Right, which is based on a basket of currencies, including sterling, the euro, the US dollar and the Japanese yen. The sterling figures quoted are approximations. Back

25   (24691) 10979/03: See HC 63-xxx (2002-03), para 14 (16 July 2003). Back

26   (27298) 6219/06 + ADD1: See HC 34-xxiii (2005-06), para 17 (29 March 2006). Back

27   (27272) 5912/06: See HC 34-xxi (2005-06), para 7 (8 March 2006), (27238) 5632/06: HC 34-xx (2005-06), para 8 (1 March 2006), (27218) 5171/06: HC 34-xviii (2005-06), para 8 (8 February 2006) and HC 34-xxx (2005-06), para 2 (24 May 2006), (27271) 5907/06: HC 34-xxi (2005-06), para 6 (8 March 2006), (27305) 6436/06: HC 34-xxiii (2005-06), para 6 (29 March 2006) and (27324) 6843/06: HC 34-xxxiv (2005-06), para 3 (5 July 2006). Back

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