7 Maritime safety: accident liability
| (27323)
6827/06
COM(05) 592
| Draft Regulation on the liability of carriers of passengers by sea and inland waterways in the event of accidents
|
| Legal base | Articles 71(1) and 80 (2) EC; co-decision; QMV
|
| Document originated | 23 November 2005
|
| Deposited in Parliament | 2 March 2006
|
| Department | Transport |
| Basis of consideration | EM of 28 March 2006 (corrected 12 July 2006)
|
| Previous Committee Report | None
|
| To be discussed in Council | Not known
|
| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information awaited
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Background
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.
Conclusion
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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