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Lord Davies of Oldham: My Lords, I beg to move that the House do now adjourn during pleasure until 8.32 pm.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 8.30 to 8.32 pm.]

Civil Aviation Bill

Consideration of amendments on Report resumed.

[Amendment No. 20 not moved.]

Lord Hanningfield moved Amendment No. 21:

(1) Section 76 of the Civil Aviation Act 1983 (c. 16) (liability of aircraft in respect of trespass, nuisance and surface damage) is amended as follows.
(2) In subsection (2) for "subsection (3)" substitute "subsections (3) and (5)".
(3) After subsection (4) insert—
"(5) No liability shall be incurred by the owner of the aircraft (or the person to whom it has been demised, let or hired out) if he proves that material loss or damage as aforesaid—
(a) resulted from an act of war, hostilities, civil war or insurrection, or
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(b) was due wholly to anything done or omitted to be done by another person, not being a servant or agent of the owner (or of the person to whom it has been demised, let or hired out) with intent to do damage.""

The noble Lord said: My Lords, I am pleased to share the amendment with the noble Lord, Lord Clinton-Davis, who is not in the Chamber at the moment. Noble Lords will no doubt recall the substance of the amendment from Grand Committee. I do not want to go through the whole subject again, but it is important that I repeat some of the points on the amendment, which is designed to remove a manifest injustice and a potential financial threat to aircraft operators of all nationalities using our airspace. The amendment would achieve that by introducing provisions for civil aviation that are similar to those currently enjoyed by merchant shipping. The noble Baroness sitting opposite will remember that we debated the Merchant Shipping (Pollution) Bill. What I am suggesting here is something similar to that.

I do not wish to repeat all the arguments in favour of what I consider to be a sensible amendment, but I wish to address some of the apparent objections made by the Minister during our previous debate. He was of the view that if aircraft owners are relieved of the burden of paying for damage on the ground caused by terrorists, that burden would fall immediately and exclusively on the British taxpayer. That is not the case. Where human victims are concerned, there is an existing responsibility assumed by the state since 1964 and facilitated by the Criminal Injuries Compensation Authority, the CICA. All 25 EU states are required to have similar schemes in operation. Nor is it the case in relation to property damage, which was the burden of the Minister's objection. As far as I am aware, and according to the legal experts I consulted, the state has no liability to compensate businesses or property owners who are damaged by criminals or terrorists.

That is why since 1993 we have had a system to ensure that adequate commercial insurance may be in place to cover terrorism risks, supported by the reinsurance vehicle known as the Pool Re. The scheme was amended in the light of 9/11, but does not so far cover household insurance. That cost is met by premiums paid, not by the Treasury. Noble Lords can see that in relation to the separate needs of human victims and business or property interests arising out of terrorism, we have existing schemes of compensation for humans, and insurance for the property interests.

As noble Lords will understand, the resources of an aircraft owner are inevitably finite. The main resource of the aircraft owner or operator will be an insurance policy with a maximum liability limit which I am told is around $2 billion. It is sometimes more and sometimes less, but it is always a great deal more than the European minimum requirements. We are told that the total cost of 9/11 as paid by insurers and by the US Government approached $40 billion. If anything on the scale of 9/11 should succeed over here, I cannot imagine that the cost would be anywhere near the US total. But even if it approached, say, only one-tenth of that total for one aircraft, it would probably transcend the limits of the airline's insurance policy and would
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probably bankrupt the airline and/or the aircraft owner. In those circumstances no claimant, human or property, could receive full compensation; all would be reduced to a dividend after lengthy legal processes. Only the CICA would provide reasonable and timely compensation.

As your Lordships' House will recall, the body of the amendment is copied from the main defences allowed to a ship owner by the Merchant Shipping (Pollution) Bill in relation to oil pollution. Unfortunately, the Minister seemed to misunderstand the purpose of this amendment when he commented in Committee:

"So it looks as though the noble Lord has extrapolated from the maritime example and has substituted for the international fund the UK Government and the taxpayer".—[Official Report, 8/12/05; col. GC 175.]

That is not the case. The International Oil Pollution Compensation Funds are designed to provide compensation in excess of the ship owner's liability. However, that is incidental, since the amendment does not seek to substitute to the British taxpayer for some aviation version of the International Oil Pollution Compensation Funds. What is crucial is that neither the IOPC Funds nor ship owners are liable if it can be proved that the pollution damage resulted from an act of war, civil war or insurrection. That defence is only part of what has been taken from Merchant Shipping (Pollution) Act.

The central purpose of the amendment is to alleviate a manifest injustice that uniquely and adversely affects British and foreign aircraft owners. It would seem entirely sensible to use the opportunity afforded in the Bill to address that deficiency and furnish aviation with the same defences available to ship owners. I am glad that the noble Lord, Lord Clinton-Davis, is in the Chamber to add to this. I beg to move.

Lord Clinton-Davis: My Lords, I have great pleasure in supporting the amendment, which is helpful not only to British interests but to foreign airlines which are affected by the work of terrorists and by the impact of our law on absolute liability.

I do not confine my attention solely to British interests, because our law applies to all aircraft and to their owners. For that reason we can recognise that the situation that we envisage is more universal. I suspect that my noble friend Lord Davies was merely laying the ground when we discussed this matter in Grand Committee and he stated the Government's preference for some form of international agreement. He concluded that the International Civil Aviation Organisation, which was convening a meeting, might revise the 1952 Rome convention—but, as he said, the conclusion to those negotiations would take years. I am not sure that there will be a positive outcome on this issue. We are saying—and I think that the noble Lord, Lord Hanningfield, would agree—that now is the time that we can do something about the matter, not wait until the conclusion of the ICAO negotiations.

It is not as if we have not experienced such situations in this country—only last July, here in London, there was a threat that involved a large number of people
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being injured as a result of the terrorist attacks. We are not all that far from what happened on 11 September. With this amendment, we can take immediate and sensible steps in relation to the threat. We are able to protect both British and foreign interests. There will be no additional impost affecting the British taxpayer. I repeat: to wait for the outcome of the international deliberations is not acceptable.

Therefore, I am prepared to support the amendment. First, it allows the aircraft owner to defend himself in the event of a criminal or terrorist attack from the ground or the air. That is precisely what we were arguing for in Grand Committee and was the subject of my amendment. Secondly, for the aircraft owner the amendment adds a conventional defence, already approved in principle by Parliament, if an aircraft crash resulted from an act of war, hostilities, civil war or insurrection. Thirdly, I understand that the amendment is the preferred choice of leading airline lawyers. But most important, as I said, there is no additional burden on British taxpayers.

Of course, this is a complicated issue; it is not something that we can resolve immediately. I hope that this amendment will be withdrawn, but I think that we ought to come back to the issue on Third Reading, because it is of vital concern not only to the British taxpayer, but internationally.

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