A new liability and compensation regime for Passenger ships.

On April 16th, during the 100th Session of the IMO Legal Committee at IMO
Headquarters in London, it was announced that with the ratification of the 2002 Protocol
to the Athens convention relating to the Carriage of Passengers and their Luggage by Sea
1974 (PAL) by a tenth state this instrument will enter into force in 2014. On ratification
states are required to denounce the 1974 treaty.

Under the 1974 Athens Convention a carrier was liable for the damage suffered as the
result of the death of or personal injury to a passenger or loss or damage to luggage if the
incident which caused the damage was due to his fault or neglect and occurred in the
course of the carriage. Fault or neglect of the carrier was presumed, unless the contrary
was proven, if the death or injury arose from a shipwreck, collision, stranding, explosion
or fire or defect in the ship.

If liable the carrier could, under the 1974 Convention, limit his liability to 46,666 Special
Drawing Rights (SDR) per carriage unless he had acted with intent to cause such damage,
or recklessly and with knowledge that such damage would probably result.

Under the 2002 Protocol, where the loss suffered as a result of the death or personal
injury to a passenger is caused by a “shipping incident” (as defined in the Protocol) the
limit is raised to 250,000 SDR per passenger and the carrier is strictly liable unless he can
prove that the incident resulted from an act of war, hostilities, civil war, insurrection or a
natural phenomenon of an exceptional, inevitable and irresistible character or was wholly
caused by an act or omission of a third party done with intent to cause the incident.
(These limited defences were not available to the carrier under the 1974 Convention.)
Again the right to limit may be lost by intentional or reckless conduct.

Where the loss suffered was not caused by a “shipping incident” the carrier is liable only
if his fault or neglect is proved by the claimant.

If the loss exceeds the new limit of 250,000 SDR the carrier is further liable up to
400,000 SDR per passenger unless the carrier proves that the incident which caused the
loss occurred without his fault or neglect.

As far as loss of or damage to luggage is concerned, the carrier’s limit of liability varies
depending on whether the loss or damage involved cabin luggage, other luggage or a
vehicle containing luggage. The carrier is liable for the loss of or damage to cabin
luggage and there is a presumption of fault if the loss results from a “shipping incident”
(as defined). If he is liable he can limit his liability to 2,250 SDR per passenger. The
carrier is liable for the loss of or damage to a vehicle including luggage carried in it
unless he can prove that the incident which caused the loss occurred without his fault or
neglect. If he is liable he can limit his liability to 12,700 SDR per vehicle.
The carrier is liable for the loss of or damage to luggage “other than cabin luggage”
unless he can prove absence of fault or neglect. If he is liable he can limit his liability to
3,375 SDR per passenger. The carrier and the passenger are at liberty (subject to
specified limits) to negotiate a deductible which shall apply to luggage claims.

A significant feature of the 2002 Protocol is the introduction of a compulsory insurance

scheme whereby all ships are required to purchase insurance cover against claims for loss
of life and personal injury and to carry evidence of the existence of that insurance.
Passenger claimants are given direct rights of action against the insurers in order to assist
recovery of damages.

The Protocol specifies that the limits of liability which it contains are minimum limits
and States Parties are at liberty to apply higher limits under their national law to their
own flagged vessels.

The Protocol follows the pattern of other recent conventions in incorporating a system for
tacit amendment of limits. This means that limits may be increased without the need for a
new convention or protocol.

For the record the ten states which have now ratified the Convention are: Albania,
Belgium, Belize, Denmark, Latvia, Netherlands, Palau, Saint Kitts and Nevis and the
Syrian Arab Republic. (The 1974 Convention has been ratified by 35 states.)

It should also be noted that by Regulation (EC) No. 392/2009 which entered into force on
31st December 2012 the 1974 Athens Convention as amended by the 2002 Protocol will
apply in all European Union and European Economic Area Member States. This includes
all the liability, compensation and compulsory insurance elements.

Those who followed the development of this Protocol will recall that a problem arose in
relation to the provision of insurance cover against war risks and terrorism. The
compulsory insurance provisions in the Protocol were drafted in the expectation that
cover would be provided and certificates of insurance supplied by P. & I. insurers.
However, P. & I. Clubs do not, traditionally, cover losses caused by war risks or
terrorism. It became necessary, therefore, to adapt the Protocol by means of a Resolution
to allow for two separate insurance certificates (“Blue Cards”) to be issued, one in respect
of normal marine risks and another in respect of war risks and terrorism which are
underwritten in a specialist insurance market.

With this recent flurry of activity it seems likely that 12 years after the final text of the
Athens Protocol was agreed, its influence on the settlement of passenger claims will
begin to have a significant impact. The benefits will be felt by the significant number of
people who choose to travel by sea whether as passengers on ferries or on cruise liners.

Patrick Griggs CBE.

Past President CMI.