Explanatory Memorandum to COM(2002)521 - Insurance requirements for air carriers and aircraft operators - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2002)521 - Insurance requirements for air carriers and aircraft operators. |
|---|---|
| source | COM(2002)521  |
| date | 24-09-2002 |
1. The Commission adopted on 10 October 2001 a Communication concerning the repercussions of the terrorist attacks in the United States on the air transport industry i. With regard to the specific problem of insurance, it recognised that the terrorist attacks have exposed the vulnerability of the air transport sector with damage exceeding all rational estimates. As insurers withdrew a few days after the events cover for actions of war and terrorism, the question if air carriers operating in the Community had sufficient cover became a serious concern.
2. In this Communication, the Commission undertook to examine the revision of the amounts and conditions of insurance required for the issuance of operating licences in order to ensure a harmonised approach. Also, it considered that Member States should verify whether third country air carriers produce proof of minimum risk cover on the basis of the European Civil Aviation Conference (ECAC) recommendations in absence of a Community rule. It undertook to examine the issue of insurance coverage provided by third country air carriers flying into and within the Community, in order to maintain equal conditions of competition with third country airlines and to avoid diverging responses by Member States. In the absence of such cover, Member States would be obliged to take appropriate, coordinated action, i.e. to withdraw traffic rights and prohibit overflight in accordance with the Community's international obligations.
3. In a second Communication adopted on 2 July 2002 on insurance in the Air Transport sector following the terrorist attacks of 11 September 2001 in the United States, i the Commission concluded that it would continue monitoring the developments of the aviation insurance market with regard to the revision of the amounts and conditions of insurance required for the issuance of operating licences. In that respect, it was recognised that "should the Commission consider that it is appropriate to further address the issues, [...] it will examine whether any legislative proposals are necessary and appropriate".
4. The Commission considers it necessary that a legal framework be established setting out the conditions of insurance and minimum amounts that both Community and third country air carriers and aircraft operators have to observe at all times in respect to their liability vis-à-vis passengers, baggage, cargo, mail and third parties. This framework should provide for legal certainty vis-à-vis Community and non-Community air carriers and aircraft operators flying into or within the Community as well as to ensure the transparent, non-discriminatory and harmonised application of minimum insurance requirements.
5. Currently, Community rules in the field of air carrier licensing i merely require that air carriers 'be insured to cover liability in case of accidents, in particular in respect of passengers, luggage, cargo, mail and third parties', without, however, setting any criteria, conditions or amounts to be observed by the licensing authorities of Member States. At the same time, the Community, considering that it is important to ensure a proper level of compensation for passengers involved in accidents, decided on 5 April 2001 to conclude and ratify i the Montreal Convention on the Unification of Certain Rules for International Carriage by Air, replacing the Warsaw Convention of 1929 relating to the same subject and to modify the Community rules on air carrier liability i.
6. As far as insurance to cover third party liability is concerned, there is currently no Community rule setting limits for such liability, the only obligations for compensation derive from public international law i.e. the Rome Convention of 1933 on the Unification of Certain Rules Relating to Damage Caused by Foreign Aircraft to Third Parties on the Surface, as firstly amended in 1952 and later by a Protocol signed in Montreal on 23 September 1978. This Convention has led the European Civil Aviation Conference to undertake further work on the subject with a view to adjusting the levels for minimum insurance requirements for air carriers operating into and within ECAC countries i. Their work has resulted in December 2000 in a Resolution (ECAC/25-1) which provides for minimum insurance levels to cover liability vis-à-vis passengers as well as third parties.
7. Examination of the above-mentioned legal instruments indicates that they provide for a reasonable system, which could form the basis for the proposed Community rules. Particular attention should be paid to the structure of the insurance levels covering third party liability. Moreover, given the crisis that has been caused by the events of 11 September 2001, the proposed rules should provide for a regular monitoring of developments in the insurance market, so as to review the minimum requirements and adjust them in due course.
Contents
a) The scope of application
8. The rules are designed to apply to all air carriers, including Community and third country, as well as to aircraft operators not disposing of an operating licence. Equally, they should apply to state aircraft. The Commission considers that the insurance requirements should cover all damage, including accidental caused of damage, as well as damage cause by war or terrorist acts.
9. It is also considered necessary for all flights to subject to the rules, namely scheduled and non-scheduled, commercial and non-commercial to ensure a harmonised approach with regard to third party liability.
10. Given that damage may be caused not only where an aircraft lands at or takes-off from a Community airport, but also during the flight over the territory of a Member State, the Regulation is applicable to flights into and out of Community airports and to overflight of Community territory.
11. In order to ensure a maximum of compatibility with existing air transport rules and in particular the 3rd Package legislation on market access and air carrier licensing, the Community rights and obligations resulting from the Montreal Convention and the regulation amending the Community rules on air carrier liability, but also with work undertaken to date by ECAC, the terminology used in the proposed Regulation follows these instruments.
12. The proposed Regulation aims at establishing a clear link between what the insurance for passengers, baggage, cargo, mail and third parties should cover and their liability. As far as passenger, baggage, mail and cargo liability are concerned, insurance should cover liability as this has been defined in the following instruments:
The 1999 Montreal Convention applicable to Community air carriers and air carriers from third countries which have ratified and apply this Convention; the 1929 Warsaw Convention which continues to exist alongside the Montreal Convention for an indefinite period, applicable to air carriers from third countries which are bound by that Convention. It should be noted that neither Convention limits liability of air carriers.
Council Regulation 2027/97 on air carrier liability as recently amended by the European Parliament and Council Regulation (EC) No 889/2002 of 13 May 2002 i applicable to Community air carriers;
In the light of the events that took place on 11 September 2001 and the developments on the insurance market thereafter, it is considered necessary to clearly state that insurance regarding passenger, baggage, cargo and mail liability shall also cover acts of war and/or terrorism.
13. As far as third party liability is concerned, there are no Community rules defining what such liability should be based on. At international level, the 1933 Rome Convention on Damage Caused by Foreign Aircraft to Third Parties on the Surface as amended in 1952 and 1978, introduces minimum insurance amounts for third party liability which follows the principle of strict liability for damage sustained on the ground. The Convention excludes from the scope of its application nuclear damage as well as damage caused by acts of war (armed conflicts) and terrorism.
14. This Convention is not applicable in all Member States as not all are signatories to this Convention or have not ratified it i. To date, generally Member States provide that air carrier's liability vis-à-vis third parties is based on proven tort arising from negligence or any other wrongful acts (wilful misconduct), as opposed to strict liability. However, some Member States have followed the principle of strict liability as introduced by the Rome Convention - France, Sweden and the United Kingdom provide for unlimited third party liability, while Germany has limited liability to certain levels.
15. The Commission is of the opinion that there are no sufficient grounds demonstrating the need for the introduction of strict liability of air carriers vis-à-vis third parties for risks linked to war and terrorist acts. As far as third party liability of air carriers and aircraft operators in case of incidents is concerned, the Commission is of the opinion that liability has been already sufficiently defined in the Member States.
In the light of the above, at this stage, it is considered necessary to provide for minimum insurance requirements to cover third party liability for damage sustained on the ground and in the air caused accidentally or by acts of war and/or terrorism by providing for a single combined limit. This requirement should ensure that air carriers would now have the obligation to buy such cover on the market or elsewhere as opposed to what was very often the case before the events of 11 September 2001.
16. As not all air carriers and aircraft operators flying into and within the Community may be in a position to observe the financial fitness requirements that are laid down in the Community rules relating to the issuance of operating licences i, it is important to allow for some flexibility so that other instruments such as state or bank guarantees are accepted in lieu of insurance policies.
17. However, such flexibility calls for increased monitoring obligations for Member States to ensure that air carriers licensed in the Community and elsewhere are capable of providing adequate cover for liability to cover any damage to passengers, baggage, cargo mail and third parties. Therefore, it is proposed that Member States have the obligation to ensure that insurance requirements are met at all times by performing regular inspections and where they have reasonable ground for doubting the existence of insurance, that they require additional evidence from air carriers and aircraft operators. Should such cover not exist air carriers should not be allowed either to take-off, if the have already landed at a Community airport, or not to enter the airspace or to land.
18. This places a particular obligation on the Commission to ensure that the minimum requirements reflect the situation in the market and to ensure that such requirements are adequate to provide coverage for liability in case there is an increase in incidents in terms of accidents and war and terrorist actions. Therefore, there should be a reporting obligation on the Commission on the developments in the insurance market taking into account any incidents which may significantly affect the conditions of insurance and a review clause in the proposed rules to enable any necessary adjustments of the required levels. Also, it should be taken into consideration that there might be considerable changes at the level of international law (possible future modification of the Rome Convention) affecting third party liability.
19. In order to reflect possible changes and developments in the proposed rules, it is foreseen that such decisions should be taken in accordance with the regulatory 'comitology' procedure provided for in Article 5 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred to the Commission. i In the context of the liberalisation rules for air transport already contain provisions for such a commitee (article 11 of Council Regulation (EEC) N° 2408/92 of 23 July 1992 on access for Community air carriers to intra-Community routes, OJ L 240 24.08.92). Therefore, it is proposed to use this Committee for the revision of the minimum insurance requirements.
20. There are clear provisions for each and every case of liability: passengers, baggage, cargo, mail and third parties.
Passenger liability: minimum insurance requirement of 250 000 SDRs.
The minimum insurance requirements reflect the amounts currently applicable at ECAC level.
In line with the provisions of the 1999 Montreal Convention and Council Regulation (EEC) N° 2027/97 on air carrier liability, as amended by European Parliament and Council Regulation (EC) No 889/2002 of 13 May 2002, i passenger liability is based on the notion of strict liability, irrespective of tort found on the account of the air carrier concerned, for claims up to 100 000 SDRs (Special Drawing Rights) as these are defined by the International Monetary Fund).
Beyond that amount (up to the minimum requirement of 250 000 SDRs and above) insurance vis-à-vis passengers and their baggage covers legal liability based on tort.
For air carriers bound by the 1929 Warsaw Convention, passenger liability is unlimited and based on the presumption of liability on the part of the carrier for injury or death, subject to certain defences, and concomitant limitation of liability, subject to certain exceptions (wilful misconduct).
Baggage: is dealt with under the same limits as passenger liability, with the proviso that baggage was checked and in the charge of the air carrier and had not an inherent defect or vice.
Cargo liability minimum insurance 17000 SDRs per ton (17 SDRs per kg).
This type of liability is covered by the Montreal Convention, which limits the liability of the air carrier, inter alia in cases of acts of war or armed conflicts. The minimum insurance requirements reflect the amounts currently provided in that Convention.
For air carriers bound by the Warsaw Convention, cargo is subject to liability is unlimited and subject to certain exceptions (diligence during care, negligence and wilful misconduct).
In order to take account of the international environment within which Community and non-Community carriers are currently operating, the present Regulation proposes to treat cargo on the basis of legal liability.
Mail liability minimum insurance to be set by national administrations reflecting national laws for the carriage of mail.
Third party liability minimum insurance according to aircraft type.
As explained earlier, there are currently no harmonised requirements among Member States. Currently, the minimum insurance requirements for leased aircraft indicate a sharp increase compared to the levels provided in the Rome Convention i or those provided in the ECAC resolution i. The proposed minimum requirements reflect this situation.
The particularity of third party liability is that insurance requirements correspond to the Maximum Take-Off Weight (MTOW) of aircraft specified in the certificate of airworthiness, which reflect the potential danger that can be caused by each type of aircraft. Therefore, for reasons of consistency with current insurance practice, it appears appropriate to undertake a clear classification of aircraft to fit specific categories according to their MTOW. For ease of reference, a table summarising the main types of aircraft used in civil aviation is presented in the annex.
Main aircraft types used in civil aviation
>TABLE POSITION>
Source: AIRCLAIMS Database (May 2002)