Montreal Convention Ratified By China - Large Variance Between International And Domestic Standard Limitation Amounts Is Source Of Continuing Concern

by George Wang (Hao Tian Law Office)

On February 28th, the Fourteenth Session of the Tenth National People’s Congress of China decided to ratify the CONVENTION FOR THE UNIFICATION OF CERTAIN RULES FOR INTERNATIONAL CARRIAGE BY AIR, popularly known as the Montreal Convention. As to the Hong Kong and Macao SARs, a special decision shall be made respectively by the Central Government of China before the Convention applies to them.

It has long been recognized that a new convention is needed to replace the patchwork of liability regimes around the world. At present, carriers are subject to vastly different liability regimes, depending upon the treaties to which their governments are parties and the private inter-carrier agreements that they have signed. In addition, differences in size and financial strength of the world's carriers, as well as differences in the objectives and legal systems of the International Civil Aviation Organization (ICAO) member States, have complicated any effort to achieve international consensus on modernization.

For the purpose of creating a modernized uniform liability regime for international air transportation, work on that large task was commenced at ICAO in 1997 and was completed at the May 1999 International Conference on Air Law in Montreal at which national governments agreed upon the final text of the Montreal Convention. The Montreal Convention entered into force on November 4th 2003, and now takes precedence over it and any of its amendments and related instruments, and as a practical matter will supersede the private inter-carrier agreements, where the State or States relevant in a particular accident are party to the new Convention.

The Convention represents a vast improvement over the liability regime established under the Warsaw Convention and its related instruments, relative to passenger rights in the event of an accident. Among other benefits, the Convention eliminates the cap on carrier liability to accident victims; holds carriers strictly liable for proven damages up to 100,000 Special Drawing Rights (approx. $135,000) (Special Drawing Rights represent an artificial “basket” currency developed by the International Monetary Fund for internal accounting purposes to replace gold as a world standard); expands the bases for jurisdiction for claims relating to passenger death or injury to permit suits in the passenger's homeland if certain conditions are met; clarifies the duties and obligations of carriers engaged in code-share operations; and, with respect to cargo, preserves all of the significant advances achieved by Montreal Protocol No. 4.

China is a party to both the Warsaw Convention, done on October 12th 1929 and its1955 Hague Protocol, and the Montreal Convention will be effective to China as of July 31, 2005. Therefore Chinese air carrier's strict liability (applicable when passengers are killed or injured in air accidents and the harm was not due to the carrier's willful misconduct) for personal injury in international flights is to be increased to USD135, 000 (approximately RMB1, 090,000) and the upper limit upon carrier liability to accident victims is eliminated. In domestic flights the upper limit of the carrier's liability to accident victims remains to be only RMB70, 000. Besides, under the Convention, the carrier's liability to flight delay is enhanced to 4150 SDR (approximately USD 5000) per passenger and the baggage damage liability has an upper limit up to 1000 SDR (approximately USD1350). They are also much higher than their domestic counterparts.

The intense contrast and the dual-standard have brought the urgent requirement to amend domestic regulations concerned on this point. However, an official of the Civil Aviation Administration of China (CAAC) told the media in a recent interview that to amend such domestic regulations is beyond the scope of CAAC’s authority, while he clearly pointed out that the Convention is not to be applied in domestic flights.

In fact, under China's domestic civil aviation laws and regulations the liability limit for passenger's personal injury has remained unchanged for more than a decade. The limit of RMB 70000 was stipulated in the 1993 Interim Provisions Concerning Compensation for Bodily Injury of Passengers in Domestic Air Transport. In the Civil Aviation Law effective as of March 1, 1996, it was stipulated in Article 128 that "liability limit for passenger's personal injury in domestic carriage is to be enacted by the Civil Aviation authority". However, up to date, no new standard has been enacted. Law suit was ever commenced by a passenger against CAAC for its failure to issue such new standard, but was rejected by the court. In the recent Da Lian and Bao Tou air disasters, this stale liability limit has become focus of disputes. Law experts tend to call on the government to increase such limit and make it in compliance with the current economic reality. In practice, in order to bate discontented feeling of the public, the carriers have actually broken through that limit in some cases. For instance, in the Da Lian disaster compensation for each passenger reached RMB 200,000 and in the Bao Tou disaster that amount was 211,000.

Obviously it's really critical for the moment to increase the liability limit in China's domestic air carriage by law. We look forward to actions from Chinese authorities in the near future.

(The author acknowledges the significant contributions of his co-author, Perry Cai of Hao Tian Law Office, Beijing)

August 18, 2005