Augmenting Air Passenger Liability

Mukesh Dangol

June 4, 2023


Augmenting Air Passenger Liability

On several occasions, the air safety records of Nepal have come under scrutiny of international agencies.

The civil aviation watchdog, International Civil Aviation Organization (ICAO) kept Nepal under Significant Safety Concern (SCC) for around four years until 2017, questioning state safety oversight capabilities.

Despite this achievement, the European Union has not yet uplifted Nepal from its air safety list owing to a series of accidents and prevalent organizational discrepancies in regulatory and service provision functions.

When we look at the history of aviation accidents and compare it with the size of civil aviation activities in Nepal, the frequency seems quite high.

As per the Safety Report 2022 published by the Civil Aviation Authority of Nepal, 50 multi-engine, 8 single-engine and 36 rotor wing Nepalese registered aircraft in domestic operation have encountered air mishaps in the seven-decade-long civil aviation history of Nepal.

In these occurrences, a total of 526 souls have lost their lives, out of which, 416 fatalities occurred in multi-engine and 25 fatalities in single engines whereas 85 fatalities were recorded in helicopter operations.

As such, governments should formulate, update and periodically review the policies so that they are capable of serving the existing and future requirements of both consumers and associated stakeholders.

In the Nepalese airspace, 10 foreign registered operators suffered an accident with a total fatality of 373 there is an urgent need for significant safety improvements.

As air travelers and citizens of the nation, it is imperative to understand the prevalent legal status and development of liability regimes and compensation amounts in case of death and injury during air accidents.

International Standards:

On October 16, 2018, Nepal ratified the Convention for the Unification of Certain Rules for International Carriage by Air signed in Montreal, on 28 May 1999; simply known as the Montreal Convention or MC99.

It is a huge step and an initiative that significantly improved the liability regimes of international air operators.

However, the liability limits set by MC99 are applicable for international flights only. Characterized by a two-tier strict liability regime, MC99 arrangements provide liability with claims up to an initial level on a strict liability basis in case of death or injury to the passengers.

The initial liability limit which is revised in 2019 by ICAO is set at 128821 SDR. Special Drawing Rights (SDR) are a mix of currency values established by the International Monetary Fund (IMF) and as of 7 March 2023 exchange rates, the liability limit is equivalent to approximately 171332 USD in case of death.

Damages above this threshold are possible unless the air carrier can prove the damage was not caused by the negligence or other wrongful act or omission of the carrier, its servants, or agents, or that the damage was solely due to the negligence or other wrongful act of a third party.

MC99 can be regarded as a modern compensatory system that provides a comprehensive legal framework as a single and universal liability regime.

It possesses several facets of consumer-friendly provisions such as advance compensation payments, a wider choice of jurisdictions in which to bring claims, modernization of transport documents, clarification on the rules of respective liability of contractual and actual carriers and obligation of air carriers to maintain adequate insurance.

For instance, it ensures that a passenger or the nearest kin can bring claims to the passenger’s principal place of residence.

Nepalese Domestic Sector:

In the domestic carriers of Nepal, the Warsaw Convention, 1929 / Hague Protocol, 1955 comes into play which limits the passenger death and injury liability to approximately $20,000 under the present context.

Warsaw Convention has been amended on a piecemeal basis by a series of protocols, supplementary rules, regulations and later conventions.

Over a period of time, it has evolved into one of the important instruments of international private law, adhered to by signatory countries across the globe.

In order to improve and significantly increase the compensation amounts, we need domestic legislation with provisions of liability regimes adapted to the Nepalese aviation environment.

The prevalent industry situation, operating environment, type of fleets, and limitations within the economy should be carefully taken into consideration.

Regulatory Provisions in Other Countries:

Sri Lanka is the most liberal nation among the SAARC nations when it comes to domesticating MC99.

In its official gazette notification No. 2211/68 dated 22nd January 2021, issued by the Minister of Tourism under Section 6 of the Carriage by Air Act No 29 of 2018; the limit of liability is set at 128,821 SDR per passenger for both domestic and international carriage.

In Pakistan, the Carriage of Air Act, of 2012 has mandated that domestic air operators set their liability limits to Pakistani Rs. 50,00,000.

In the case of India, notification in the gazette was done in 2014 which changed the limits to INR 25,50,000.

The passenger death and injury liabilities are guided by Carriage by Air Act, 1972 in India. The existing provisions for domestic sectors in Nepal are no different from Bangladesh; following the Warsaw/Hague provisions.

Unfortunately, these contemporary provisions are not duly updated and, therefore, the allotted compensation amounts are very much in contrast with and discriminatory from that in the other advanced and emerging economies of the world.

Taking inflation and other economic indicators into the picture, the current compensation amounts need revamping.

For the landlocked country of Nepal, there is no doubt that aviation is a lifeline from multitudes of aspects, including its explicit linkage with the growth and development of tourism.

In Nepal, the aviation industry is not only complex, dynamic and competitive but also crucial to the Nepalese economy.

The policies that govern the industry had a direct bearing on the passenger experiences, confidence and ultimately, the success of the whole aviation industry.

The Nepalese government and regulatory bodies in aviation should primarily focus on maintaining a sustainable policy framework that satisfies the contemporary and emerging needs of the aviation industry.

Passenger and other associated insurance and liability arrangements being the critical areas of consumer protection need a high degree of attention as part of this framework.

Article 44 of the Constitution of Nepal provided every consumer the right to obtain quality goods and services.

Furthermore, the constitution also states that a person who has suffered damage from any substandard goods or services shall have the right to obtain compensation in accordance with the law.

If the legal instruments are not articulated from the viewpoint of consumer protection, consumer rights would just be another buzzword and eventually, underrating the value of Nepalese life.

By doing so, Nepal can leap the liability regimes and showcase that passenger rights are better served in the Nepalese airspace.

As such, governments should formulate, update and periodically review the policies so that they are capable of serving the existing and future requirements of both consumers and associated stakeholders.

In a nutshell, owing to the lack of updated and effective domestic legislation covering domestic aviation, the passengers’ rights are not well protected.

At the moment, Nepal has adopted dual provisions for air carrier liability provisions – MC99 and Warsaw/Hague provisions applicable in international and domestic sectors respectively.

Hence, it is better to give due consideration and priority to formulating unambiguous national legislation. The legislation can act as an enabling factor for the sustained growth of the industry.

However, if the compensation amounts are inefficient and outdated, it can induce adverse effects for the industry or consumers.

It implies that the passenger liability limits must remain modern, updated and at the same time, relevant. These efforts will reinforce the government’s focus on ensuring robust safety arrangements are in place for aviation.

As such, a national federal act encompassing and increasing the liability limits by significant amounts becomes paramount for the sustainable growth of Nepalese air transportation.

By doing so, Nepal can leap the liability regimes and showcase that passenger rights are better served in the Nepalese airspace.

(Mukesh Dangol is an officer at the Ministry of Culture, Tourism and Civil Aviation)