ICCL
LEADS OPPOSITION TO PROPOSED SWEEPING MODIFICATIONS TO ATHENS CONVENTION
(published December
2001)
In
1999, airline industry leaders met in Montreal, Canada to propose changes to
the Convention for the Unification of Certain Rules Relating to International
Transportation by Air (commonly called "The Warsaw Convention"). Among other
changes, delegates to the Montreal Convention proposed increasing the damage
caps and revamping the liability scheme to include a two-tier system: strict
liability in the first tier up to a certain absolute limit and so-called reverse
burden negligence in the second tier (this form of liability presumes negligence
and requires the airline prove the damages were not a result of its negligent
actions). Thereafter, their ocean-going counterparts, led by the Legal Committee
of the International Maritime Organization ("IMO"), introduced a draft Protocol
seeking to enact similar changes to the Athens Convention Relating to the Carriage
of Passengers and Their Luggage by Sea (the Convention regulating passenger
cruises outside the United States commonly called "The Athens Convention").
Unfortunately, in many respects the draft Protocol to the Athens Convention
went far beyond the liability scheme adopted for airlines, creating a regime
which would have been unworkable in the maritime passenger carriage and insurance
industries.
Through its representation of the International Council of Cruise Lines ("ICCL"), Kaye, Rose & Partners has been at the forefront in advancing these industries' many serious concerns with the proposed liability and insurance proposals of the draft Protocol, and most notably: the liability regime, damage caps, statute of limitation, increased venues for maintaining actions, and compulsory insurance requirements. A brief outline of ICCL's position (which was advanced at the recent IMO Convention) with regard to specific provisions follows:
Proposed Two-Tier Liability Scheme
ICCL has opposed the imposition of a two-tier liability system for cruise vessels. Under the draft Protocol, vessel operators would be held strictly liable for "shipping incidents" (i.e., shipwreck, collision, stranding, etc.) or any "defect in the ship" up to an as-yet-undetermined limit. Although arguments could be made for strict liability as applied to traditional common carriers (i.e., airlines or railways) whose sole function is to provide transportation, cruise lines are not common carriers in the typical sense because the primary function of a cruise ship is not to transport passengers. For this reason, the vast majority of passenger injuries and deaths aboard cruise ships are not related to transportation, but instead occur in the context of recreational or other ancillary activities which are no different than comparable activities on land. Cruise ships offer a myriad of activities involving direct participation by the passenger, and incorporate countless products and facilities designed, manufactured and maintained by entities other than the carrier. Particularly problematic is the phrase "defect in the ship." This extremely broad term, in the context of a cruise ship, could well be interpreted to include all the ancillary resort facilities and components unrelated to transportation.
For all other injuries and deaths not resulting from a shipping incident, the carrier is presumed liable unless the carrier proves the incident which caused the loss occurred without fault or neglect of the carrier. This same standard would apply to the second-tier of liability above strict liability for shipping incidents or vessel defects. This dramatic departure from the current scheme, which requires the claimant prove fault, would make cruise lines presumptively liable for any damage resulting from countless incidental or trivial activities, contrary to long-standing maritime and shoreside tort principles. No known evidence suggests the existing liability regime of the Athens Convention (with its rebuttable presumption of fault against the carrier for shipping incidents, and a requirement that the passenger otherwise prove fault) is in need of revision. The onerous liability scheme of the draft Protocol would remove most incentives a passenger otherwise has to exercise due care for his or her own safety. It would foment an excess of litigation by encouraging the assertion of even the most frivolous claims which, under a strict liability or reverse burden standard, would be viewed as a "no lose" proposition.
The "Opt-Out" Provision For Damage Caps
The ICCL likewise strongly opposed the draft Protocol's "opt-out" provision, allowing nations to subscribe to the more onerous liability scheme but not the limitations on damages. This provision is unique to the draft Protocol and is not found in either the existing Athens Convention or the Montreal Convention. The "opt-out" provision permits any nation to establish per capita unlimited liability, based on presumed fault in excess of the strict liability limit, or unlimited liability for all non-shipping incident casualties based on presumed fault. Given the U.S. stance on damage caps, it is anticipated the U.S. would only sign this new Protocol if it were allowed to "opt-out" of the limitations of liability. Should the U.S. subscribe to the draft Protocol on that basis, the current legal scheme in place for U.S. litigation of claims by American passengers against U.S.-based cruise lines would be entirely usurped, and cruise lines would become virtual insurers for every mishap occurring on their ships. The result of such an unprecedented standard would be dramatically increased costs for U.S. consumers.
Compulsory Insurance Requirements
The ICCL likewise opposed the imposition of guaranteed insurance on every vessel in an amount representing the per capita limitation (estimated to be between 350,000 - 500,000 SDRs, or approximately $435,000 - $620,000 U.S.) multiplied by the number of passengers the vessel is authorized to carry. Under this provision, the guarantee for the largest capacity vessels, carrying upwards of 3000 passengers, is a staggering $1.35 to $1.92 billion U.S. This unprecedented amount of insurance is unavailable in the current market and the International Group of P & I Clubs, which provides insurance for most or all of the world's passenger vessels, has already indicated it cannot provide such an extraordinary level of guaranteed cover. An additional limitation under the draft Protocol forbids the insurer from asserting any coverage defenses it might otherwise have against the carrier under the insurance contract. There is also under consideration a proposal denying the insurer the right to limit its coverage even when the assured carrier engaged in wilful misconduct. There are no known insurers who will, or even could under their own underwriting rules, provide coverage for wilful misconduct of an assured.
Expansion Of The Statute Of Limitation For Filing Claims
Another aspect of the draft Protocol opposed by ICCL is the expansion of the statute of limitation to a date three years from the date when the passenger knew or ought reasonably to have known of the injury, up to ten years from the date of disembarkation. Taken to its logical conclusion, under this provision cruise lines would necessarily have to keep accident reports, medical records and other claims materials for ten years. Moreover, the cruise lines would be in the untenable position of having to track down duty rosters, passenger lists, former employees and other evidence long after the incident which gave rise to the claim. Such an expansion of the statute of limitation is at odds with most national laws and other international treaties. Additionally, if the United States ratifies the draft Protocol, it would vitiate the one-year statute of limitation provision in every passenger ticket contract.
The Draft Protocol Fails To Specify That Recoverable Damage Must Be Linked To Measurable Pecuniary Loss
The ICCL believes, if the draft Protocol is adopted, especially if it is to include any element of strict liability or presumed negligence with a reverse burden of proof, language limiting recoverable damages to pecuniary loss is both necessary and justified. Even the Montreal Convention specifically excludes recovery for punitive damages or any other "non-compensatory damages" in airline disasters. The draft Protocol should also disallow recovery for purely emotional distress in the absence of either a physical injury or actual threat of such injury.
The Draft Protocol Should Clarify That The Venue Criteria Will Not Undermine National Law
The draft Protocol allows passengers to file suit against cruise lines in any one of five different "states." While these provisions are not necessarily objectionable, the ICCL believes clarifying language must be added affirming that the internal laws of each nation will continue to govern where, within that nation, an action may be maintained. For example, most cruise lines include a forum selection clause in the passenger cruise ticket specifying where in the United States suit may be brought. One of the primary bases for national venue rules is that allowing carriers to specify their national base of operations as the exclusive forum for claims promotes easier access to evidence and witnesses, thus benefitting consumers by lowering litigation costs and preserving judicial resources.
The Liability Scheme For Lost Or Damaged Luggage
An additional detrimental provision is the reverse burden negligence requirement for lost or damaged passenger luggage. A reverse burden standard of proof for passenger luggage claims would result in gross unfairness, because luggage is typically handled by other carriers, such as airlines and buses, both before and after a cruise. Passengers would have no incentive to seek redress from connecting carriers, who in turn would have no incentive to handle luggage with due care. Imposition of presumed fault for damage or loss of luggage upon carriers would also encourage assertion of fraudulent claims, driving up the cost of doing business and necessitating increased fares for the traveling public.
The Good News
None of these provisions is set in stone as the draft Protocol has not yet been finalized. In addition to the ICCL, other organizations, including the International Chamber of Shipping, submitted oppositions to many of these provisions and further discussion on the Protocol was taken up on October 8-11, 2001, at the 83rd Session of the IMO Legal Committee in London.
The ICCL also submitted an official position paper to the U.S. delegation, and the IMO itself, outlining the above problems and recommended solutions. Based in large part on these contributions, the IMO Legal Committee agreed at the meeting to modify the draft Protocol in several important aspects:
- For purposes of imposing strict
liability, the term "shipping incidents" and "defect
of the ship" will now be tightly defined to include only those incidents
speci- ically related to shipping, such as collisions, ground- ings, fires,
etc; and will exclude trivial mishaps occur- ring in the operation of the "hotel" aspects
of the ship;
- Carriers can seek recourse against third parties for any liabilities, and while restricted from using third party liability as a defense in cases based on strict liability, contributory negligence of the claimant will always be considered in reducing recoverable damages;
- If the incident is non-shipping in nature, the burden of proof will remain on the claimant to prove fault;
- The general statute of limitations will remain two years, which can be extended under national laws for injuries that manifest slowly such as chemical exposure, to a maximum of five years;
- The venue provisions will remain unchanged from the current Athens Convention, with each country remaining free to dictate where within its own legal system claims can be brought. (This will ensure Carnival Cruise Lines v. Shute and its progeny will remain intact);
- Claimants may not recover punitive or exemplary damages under any circumstances, and national laws will otherwise delineate the types of damages recoverable in cases brought in that forum.
In fact, the only major changes the ICCL opposed which were not altered by the Committee were the allowance of direct action against insurers, requiring insurers to provide evidence of coverage to the limits of the strict liability and second tier liability, and allowing countries to "opt out" of the second tier limits of liability.
Where We Go From Here
At the termination of the October Convention, the Legal Committee proposed that the draft Protocol be put before the IMO at large at a diplomatic conference which will probably be held in October 2002. It is likely the draft Protocol will be set for adoption at that time. Following its adoption, it must still be ratified by at least ten member nations before it can be entered into force. Kaye, Rose will continue to follow the progression of this most important draft Protocol as it makes its way through the international legal labyrinth and will provide updates as we receive them.
