The great lottery in the sky

Where you go on holiday and who you fly with affects the amount of compensation if you have a crash. Why the discrepancy?

The Concorde tragedy will not only have unsettled the privileged few who can afford to pay for a seat on the supersonic craft, but it will also worry millions of ordinary air travellers.

The Concorde tragedy will not only have unsettled the privileged few who can afford to pay for a seat on the supersonic craft, but it will also worry millions of ordinary air travellers.

Once again, an air disaster has focused attention on the rules for compensating victims and their families. Many air passengers will be surprised to know that the amount of compensation is not fixed, but depends on the airline and your final destination.

Airlines have a duty to take all reasonable care to provide aircraft that are fit for the journey and to carry passengers safely. Although land-based victims are entitled under the Rome Convention to seek unlimited financial compensation for their loss, passengers can be in a less advantageous position.

The amount that they will be awarded depends on international agreements. This can lead to anomalous results, with the amount paid to casualties of similar incidents varying considerably simply because of the location of the event and nationality of the carrier.

The definitive agreement on the liabilities of carriers is the 1929 Warsaw Convention on International Carriage by Air as amended at The Hague in 1955. The convention has been adopted by a large number of aviating countries worldwide. On one view the convention represented a positive development because it placed the burden on the carrier to displace liability if injury occurred. This in effect removed the need for victims to investigate cause before they could receive financial recompense. This is the normal rule in road and rail accidents.

The main drawback of the convention was that it provided a low ceiling of compensation, said to be necessary to prevent the airline industry in its infancy from being brought down by lawsuits. Liability was limited to a maximum of £7,000 per person on death or injury unless "wilful misconduct" could be established (article 25). This sum was doubled in 1955 by the Hague protocol.

But if the worst happens, compensation claims can be brought not only by any survivors or the relatives of the deceased but also by victims on the ground. The latter include not only human casualties but also property-owners if a plane impacts or causes loss.

In the UK there is strict liability for objects which fall from the sky. This is just as well since many household insurance policies exclude this form of liability. No doubt the proprietor of the hotel obliterated by Concorde will be filing her claim in due course.

The Department of the Environment, Transport and the Regions (DETR) compiles annual statistics of fatalities and injuries in all modes of transport. These clearly demonstrate that flying remains the safest way to travel. According to a Civil Aviation Authority spokesman, there is a greater chance of being struck by lightning than of being involved in an air crash.

The CAA points out that there have been no "complete loss" incidents involving UK registered commercial aircraft in the last decade. Moreover, despite air traffic congestion, there are few incidents over British soil. The British Midland 737-400 crash and Pan Am's Lockerbie disaster both took place in 1989. The latter, of course, was blown apart by terrorists. Most recently, the freight plane which came down near Stansted last December was Korean registered.

With realistic insurance cover available to airlines and a recognition that payouts under the Warsaw Convention have become increasingly paltry, some major parties to the convention have agreed "by special contract" to a higher limit of liability. In the UK, the CAA imposed a standard condition in airline operating licences requiring the licence-holder to increase the limit. The Licensing of Air Carriers Regulations 1992 set the limit at 100,000 SDRs (an international monetary unit worth approximately 85p).

In the US a separate agreement, drawn up in Montreal in 1966, regulates traffic. It is mandatory that all aircraft entering US airspace undertake to provide compensation of up to $75,000 per person. In the Lockerbie tragedy, this meant that more realistic compensation could be awarded only if it were proven that Pan Am had been reckless in its security arrangements.

An important change to the rules on compensation occurred in 1998. For carriers based in the European Union, compensation for death, wounding or any other bodily injury by a passenger in an accident is governed by the provisions of EC Regulation 2027/97.

The regulation is important because it removed the financial cap on damages in air accidents involving EU carriers. It begs the question whether the destruction of a plane by a premeditated event such as terrorist activity would be termed accidental. This sensitive issue has not been tested by the courts.

In addition, EU carriers are precluded from defending claims up to £85,000 unless they can prove that the passenger caused or contributed to the accident. In the event of a passenger's death, the airline is further required under Article 5 to pay at least 15,000 SDRs within 15 days of identifying the passenger, to alleviate initial financial hardship. This obligation has been discharged by Air France in relation to the Concorde casualties.

The regulation highlights the low levels of compensation that apply in countries such as India, Egypt and many African states. Article 6(3) of the regulation obliges non-EU airlines that do not apply the provisions to inform passengers of the fact when they sell tickets in the EU. The Air Carrier Liability Order 1998 provides for the imposition of a modest fine on airlines failing to comply.

Interestingly, the International Air Transport Association launched an unsuccessful bid last year to have the Order declared invalid, in part, perhaps, because the requirement to provide details of compensation rights was regarded as an unfair "name and shame" policy.

The interrelation of the 1966 Montreal Agreement and the new regulation is confusing to lawyers and passengers. Some may assume that the 1998 regulation supersedes earlier agreements. The information provided in tickets is contradictory. A current British Airways ticket says under the heading "EU notice requirement" that 'the Warsaw Convention... limits the liability for death or bodily injury and for baggage loss, delay or damage. Many air carriers, including all European Community Air Carriers, have waived the Warsaw Convention limits for death or bodily injury and the defence that they have taken all necessary measures to avoid the damage for the first 100,000 Special Drawing Rights." This implies that for BA flights, the EU regulation applies with no limit on claims.

However, underneath this, in a section entitled "Advice to international passengers on limitation of liability", it explains that if your journey involves a destination or stop outside the country of origin, the Warsaw Convention may apply. For such journeys - including trips to the US - BA's liability is limited in "most cases to proven damages not to exceed US$75,000 per passenger". For other carriers, the document warns that liability may be as little as $10,000 or $20,000. Where does this leave a BA or Air France Concorde flight to New York that crashes in Europe or mid-Atlantic?

The answer is unsatisfactory. According to the DETR, the situation arises from the wish of airlines to use a common ticket format worldwide. The Warsaw Convention requires a certain amount of information to be given on tickets, and since the USA and the EU have applied different limits, tickets now contain three separate liability notices. This means Concorde relatives will be able to avail themselves of the more favourable position under the European legislation.

The inconsistency is currently being reviewed by the European Commission in conjunction with the US authorities, and it is hoped that the wording on airline tickets will finally be clarified. In the meantime, if you are anxious about what your estate will receive if you are unlucky enough to be on a doomed flight, read the small print.