TT Talk - Montreal Convention 1999 - increase of liability limit from 17 SDR to 19 SDR per kg
a) Montreal Convention 1999By the end of 2009 the liability limit for cargo in Art 22(3) of the Montreal Convention 1999 for international carriage by air will increase from 17 SDR to 19 SDR per kilogram. A SDR (Special Drawing Right) currently equals about USD 1.60.
The International Civil Aviation Organisation (ICAO), who is the depositary of the Montreal Convention 1999, stated that this increase would enter into force six months after the ICAO notification of 30 June 2009 (whether the precise date is the 30 Dec 2009, 31 Dec 2009 or 1 Jan 2010 is maybe not entirely clear).
The reason for this increase from 17 SDR to 19 SDR per kilogram is the 'escalator clause' in Art 24(1) of the Montreal Convention 1999, which requires ICAO as depositary to review the liability limits in this convention at five-year intervals. The increase from 17 SDR to 19 SDR per kilogram is said to reflect inflation of 13.1% over that period (this figure is apparently based on the IMF world economic outlook database).
This increase from 17 SDR to 19 SDR per kilogram will apply only under the Montreal Convention 1999, i.e. to air carriage contracts where the Montreal Convention 1999 is in force in both the country of departure and destination. The TT Club Conventions Handbook, which was published a few months ago, explains the plethora of air carriage conventions and contains the table 'Carriage conventions per country'.
b) IATA air waybill form
The Conditions of Contract in the IATA air waybill set the global industry standard. They are based on IATA Resolution 600b, which currently includes a limit of 17 SDR. Any revision of IATA Resolution 600b has to be approved at an IATA Cargo Service Conference (CSC) and authorised by government authorities, such as the US Department of Transport DOT. It is unlikely that this process will already be completed when the new limit of 19 SDR comes into force at the end of 2009, yet IATA advised its members (the vast majority of the world's airlines) to continue using, for the time being, Resolution 600b in its current version of 17 March 2008. It is expected that the new IATA Conditions of Contract will become available in the first half of 2010.
c) Transport Operators' house air waybills and standard trading conditions
For Transport Operators (freight forwarders) who assume liability as contracting air carriers under their own house air waybills, the Club strongly recommended in TT Talk Edition 108 (of 30 May 2008) the use of the IATA air waybill form based on IATA Resolution 600b, supplemented at the bottom of the air waybill back with the following FIATA recommended 'Note':
'If this air waybill is used by a forwarder in a capacity as contracting carrier for air transportation, any transportation or other service which is not subject to an international air carriage convention will not be subject to the terms and conditions of this air waybill but will instead be subject to the forwarder's general conditions as have already been provided to you.'
In addition to including this 'Note' in its house air waybill, the Transport Operator must of course validly incorporate its general conditions to which this 'Note' refers.
This recommended approach is not affected by the increase to 19 SDR per kilogram under the Montreal Convention 1999. While the current version of IATA Resolution 600b with its liability limit of 17 SDR per kg will not comply with the new liability limit of 19 SDR under the Montreal Convention 1999, it is believed that this is tolerable for what is likely to be a transitional period of a few months only.
Naturally, the liability limit of 19 SDR per kilogram in the Montreal Convention 1999 has compulsory force of law and will therefore simply override lower limits in contractual documents
such as house air waybills or standard trading conditions. Transport Operators might therefore want to review the limit of liability for air carriage in their standard trading conditions; in any case, Members should be reminded of the importance of a clause which states that any provision in the standard trading conditions shall be overridden to the extent that it conflicts with compulsory legislation, but no further.
The TT Club is happy to assist its Members with any enquires in connection with the increase of the Montreal Convention liability limit to 19 SDR per kg. In any case, Members are advised to keep their stock of current air waybills at suitably low levels.
You may also be interested in:
This case highlights the importance of careful drafting in order to communicate terms and conditions to customers and suppliers and to ensure that they are sufficiently wide to cover extra-contractual services where necessary and appropriate.
The logistics world is fraught with potential risks, and claims are perhaps inevitable. The exposure to such claims can be minimised, however, by maintaining a robust risk mitigation policy. Risk mitigation extends not only to the physical steps taken to improve operational safety and security, but also to ensuring, from the outset, that adequate contractual protections are in place.
TT Club Advises Transport Operators on their Liabilities as a Consequence of the Coronavirus
Insurance provider, TT Club, is advising on the potential unforeseen exposures that may accrue in the face of the coronavirus outbreak - on top of the challenges already being experienced moving freight to and from China.
Incorporation of Standard Trading Conditions is an 'old chestnut', but remains critically important in supply chain operations. Don't let the 'big picture' deal blind you to such protective 'detail'.