The existing liability and compensation regime dealing with the relationship between passengers and carriers is the 1974 Athens Convention Relating to the Carriage of Passengers and their Luggage by Sea (PAL), which is significantly amended and added to by the 2002 Protocol. This article provides an overview of the carrier’s liability under the Convention and the requirements for compulsory insurance, with a purpose to help Members understand the potential liability of passenger vessel owners.

I. Notable passenger ship accidents

1. On March 6, 1987, the RORO ferry MS Herald of Free Enterprise capsized just a few minutes after leaving the Belgian harbour of Zeebrugge, killing 193 passengers and crew. It was a disaster with the highest number of fatalities on a British ship since the World War II.
2. On April 7, 1990, the car and passenger ferry MS Scandinavian Star caught fire on a voyage between Oslo, Norway and Frederikshavn, Denmark. The fire quickly spread to the entire ship in high winds and waves and took 158 lives.
3. On September 27, 1994, the passenger ferry MS Estonia sank in less than one hour after hitting stormy weather in the Baltic Sea off southwest coast of Finland. Of the 964 passengers and crewmembers, only 141 survived. It is the worst maritime disaster in the Europe since World War II.
4. On January 13, 2012, cruise liner Costa Concordia struck a rock and sank off the coast of Italy, claiming at least 32 lives. The captain was charged with manslaughter as well as abandoning ship and was sentenced to more than 16 years in prison. The total insurance claims were close to $2 billion with the International Group of P&I Clubs paying up to $1.4 billion for salvage, wreck removal, loss of life and personal injury claims, plus the $500 million indemnity from hull insurers.

II. Adoption and development of the Convention

With a series of serious cruise ship disasters stirring public concern over safety of maritime transport, the world has come to realize the need to provide legal compensation for passengers who suffer damages. The Convention was then adopted at an IMO conference in Athens in 1974. Weighing the interest of both parties, it established a regime of liability for damage suffered by passengers while providing the carrier’s limit of liability. The Convention entered into force on 28 April 1987 and is now applying to international carriage in 24 States.

The 1976 Protocol made the unit of account the Special Drawing Right (SDR) which was set at 46,666 SDR per carriage for the death of or personal injury to a passenger, replacing the “Poincare franc” as the applicable unit of account. The 1976 Protocol entered into force on 30 April 1989 with so far a total of 16 contracting states. China has acceded to the Convention and the 1976 Protocol in 1994.

The 1990 Protocol was then adopted to raise the limits to 175,000 SDR per passenger with a simplified procedure, but it did not enter into force and was superseded by the 2002 Protocol.

The 2002 Protocol further raised the limit of liability to 400,000 SDR per passenger and introduced compulsory insurance to cover passengers on ships. It also replaced the fault-based liability system with a strict liability system for shipping related incidents. These changes have assisted passengers in obtaining compensation, indicating that personal safety is very much valued by the international community. The Protocol entered into force on 23 April 2014 and is now accepted by 32 States.

III. Main content of the Convention

1. Shipowner’s liability

It is well known that most maritime legal regimes, including the Athens Convention, are based on the strict liability of the shipowner/carrier and the requirement of compulsory insurance. To help better understand the liability of shipowners for personal injury or death of passengers, the provisions of the Convention are explained as follows.

• The carrier shall be liable for the damage suffered as a result of the death of or personal injury to a passenger if the damage was caused by a shipping incident (capsizing, stranding, explosion, fire or defect in the ship), unless the carrier proves that the incident resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character; or it was wholly caused by an act or omission done with the intent to cause the incident by a third party.
• The carrier could limit its liability for the death of, or personal injury to, a passenger to 250,000 SDR per passenger on each distinct occasion.

If the loss exceeds 250,000 SDR, the carrier is further liable – up to a limit of 400,000 SDR per passenger on each distinct occasion – unless the carrier proves that the incident that caused the loss occurred without the fault or negligence of the carrier.

(3) Where the loss suffered is not caused by a shipping incident, the carrier is liable only if its fault or negligence is proved by the claimant.

(4) In no case shall the carrier’s liability for the death of or personal injury to a passenger exceed SDR 400,000 per passenger on each distinct occasion.

(5) The 2002 Protocol allows state parties to the convention to vary the limitation levels provided that these are not lower than those in the Protocol.

(6) The liability of the carrier for the loss of or damage to cabin luggage is limited to 2,250 SDR per passenger, per carriage; for the loss of or damage to vehicles including all luggage carried in or on the vehicle is limited to 12,700 SDR per vehicle, per carriage; for the loss of or damage to other luggage is limited to 3,375 SDR per passenger, per carriage. Or the carrier may agree with the passenger on a limit of 330 SDR for the loss of or damage to vehicles and 149 SDR for the loss or damage to other luggage.

2. Compulsory insurance

The 2002 Athens Protocol requires carriers to maintain adequate insurance, which also protects the passengers by providing them a right of recourse against the insurer.

(1) When passengers are carried on board a ship registered in a state party that is licensed to carry more than twelve passengers, the carrier shall maintain insurance or other financial security (such as the guarantee of a bank or similar financial institution) to cover liability under the Convention in respect of the death of and personal injury to passengers.

(2) The limit of the compulsory insurance or other financial security shall not be less than 250,000 units of account per passenger on each distinct occasion.

(3) Each state party shall ensure that insurance or other financial security is in force in accordance with the provisions of the Convention in respect of any ship that is licensed to carry more than twelve passengers, entering or leaving a port in its territory in so far as the Convention applies.

(4) the certificate attesting that insurance or other financial security is in force shall be carried on board the ship.

(5) Any claim for compensation covered by insurance or other financial security may be brought directly against the insurer. The limit of liability applies to the insurer even if the carrier is not entitled to limitation of liability.

(6) The insurer may invoke the defences (other than the bankruptcy or winding up) which the carrier would have been entitled to invoke in accordance with the Convention, or the defence that the damage resulted from the wilful misconduct of the assured.

IV. Typical owner liability arising from passenger ship accidents

Very large cruise ships are presented with an elevated risk for carrying a large number of passengers, who would typically seek compensation from the carrier on the grounds of violation to the contract of carriage, in the event of a collision, grounding, explosion, fire, or a safety incident that has resulted in personal injury or death on ships.

Even if there are no casualties, claims may also arise on cruise ships, such as for accommodation and repatriation fees in the event of a journey disrupted by accident. And when the cruise ship’s schedule is cancelled or delayed before the passenger gets on board, passengers may also claim for financial compensation due to the time loss.

Some passenger ship owners in reality even offer a “door to door” travel package, which includes shore-based risks before embarkation and after departure. Passengers can claim compensation from the carrier for these shore risks, such as injury from a fall in the bathtub while staying in a hotel. In response, some P&I Clubs have developed additional insurance to provide comprehensive cover for these liabilities.

For more information, please contact Managers of the Association.