The Montreal Convention - amendments to limits of liability and the implications for freight forwarders

Article 22 of the Montreal Convention sets the limits of liability in relation to delay, baggage and cargo. Of particular relevance to the freight forwarding industry is Article 22 (3) which sets the limit applicable to claims for destruction, loss, damage or delay to cargo. Although the limit within the original 1999 Convention was set at 17 SDRs (Special Drawing Rights) per kilogramme, this was revised on 30 December 2009 to 19 SDRs.

During 2019, the International Civil Aviation Organisation (ICAO) conducted a review of the limits of liability in the Montreal Convention. As a result of this review, the limit has been amended from 28 December 2019 to 22 SDRs per kilogramme. 

Application

The Montreal Convention has force of law in the UK through the Carriage by Air Acts (Implementation of the Montreal Convention 1999) Order 2002. By reason of Article 24 of the Montreal Convention, the contracting states have agreed a mechanism by which the limits of liability can be amended. It is pursuant to this provision that the ICAO has issued the revision.

For freight forwarders, the amendments may not be particularly significant. Indeed, the amendments are considered necessary to reflect inflationary trends - so in real terms, there should be little monetary impact. Cargo carried by air tends not to be particularly heavy for obvious reasons. As such, an additional 2 SDRs per kilo shouldn’t substantially increase the amount of compensation paid.

Actions required

However, where air waybills or standard contract terms have been drawn up to reflect the current limits within the Montreal Convention, these will now need to be revised. Clauses which seek to limit liability below the limit set by Article 22 will, where the Convention applies, be null and void according to Article 26. 

Moreover, it may call into question the reasonableness of the limits within some of the standard trading terms. Many of these have held their limits of liability constant for the last 20 years or so. Where the ICAO has considered it necessary to make two increases (in 2009 and 2019) to reflect inflationary pressures, this may act as something of a benchmark in relation to the freight forwarding industry generally. Such issues would be relevant to a challenge of standard trading terms under the Unfair Contract Terms Act 1977.

Comment

Of course, this has to be seen against static limits in other modes of transport. The Hague Visby Rules, the CIM and the CMR have not received similar uplifts to their limits. Air carriage is, therefore, somewhat on its own in that regard. However, this may be due to the application of the Convention and its limits to passengers and baggage. This receives rather more attention and scrutiny than conventions which apply to cargo alone. 

Nevertheless, it demonstrates that inflationary pressures should be considered when limits of liability are set and it is certainly not be safe to assume that limits which have been in place for decades are immune from judicial scrutiny.

Read others items in Marine Brief - March 2020

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