Kevin O'Toole/LONDON

THE WORLD'S major airlines are due to meet in June in an attempt to break the deadlock over raising the international passenger-liability limits laid down in the Warsaw Convention.

Insurers have welcomed the initiative to make the existing $75,000 limit more realistic, but warn that insurance rates are likely to rise if the cap on liabilities is increased.

The International Air Transport Association (IATA), which is leading the initiative, hopes to thrash out a consensus at an airline conference it is hosting in Washington on 19-27 June.

"If possible, we want to try to see if an inter-carrier agreement can be put together at the conference, but that is a big if," says Ludvig Weber, one of the IATA team leading the initiative.

IATA had to secure an exemption under US and European competition rules before the discussions could take place, but these waivers expire by the end of June, effectively making the conference the last chance for the industry to reach consensus before hitting the deadline.

If a consensus is reached, the carriers would then voluntarily accept the new limits, subject to any government approval, under the mechanism set down by the Warsaw Convention.

IATA is keen to preserve an international consensus and avoid a series of regional splits over the liability issue. "We favour a worldwide solution. If we start to settle this on a regional basis, the Warsaw Convention could very quickly unravel," says Weber, adding that the convention's other benefits "would then be lost".

The Warsaw limits are already largely, disregarded by the USA and Japan, while others too, have moved to alter the liabilities cap unlitaterally, after the failure of international efforts to agree a new limit. The European Commission has proposed setting new limits at ECU600,000 ($775,000), but that is still at the discussion stage.

Most recently, Australia has required its domestic carriers to insure themselves for liabilities of up to A$500,000 ($370,000) per passenger, following a public outcry over unpaid claims. Legislation is also pending which would raise limits for international travel to the country.

Peter Harbison, an Australian aviation lawyer with BDW Aviation Services, admits that it is unlikely that foreign airlines could be compelled to follow such guidelines, although they could be shamed into a voluntary rise by regulations requiring that lower limits be made highly visible on passenger tickets.

Harbison points out that the last international attempt to raise limits through the 1992 Montreal Protocols failed when the USA declined to ratify the agreement. "In this vacuum, Australia sought an acceptable form of unilateral action which would nevertheless keep it within the framework of the Warsaw Convention," he says.

Insurers have given a broad welcome to IATA's efforts to raise the liability limits, in the hope that this will avoid the current growth in expensive and time-consuming litigation as lawyers attempt to win higher settlements.

"A claim rarely improves by being kept open," says Jeff Western, aviation underwriting manager of Zurich Reinsurance, adding that few other forms of liability are as capped. He echoes a general warning from underwriters, however, that insurance rates will have to rise if airlines accept higher limits.

Source: Flight International