Kaurin, Sara --- "Australia's accession to the Athens Convention: Business as usual ... for now" [2021] PrecedentAULA 16; (2021) 163 Precedent 8

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AUSTRALIA’S ACCESSION TO THE ATHENS CONVENTION

BUSINESS AS USUAL ... FOR NOW

By Sara Kaurin

In June 2020 the Australian Government announced that it would not be acceding to the Athens Convention at this stage, finding that the existing compensation recourse available to passengers is sufficient for the time being.

Due to the popularisation of cruise holidays and the growth of the cruise ship industry prior to 2020, the Department of Infrastructure, Transport, Regional Development and Communications (the Department) recognised a need to examine the current legal protections afforded to Australian cruise passengers and shipping carriers. The Department conducted a consultation process on the possible ratification of the 1974 Athens Convention,^[1] as amended by the 2002 Protocol,^[2] known together as the Athens Convention. The consultation process examined:

• the adequacy of the current legal framework regarding the international carriage of passengers by sea and, in particular, the compensation and liability regime for these passengers; and

• the commercial implications if Australia were to ratify the Athens Convention.^[3]

Key stakeholders in the Australian cruise industry were invited to provide submissions as to whether Australia should accede to the Athens Convention. Accession looked promising, however the Australian Government has decided not to accede at this stage, finding that the existing legal recourse available to passengers against seafaring carriers provide sufficient compensation avenues. Although the Department states that its decision was based on analyses and assumptions prior to February 2020 (that is, prior to the onset of the COVID-19 pandemic), it is evident from the comments made in the Department’s Regulation Impact Statement that the unknown financial impacts of the pandemic on the cruise industry may have been a key factor taken into account in their final decision.

OVERVIEW OF THE ATHENS CONVENTION

The Athens Convention is an important convention which establishes a liability and insurance regime for passenger ships and sets out the appropriate jurisdiction, while also allowing seagoing carriers to limit their liability. The Convention aims to improve the compensation process for passengers who have suffered injuries and damage as well as the overall safety of maritime transport.

Under the Athens Convention, a carrier is liable for damage suffered as a result of the death of, or personal injury to, a passenger or loss of or damage to luggage if:

• the incident occurred during the course of carriage; and

• the incident was due to the fault or neglect of the carrier (fault is presumed in incidents of shipwreck, collision, stranding, explosion, fire or defect in the ship, unless the contrary is proven).^[4]

Pursuant to the 1974 Athens Convention, the carrier could limit its liability to 46,666 Special Drawing Rights (SDR) per carriage,^[5] unless it acted with intent to cause damage or acted recklessly and with knowledge that such damage could result. The 2002 Protocol substantially raised this limit to 250,000 SDR per carriage on each distinct occasion. Under the 2002 Protocol, strict liability is imposed on the carrier for loss not exceeding 250,000 SDR unless it can prove 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

• was wholly caused by an act or omission done with the intent to cause the incident by a third party.^[6]

For loss exceeding 250,000 SDR, the carrier is liable up to an overall limit of 400,000 SDR unless it can prove that the incident which caused the loss occurred without fault or neglect. Non-shipping related incidents, such as trips and falls, are not covered under the Athens Convention and the passenger would need to prove that the carrier was at fault for the incident. Any contractual terms that purport to limit or change the rights and liabilities under the Convention are void.

The Convention requires carriers to have sufficient financial security or insurance to cover death or personal injury of 250,000 SDR per passenger, and a claim can be brought directly against a ship’s financial securer.

Currently, there are 31 member states, including major flag states such as the UK, Panama and the Marshall Islands, which means that international carriage is captured under the Athens Convention where:

• the ship is flying the flag or is registered in a state party to the Convention; or

• the passenger’s contract is made in a state that is party to the Convention; or

• the place of departure or destination is in a state that is party to the Convention.^[7]

The European Union has not only adopted the Convention but has extended it from international to domestic travel.

THE LEGAL FRAMEWORK IN AUSTRALIA

Presently, most Australians who travel on international cruises book their trips through Carnival PLC (Carnival) or Royal Caribbean Cruises (Royal Caribbean). As part of the contract of carriage with these two carriers, Australian passengers may be able to bring an action for breach of contract, negligence and breaches of the Australian Consumer Law^[8] (ACL) in the event of any injuries and/or damage sustained during their cruise. Their rights under the ACL in particular are expressly incorporated in the terms and conditions of the contract of carriage, as is the choice of jurisdiction and the governing law.

Australian Consumer Law vs Civil Liability Acts

The ACL is a national law which protects consumers and fair trading. It commenced on 1 January 2011 and is administered and enforced by the Australian Competition and Consumer Commission (ACCC) and the respective state and territory consumer protection agencies.^[9] The ACL affords guarantees to consumers who acquire goods or services (such as passenger cruises) from a service provider or carrier where there is a relevant connection to Australia.^[10] Remedies are provided to consumers in circumstances where the provider has breached one or more of the statutory guarantees, including a right to recover the amount of the loss or damage under s236 or compensation for damages and loss under s237.

In addition to the protections conferred under the ACL, passengers who are injured on a cruise generally bring a claim in negligence pursuant to their state or territory Civil Liability Act (CLA). However, these ‘joint’ actions encounter various issues – for example, each CLA modifies aspects of the elements of a negligence action, including the limitation periods, statutory defences and limits on damages. This is somewhat ameliorated by the fact that Carnival and Royal Caribbean are both governed by NSW law, however these issues may nevertheless arise with respect to other cruise lines that fall under a different jurisdiction.

Dangerous recreational activities

There is also an inconsistency between how the ACL and the CLAs deal with recreational activities. Under the ACL, s139A allows a provider to exclude liability for injury or death as long as the exclusion is part of the contract. Importantly, however, significant personal injury caused by a provider’s reckless conduct cannot be excluded.

In contrast, the CLAs have unique rules with respect to recreational activities and permit the use of waivers, risk warnings and disclaimers. Further, there are special rules applicable to ‘dangerous recreational activities’ which bar access to compensation even in circumstances where a claim in negligence is made out.^[11]

Limit to damages

The CLAs also seek to minimise the amount of damages payable and most states and territories either have a threshold or a cap with respect to general damages. In NSW, the threshold currently requires the personal injury to be more than 15 per cent of the most extreme case in order to receive compensation, with a cap of $658,000.^[12]

The Competition and Consumer Act 2010 (Cth) (CCA) stipulates the same 15 per cent threshold, however the cap is significantly lower at $350,000.^[13] Further, the CCA does not apply to personal injury damages awarded for breaches of the consumer guarantees, which are instead assessed by the applicable CLA provisions.^[14]

The Limitation Act

Carriers are also afforded some protection pursuant to the Convention on Limitation of Liability for Maritime Claims^[15] as amended by the 1996 Protocol^[16] (the LLMC Convention), which is ratified in Australia pursuant to the Limitation of Liability for Maritime Claims Act 1989 (Cth) (the Limitation Act).

The Limitation Act allows shipowners to limit their total liability for claims arising out of one single event, called ‘global limitation’. The limit applies to claims for loss of life, personal injury and property damage and is calculated according to carrying capacity where the overall passenger limit is 175,000 SDR multiplied by the ship’s certified carrying capacity.^[17] Article 15 of the LLMC Convention allows state parties to set a higher liability limit however Australia has implemented the standard limit.

Jurisdiction

In addition to some of the issues that arise within the existing national framework between the CLAs and the ACL, further jurisdictional problems arise where cruise ships are registered in foreign countries, the companies that own the cruise ships are based internationally, or the accidents happen in international waters or in the territory of another country. In these circumstances, the burden of proof lies with the claimant, who typically has one year to bring a claim.^[18]

Unsurprisingly, international cruises that are not governed by Australian law are attended by a large number of Australian passengers. If Australia were to accede to the Athens Convention, the issues mentioned above would primarily be addressed by simplifying the claims process and providing Australian passengers with a uniform approach to access compensation.

THE CONSULTATION PROCESS

Policy options identified

A discussion paper on Australia’s accession to the Athens Convention was published in November 2017^[19] and the Department subsequently engaged with various stakeholders in the legal sector, cruise/maritime industry, government, and insurance and consumer groups to assist in its decision-making process.

Four policy options were identified after the initial consultation:

1. Retain the status quo;

2. Accede to the Athens Convention but opt out of the limits in the Athens Convention and retain the limits of the LLMC Convention;

3. Accede to the Athens Convention with tier 1 (250,000 SDR) and tier 2 (400,000 SDR) limits, or increased tier 2 limits; or

4. Proceed with option 2 or 3 and extend to ‘Voyages to Nowhere’ – cruises that do not have any ports of call.^[20]

Submissions

Strong submissions in favour of accession were made by Australian maritime law academics Professor Kate Lewins (Murdoch University) and Professor Nick Gaskell (University of Queensland), as well as the Maritime Law Association of Australia and New Zealand (MLAANZ). Due to the uncertainty surrounding passengers’ rights against international carriers that are not governed by Australian law, as well as legal issues surrounding the interplay between the ACL and CLAs (in particular any damages thresholds and the defence of ‘dangerous recreational activity’), advocates in favour of accession stressed the importance of providing uniformity to the claims process, security of passenger protection, and consistency within existing maritime treaties to which Australia is a party.^[21] For example, in her submissions to the Department, Professor Lewins was of the opinion that ‘if a ship tragedy were to occur under current Australian law, Australian passengers on board a vessel would be at a significant disadvantage as regards liability, onus of proof, procedure, evidence, insurance and enforcement compared to other passengers on board the same ship whose contracts are subject to the Athens Convention’.^[22]

Submissions were also received from the two largest cruise operators in Australia, Carnival and Royal Caribbean. Carnival took a ‘neutral’ stance on accession however set out the existing legal framework governing Australian cruise claims and its approach to claims made against it by Australian passengers. Carnival encouraged ‘practical consideration of the issues informed by the context’ set out in its submissions.^[23]

Royal Caribbean submitted that the ‘combination of Australia’s existing consumer protection laws together with the industry’s approach to passage conditions, insurance etc. do provide cruise ship passengers with effective protection/rights that are as effective as those enjoyed by landside vacationers’.^[24] Royal Caribbean thus took the position that ratification of the Athens Convention was unnecessary.

Final submissions were due by 31 January 2018 and following both cost-benefit and options analyses, the Department conducted the final consultation process between January and March 2020 before publishing the Regulation Impact Statement (RIS) in July 2020.^[25] The RIS sets out in great detail the financial, policy and regulatory impacts of accession on cruise and insurance industry stakeholders and passengers and consumer markets.

The Department’s decision

The Department determined that consumers or passengers would be the most disadvantaged group if the status quo was maintained due to ‘uncertainty of coverage for damages, jurisdictional inconsistencies, lack of clarity around extraterritorial application of state/territory laws, and the interaction of “recreational activities” under the ACL’.^[26]

However, the Department also noted that ‘acceding to the Athens Convention would only partly resolve these issues, namely through mandating carrier insurance, establishing strict liability limits and providing uniformity of rights to all passengers were captured by the Athens Convention’.^[27] The claims process may still prove complex in part and ‘further consideration would need to be given to the legislation enacting the Athens Convention to ensure it is explicit as to how damages would be awarded under the regime’.^[28]

Maintaining the status quo or introducing changes to existing legislation to ratify the Athens Convention were assessed as having a neutral impact on the Government and the insurance industry. Engagement with insurance companies suggested that any changes would be dealt with through proportional changes to insurance premiums in the cruise industry.^[29] Insurance companies would also benefit from consistency among their protection and indemnity member groups.^[30]

Consultation with the Australian Maritime Safety Authority indicated that little additional regulatory cost would be required to handle compliance around the Athens Convention requirements compared to current compliance costs already being incurred.^[31] Costs associated with the drafting and implementation of new legislation may be incurred by the Government if the Athens Convention was adopted, however these costs would primarily be a one-off and the Government may derive benefit from their laws and regulations being in line with other signatory countries.^[32] Accession would thus promote international conformity and consistency.

The Department found that:

• Australia’s accession to the Athens Convention would likely have a detrimental impact on the cruise industry in the short- to medium-term.

• The cruise industry operating in Australia ‘has an adequate consumer complaints resolution policy and approach seeing most claims resolve directly through the company’.^[33]

• Ratifying the Athens Convention would result in cruise companies incurring costs to enact changes within their existing contracts of carriage, policies and insurance.

Given the current cruise climate and the uncertainty as to how it will fare in the short- to medium-term in the post-pandemic era, it is likely that the detrimental financial impact on cruise companies was an important factor considered by the Department.

The Department concluded that ‘whilst there are benefits to passengers if Australia were to accede to the Athens Convention, there is no strong or urgent case for government action. Except in the event of a catastrophic incident, passengers have access to greater amounts of compensation under the current system.’^[34] Ultimately, the Department determined that the existing protection and legal recourse afforded by the ACL and the state and territory CLAs was adequate for the time being, however noted that it may be beneficial to revisit the assessment of the regulatory impact of accession to the Athens Convention at a later date.^[35]

CONCLUSION

The Australian Government sought to address the issues within the current legal framework governing compensation for passengers injured during international cruise travel by conducting a consultation process to consider the ratification of the Athens Convention. Submissions were due by January 2018 and although the majority of submissions advocated in favour of accession, it is clear from the comments made by Department in its RIS that the onset of the COVID-19 pandemic played a significant role in its decision not to accede at this stage.

As the cruise industry is suffering significant disruption following the COVID-19 outbreak, it is premature to add further obstacles to the industry’s recovery. Given the uncertainty as to when cruise travel will resume in Australia, and the reality that the short- to medium-term effects on the cruise industry are yet to be realised, it makes sense that the Department has decided to retain the status quo for the time being.

Sara Kaurin is an associate and the practice leader of travel and abuse Law at Shine Lawyers. PHONE [phone] EMAIL [e-mail].

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^[1] Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, opened for signature 13 December 1974, UNTS 1463 (entered into force 28 April 1987) (1974 Athens Convention).

^[2] Protocol of 2002 to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, opened for signature 1 November 2002 (entered into force 23 April 2014) (2002 Protocol).

^[3] Department of Infrastructure, Transport, Regional Development and Communications (Department), Claims for Passenger Injury and Damage to Luggage (3 November 2020) <https://www.infrastructure.gov.au/maritime/business/liability/damage_luggage.aspx>.

^[4] 1974 Athens Convention, above note 1, art 3.

^[5] SDR is an artificial unit of account for the International Monetary Fund (IMF), representing a claim to currency held by IMF member countries for which they may be exchanged. At present, 1 SDR = approximately AUD $2.

^[6] 2002 Protocol, above note 2, art 4.

^[7] Department, Australia’s accession to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, as amended by the 2002 Protocol (Athens Convention 2002) (Regulation Impact Statement, July 2020) (RIS) 8.

^[8] Competition and Consumer Act 2010 (Cth) (CCA), sch 2.

^[9] RIS, above note 7, 19.

^[10] See CCA, above note 8, s5.

^[11] For a recent example, see Singh bhnf Ambu Kanwar v Lynch [2020] NSWCA 152.

^[12] RIS, above note 7, 21.

^[13] Ibid.

^[14] Ibid.

^[15] Convention on Limitation of Liability for Maritime Claims, opened for signature 19 November 1976, UNTS 1456 (entered into force 1 December 1986) (LLMC Convention).

^[16] Protocol of 1996 to amend the Convention on Limitation of Liability for Maritime Claims, 1996 (entered into force 13 May 2004).

^[17] See Limitation of Liability for Maritime Claims Act 1989 (Cth) (Limitation Act), sch 1, art 2 and sch 1A, art 4.

^[18] RIS, above note 7, 8.

^[19] Department, Carriage of passengers and their luggage by sea (Discussion paper, November 2017).

^[20] RIS, above note 7, 14.

^[21] K Lewins, ‘Carriage of Passengers and their Luggage by Sea: The Athens Convention Discussion Paper’ (Submission, 19 January 2018); N Gaskell, ‘Carriage of Passengers and their Luggage by Sea: The Athens Convention 2002’ (Submission, 22 December 2017); The Maritime Law Association of Australia and New Zealand, ‘Carriage of Passengers and their Luggage by Sea: The Athens Convention Discussion Paper’ (Submission, 4 February 2018).

^[22] K Lewins, above note 21, 2.

^[23] Carnival Australia, ‘Carriage of Passengers and their Luggage by Sea: The Athens Convention 2002’ (Submission, 31 January 2018) 4.

^[24] Royal Caribbean International, ‘Carriage of Passengers and their Luggage by Sea: The Athens Convention 2002’ (Submission, 12 February 2018) 1.

^[25] RIS, above note 7.

^[26] Ibid, 10.

^[27] Ibid.

^[28] Ibid.

^[29] Ibid, 11.

^[30] Ibid.

^[31] Ibid.

^[32] Ibid.

^[33] Ibid.

^[34] Department, above note 3.

^[35] RIS, above note 7, 12.