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PART OF EC PROPOSAL HAS AIRLINES BALKING

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LONDON-Airlines have some misgivings about a proposed regulation by the European Council of Ministers for implementing a new passenger liability system for international flights.

The regulation "on air carrier liability in the event of accidents," which is under review by the European Union's Parliament in Strasbourg, France, is designed to incorporate the International Air Transport Assn.'s agreement to waive passenger liability limitations on international flights (see story, page 3.)

The E.U. Parliament could approve the measure as early as next month.

According to the regulation, "It is necessary to improve the level of protection of passengers involved in air accidents."

Like the IATA agreement, the E.U. regulation insists on unlimited passenger liability and strict liability for up to 100,000 Special Drawing Rights ($136,350).

This regulation would override the Warsaw Convention's passenger liability limitations, which currently can be exceeded only if willful misconduct is proved.

However, the E.U. proposal would go further than the IATA agreement, delegates of the 12th Annual International Airline Insurance conference conducted by DYP/LLP Ltd. heard late last month.

For example, a provision in the regulation calls for airlines to make advance payments to surviving relatives "without delay, and in any event not later than 15 days after the identity"

of a deceased or injured passenger.

The advance payment should not be less than 15,000 SDRs ($20,453), though it can count toward the total amount of any payment. The advance payment also is not a recognition of the airline's liability, the regulation states.

This rule could be impossible to fulfill, stated Tony Galbraith, treasurer of British Airways P.L.C.

"Does the E.C. have any idea how difficult proving title (to the compensation) can be?" he asked rhetorically.

In addition, the E.C. regulation calls for non-European Union airlines that fly into or through the European Union to "expressly and clearly inform" passengers if they are not signatories of the IATA agreement and therefore carry a liability limitation on their tickets.

These limitations should be posted at the airlines' ticket offices and travel agencies so that passengers know before they purchase their tickets, the regulation states.

Although airlines accept most of the proposed regulation, they object to some of it, such as the posting requirement, said Lorne S. Clark, general counsel and corporate secretary of IATA in Geneva. Other provisions that airlines reject are the 15-day time frame for paying compensation and a lack of guidance on insurance requirements.

"They want non-European airlines to put in their storefront windows large signs saying that they do not meet the same standards as the Europeans do," said Mr. Clark. "We believe that that is contrary to the Warsaw Convention," which remains in effect except for the liability limitations. "If necessary, we will challenge that in court."

The E.C. regulation also states that it "clarifies some insurance requirements" for E.U.-based airlines. However, the regulation does address what those requirements are.

These insurance requirements are not stated in the regulation but rather are implied, according to Nicholas Hughes, partner of Barlow Lyda & Gilbert in London.

"There are open references

to the expectation that (passenger liability) will be insured," he

said.

There is no specific rule stating that airline passenger liability must be insured, "but what other plan is intended by this, I do not know," said Mr. Hughes.