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Civil Aviation Bill

I am not the slightest bit averse to returning to the matter on Thursday. We are guaranteed that by the degrouping, which will give us a chance to consider this issue further. Perhaps I can state the Government’s position so that noble Lords are aware of where we stand on this important issue. As the noble Lord, Lord Clinton-Davis, said in his opening remarks, his amendment proposes a fundamental change in the way that the United Kingdom legislates for airline liability for surface damage caused by an aircraft. Although the perpetrators of a terrorist act would be legally liable for their actions, the British state would carry the financial burden of the consequences. As the Committee would expect, the Government have given this amendment very careful thought. At this stage, we are not persuaded by the argument. We may be pushed to be persuaded at any stage unless my noble friend looks at this issue again. First, the international dimension is completely absent from this proposal—but air travel, by its very nature, is international. It is not an area where it makes sense for the UK to try to act alone. It would be illogical to limit airlines’ liability for events in the United Kingdom, including the liability of foreign airlines on our territory, without also dealing with the liability of UK airlines for events on foreign territory. The trouble with my noble friend’s amendment—I commend him for his efforts and for raising an issue of such significance and salience—is that it treats the United Kingdom as an enclosed bubble and would not resolve any incident, for example, when a British carrier was in a third country. International terrorism, particularly when it deals with international transport, requires international co-operation and international answers. The airline industry of the United Kingdom as a European Union member state is legally obliged to hold minimal levels of third-party liability cover, including for terrorist risk; so too are third countries whose airlines fly in, over or to EU countries. That is an important protection for British and European citizens. I fear that my noble friend’s amendment would call into question the continuation of the EC insurance regulations—No. 785/2004—because one might ask why an airline should continue to insure when there is no liability. Secondly, the amendment makes no mention of airline negligence, which of course is possible. The pros and cons of the issue of contributory fault are not ones that I dare to go into here—I am not sure that I dare to go into them in any circumstances, as I am not a lawyer, but I certainly dare not do so here. My noble friend will recognise that to leave airline negligence out of the issue entirely is a serious and important omission. I also regret to say that changing the status quo in the way this new clause proposes would strike a wrong note about the Government’s resolve to deter terrorism by signalling that it is the responsibility of the state and that financial reparation should be transferred wholly to the British taxpayer. We have no plans to exempt or limit airlines’ liability through UK legislation. We cannot do it and we will not. So what is the way forward? In the longer term a solution to the problem of capping airlines’ liability with respect to third parties is most likely to come via international agreement. This looks most likely in the context of the work being undertaken by the International Civil Aviation Organisation to revise the 1952 Rome Convention on third party liability, though we do not expect speedy decisions in that area. We are talking in terms of years not months. I can see from the Committee’s response that I have struck a chord of recognition at least on that point. In the shorter term we need to be ready in case airlines are exposed to uninsurable risks. As your Lordships would expect, the Government are monitoring developments in the aviation insurance market closely. We stated after 11 September 2001:"““Should another terrorist incident lead to a lack of third party insurance, such that the UK aviation industry was unable to operate, the Government’s intention would be to intervene as it did after September 11th””." That remains our position. We are aware of calls by the aviation industry for states to indemnify airlines against third party war and terrorism risks. However, in balancing the risk we favour a solution that maintains as much market involvement as possible, and seeks to maximise the amount of commercial insurance available. I realise that I am on a collision course with my noble friend, and that he has tabled his amendment with the best of intentions as regards securing the future of the UK airline industry. However, these are very big issues indeed. My noble friend will recognise the measured response that I have sought to give to him. I am sure that this is not the last we shall hear of this issue, but I hope he will recognise that the Government’s position is not compatible with the proposal he has put forward.