Council Regulation (EC) No 2027/97 defines and harmonises the obligations of Community air carriers as regards the nature and limits of their liability in the event of accidents to passengers. The Regulation applies to damage sustained in the event of death, wounding or any other bodily injury to a passenger if the accident in question took place on board an aircraft or during any of the embarking or disembarking operations. The liability of an air carrier (air transport undertaking) for damage sustained by a passenger or a passenger's baggage in the event of an accident cannot be subject to any financial limit defined by law, convention or contract. The carrier can be discharged of his liability only by proving that the damage was caused by the negligence of the injured or deceased passenger. The Community air carrier is obliged to pay the victims or those entitled to compensation an advance proportional to the damage sustained not later than 15 days after identification of the victim.

Community air carriers must inform passengers of the provisions relating to their liability in the event of accident and the compensation of victims, in particular by including them in the conditions of carriage.

Regulation (EC) No 889/2002 brings the Community arrangements fully into line with the new international rules (Montreal Convention). The aim is to harmonise liability limits and legal defences in respect of European carriers, irrespective of the route (internal, intra-Community, international) on which the accident occurs. A new Convention unifying certain rules relating to international carriage by air was signed in Montreal on 28 May 1999, setting new global rules on liability in the event of accidents in international air transport. This Convention provides for a regime of unlimited liability in the event of the death or injury of air passengers and lays down a number of additional provisions.

Accordingly, Regulation (EC) No 2027/97 has been amended to bring it into line with the provisions of the Montreal Convention, by setting up a uniform system of air transport liability. The obligation of insurance is to be understood as requiring that a Community air carrier must be insured up to a level that is adequate to ensure that all persons entitled to compensation receive the full amount to which they are entitled in accordance with the Regulation.

Air carriers must provide each passenger with a written indication of:

• the applicable limit, for the flight in question, on the carrier's liability in respect of death or injury;
• the applicable limit, for the flight in question, on the carrier's liability when baggage is destroyed, lost or damaged;
• the applicable limit, for the flight in question, on the carrier's liability in respect of damage occasioned by delay.

Air carriers' liability in respect of passengers and their baggage relates to:

• compensation in the event of death or injury: no financial limit is set. However, there is a first tier of strict carrier liability for damages of up to 100 000 SDRs (special drawing rights, as defined by the International Monetary Fund, i.e. around 135 000 euros), in respect of which the air carrier cannot contest claims for compensation. In excess of that amount, a second tier of liability is based on the presumed fault of the carrier, which the latter may avoid only by proving that it was not at fault (the burden of proof is on the carrier);
• advance payments: the air carrier must make an advance payment to cover immediate economic needs, with 15 days from the identification of the person entitled to compensation. In the event of death, this advance payment must not be less than 16 000 SDRs;
• Passenger delays: the air carrier is liable (unless it took all reasonable measures) and must pay passengers up to 4 150 SDRs in the event of a delay. Liability for baggage delay is limited to 1 000 SDRs;
• destroyed, lost or damaged baggage: in the event of damage, delay, loss or destruction of baggage, the passenger concerned must complain to the air carrier in writing.

Any action in court to claim damages must be brought within two years from the date of arrival of the aircraft, or from the date on which the aircraft ought to have arrived.

^{Source: EUR-Lex}