The civil aviation ministry has revived the stalled process of enacting separate air carriers' liability and insurance legislation for domestic carriers, years after adopting the Montreal Convention 1999 that makes international airlines liable in case of death or injury to passengers.

Nepal adopted the Montreal Convention of 1999 on December 15, 2018.

The draft of the air carriers' liability and insurance bill from domestic carriers, which proposes a five-fold increase in compensation for death or injury, has been in the making since Nepal ratified the Montreal Convention.

The draft bill was extensively discussed with the stakeholders before finalising it in 2020.

However, successive tourism ministers failed to table the bill in Parliament.

The draft bill was then kept on hold without much explanation.

“We received the Cabinet’s approval to prepare the bill three days ago,” said Buddhi Sagar Lamichhane, joint-secretary at the ministry. “We have now expedited the process to pass the bill at the earliest.”

The draft bill, however, is already ready.

In 2020, the ministry finalised the draft bill on a separate liability system for domestic flyers, after the compensation provision, including unlimited liability claims in the Montreal Convention, was much higher for domestic carriers.

The long-delayed air carriers' liability and insurance draft bill has proposed a five-fold increase in compensation for death or injury.

As per the planned law, domestic airlines have to pay a minimum compensation of $100,000 for the injury or death of a passenger. Currently, the minimum compensation for passenger death on a domestic flight is $20,000.

Under the Montreal Convention of the International Civil Aviation Organization (ICAO), carriers have to pay 128,821 Special Drawing Rights (SDRs) or ($171,018) if the damage was due to the carrier's negligence or a wrongful act or omission.

SDRs are an interest-bearing international reserve asset used by the International Monetary Fund.

In any crash under the Montreal Convention 1999, the families of the victims have a right to claim unlimited compensation if it is a wrongful death.

The draft bill says that the carrier should make an advance payment where it determines it is necessary to meet the immediate economic needs of, and hardships suffered by, a passenger or the families of the victims.

According to the proposed law, a compensation claim should be filed with the airline or its agents within 60 days of the incident or accident. The carrier’s liability limitation for cargo lost, damaged or delayed shall be $20 per kg, if the damage was caused or contributed to by the negligence of the carriers, it says.

Under the Montreal Convention 1999, effective as of December 28, 2019, a carrier's liability limitation for cargo lost, damaged or delayed shall be 22 SDRs per kg ($29.21 per kg) in the case of destruction, loss, damage or delay concerning cargo carriage.

Similarly, carriers have to pay 1,288 SDRs ($1,709.90) for each passenger in case of destruction, loss, damage or delay with respect to baggage.

Likewise, 5,346 SDRs ($7,097.16) should be compensated for each passenger in relation to damage caused by delay in the carriage of persons.

The domestic carriers, however, have been objecting to a few clauses like the carrier’s liability limitation for delays and unlimited compensation, which according to them, was not practical in a country like Nepal.

Airlines officials say that given Nepal’s geographical terrain, climatic behaviour and airport facilities, Nepali airlines cannot afford to bear liability for delays.

Tourism ministry officials say the proposed legislation is a modified version of the Montreal Convention 1999 because there are several clauses that domestic airlines would not be able to comply with.

“There are some issues which need a wide consultation with the stakeholders before we table the bill at the Cabinet,” said Lamichhane.

After consultations with the stakeholders, the draft bill will be sent to the finance and law ministries for their comments on the relevant clauses.

“Then it will be tabled at the Cabinet for approval to present the bill in Parliament,” said Lamichhane. The process could take at least two months.

According to ministry officials, frequent changes of ministers have slowed it down. “Some ministers lasted a long time, but they were not bothered about the bill,” the officials added.

Lamichhane said they could not table the bill because Parliament was prorogued several times in the past.

As a result of the delay, passengers who died in the Yeti Airlines plane crash in January 2023 missed out on compensation in millions of rupees.

The Yeti Airlines tragedy in Pokhara was Nepal’s 104th crash and the third biggest in terms of casualties.

According to Nepal’s civil aviation body, more than 900 people have died in air crashes in the country since the first disaster was recorded in August 1955.

The biggest air accident occurred on September 28, 1992, when an Airbus A310 belonging to Pakistan International Airlines slammed into a hillside at Bhattedanda near Kathmandu Valley, killing 167 people on board.

Earlier, on July 31, 1992, an Airbus A310 of Thai Airways crashed in Ghyangphedi, killing 113 on board.

Nepal’s domestic airlines—nine fixed-wing operators and 12 helicopters—flew 4.15 million passengers in 2023.