The Cabinet on Wednesday gave in-principle approval to table in Parliament a long-pending bill governing domestic airlines’ liability and insurance responsibilities, reviving a reform process that has remained stalled since the draft was first prepared in 2019.

The bill seeks to overhaul Nepal’s domestic aviation liability and insurance regime, renewing efforts to align the country’s aviation laws with international standards years after ratifying the Montreal Convention 1999.

Although the Montreal Convention governs liability only in international air travel, the proposed legislation seeks to bring Nepal’s domestic aviation liability framework closer to global norms by clearly defining airlines’ responsibilities in cases of accidents, delays, baggage loss and flight disruptions.

The bill establishes passengers’ rights and carriers’ obligations while introducing comprehensive provisions on compensation, cargo liability, insurance coverage and the circumstances under which airlines may be exempt from liability.

The Ministry of Culture, Tourism and Civil Aviation had published the draft for public feedback in July last year before forwarding it to the Ministry of Law for legal scrutiny. However, the government was toppled by the September Gen Z movement, halting progress on the legislation.

“We have revised the draft and resubmitted it to the law ministry under the new government,” Indu Ghimire, joint secretary at the Tourism Ministry, told the Post in a recent interview.

Under the proposed law, domestic airlines would be liable to pay compensation of up to $100,000 if a passenger suffers serious injury, disability or dies in an accident during boarding, the flight or disembarkation. In the event of a passenger’s death, compensation would be paid to the deceased’s nearest legal heir.

The minimum compensation for the death or injury of a passenger on a domestic flight in Nepal is currently $20,000. For crew members, the minimum compensation is typically $40,000 per person.

By comparison, the Montreal Convention currently sets airline liability at up to $202,500 for passenger death or injury on international flights. The liability limit was last revised on December 28, 2024.

The Montreal Convention follows a two-tier liability system. Under the first tier, airlines are strictly liable for proven damages up to $202,500 and cannot contest liability unless the passenger contributed to the injury. For damages exceeding that threshold, there is no upper limit. Airlines remain liable for the full amount unless they can prove that the accident did not result from their negligence or was caused solely by a third party.

The draft bill also requires airlines to provide appropriate medical treatment to passengers who suffer non-fatal injuries or disabilities. In the event of a fatal accident, airlines must arrange for the return of the deceased’s body to the family and provide advance payments to help cover immediate funeral and transportation expenses.

The legislation introduces clear obligations regarding flight delays and cancellations. Airlines would be required to notify passengers with valid tickets at least three hours before a revised departure time if a scheduled flight is delayed or cancelled.

If a flight is overbooked or a ticketed passenger cannot be accommodated, the airline must either arrange a seat on another carrier operating to the same destination at a similar time, provide an alternative means of travel at no additional cost, or issue a full refund immediately.

The draft also sets compensation standards for baggage loss and damage. Airlines would be required to compensate passengers up to $20 per kilogram, subject to a maximum of $5,000, for lost or damaged checked baggage, with payments made in Nepali currency.

For unchecked baggage carried into the cabin, compensation of up to $400 would be payable for loss or damage.

Cargo liability has also been addressed. Airlines would be liable for up to $20 per kilogram for lost or damaged cargo unless the shipper had declared a higher value in writing. Carriers would be responsible for losses arising from negligence by the airline, its employees or authorised agents.

The bill also requires compensation for delayed cargo deliveries. Cargo would be considered undelivered if it failed to arrive within three days when no delivery deadline had been agreed upon. It would be deemed officially lost if it were not delivered within 15 days of the scheduled date or within 30 days of acceptance where no delivery period had been specified.

The proposed legislation specifies situations in which airlines would not be held liable. These include delays or cancellations caused by adverse weather, natural disasters, airport or air traffic service disruptions, and security restrictions imposed by government authorities.

Similarly, airlines would not be liable if injuries resulted from a passenger’s gross negligence or a pre-existing medical condition, provided they could produce evidence to support the claim.

The bill also introduces provisions governing third-party liability arising from aircraft accidents.

It proposes mandatory insurance coverage based on aircraft weight, requiring $25 million for aircraft weighing up to 10,000 kilograms, $35 million for aircraft weighing between 10,001 and 35,000 kilograms, and $60 million for aircraft exceeding 35,000 kilograms.

Passengers seeking compensation for injuries or medical expenses would have to file claims with the airline or its authorised agent within 60 days, supported by the necessary documentation. If the airline rejects the claim, the passenger would be entitled to file a lawsuit in the appropriate court within 35 days of receiving the airline’s decision.

The draft also introduces the principle of unlimited liability in certain cases. Compensation for injuries or disabilities would be determined according to the severity of the harm, the resulting loss of income and the long-term impact on the victim’s earning capacity.

In addition, the government would be required to review compensation limits every 10 years, adjusting them to account for inflation and prevailing market conditions. Any revisions would have to be published in the Nepal Gazette.