1.  Relevant Laws

The Republic of Korea (“South Korea”) ratified the Convention for the Unification of Certain Rules Relating to International Carriage by Air, commonly known as the Warsaw Convention, as amended by the Hague Protocol (the “Warsaw Convention”) in 1967 and resolved issues regarding the limitation of liability  of  air  carriers pursuant to the Warsaw Convention for a long time (the “Warsaw System”). However, the 1999 Convention for the Unification of Certain Rules for International Carriage by Air (the “Montreal Convention”), which had come into international effect on November 4, 2003, was ratified by South Korea in 2007 and subsequently became effective under Korean law on December 28, 2007. On May 23, 2011, South Korea amended the Korean Commercial Code and newly inserted Part 6 on Air Transport which became effective on November 24, 2011. The Air Transport section of the Korean Commercial Code adopts most terms contained in the air transport treaties, particularly the Montreal Convention.

2.  Liability for Death and Injury of a Passenger – A Dual Liability Structure

Under the Korean Commercial Code, an air carrier is liable for damages of up to 113,100 Special Drawing Rights (“SDR”) without regard to the carrier’s negligence. For damages exceeding 113,100 SDR, an air carrier is liable for the damage only if the air carrier cannot prove that (i) the damage was caused by the negligence, unlawful act or omission of a carrier, its employee or agent or (ii) the damage was caused by the negligence, unlawful act or omission of a third party. That is, Korea has directly adopted the two-tier liability system of the Montreal Convention. Under  this  system,  absolute  liability  (strict  liability)  and  limited  liability,  which  cannot limit or exclude the liability of the carrier, will apply to the carrier for damages of up to 113,100 SDR (although the two types of liability can be offset pursuant to Article 898 of the Korean Commercial  Code),  while negligence liability and unlimited liability will apply to the carrier for damages exceeding 113,100 SDR.

South Korea’s limitation of liability on the absolute liability of an air carrier in the  death  or  injury  of  a passenger had been set at 100,000 SDR in accordance with the Montreal Convention until January 1, 2010, on which date the Montreal Convention was amended to increase the limitation to 113,100 SDR. The Korean Commercial Code was amended on May 30, 2014 to increase the limitation of liability to 113,100 to reflect the change in the Montreal Convention. For your reference, Article 24 of the Montreal Convention prescribes a review of the limitation of liability at five-year intervals after the Convention enters into force.

3.  Limitation of Liability for the Delayed Arrival of a Passenger

Under the Korean Commercial Code, an air carrier’s liability for the delayed arrival of a passenger is limited to 4,694 SDR per passenger (1,000 SDR for domestic accidents). As with the liability of an ocean carrier, the limitation of liability for the delayed arrival of a passenger is excluded if the damage is caused  by  the intent/willful misconduct, recklessness or omission of a carrier.

4.  Limitation of Liability for the Loss of, Damage to, or Delay of Baggage

Under the Korean Commercial Code, the liability of an air carrier (passenger carrier) for the loss of, damage to, or delay of baggage is limited to 1,131 SDR per passenger.  Limitation of an air carrier’s liability is excluded if the liability results from the carrier’s intent/willful misconduct or reckless conduct.

5.  Limitation of Liability for the Loss of, Damage to, or Delay of the Cargo of a Cargo Carrier

Under the Korean Commercial Code, the liability of an air carrier (cargo carrier) for damage to the cargo is limited to 19 SDR per 1kg of cargo (15 SDR for domestic accidents). The “per kg” limitation of liability of an air cargo carrier can be compared with the ocean cargo carrier’s limitation of liability per weight (2 SDR per weight). However, there is no regulation on the limitation of liability per package/unit or on the exclusion of the limitation of liability in case of an air carrier’s liability for damages to the cargo. Accordingly, the grounds for the exclusion of an ocean cargo carrier’s limitation of liability (i.e., carrier’s intent/willful misconduct and recklessness) will not likely apply for an air cargo carrier’s liability for damage to the cargo.

6.  Limitation of Liability for Damages against a Third Party within the Territorial Area

Under Article 932 of the Korean Commercial Code, the limitation on an air carrier’s liability for the damages against a third party within the territorial area depends on the weight of the aircraft. However, if the damages are intently caused by the aircraft operator, its agent or employee, limited liability (limitation  of  liability)  is excluded. The grounds for exclusion of limitation of liability for damages  against  a  third  party  within  the territorial area do not include a carrier’s general grounds for exclusion (e.g., recklessness or omission). As such, this limitation is distinguishable  from the other limitation of liability.

7.   Defense for Limitation of Liability by an Employee and Agent and Limitation on the Total Amount of Limitation of Liability

If a carrier’s employee or agent faces a claim for damages, they may invoke the carrier’s defense for limitation of liability.  In such a case, the total amount of limitation of liability for passengers, baggage, or cargo borne by a carrier and its employee or agent cannot exceed the carrier’s limitation of liability prescribed in the Korean Commercial Code for the loss of, damage to or delayed arrival of a passenger, baggage and cargo (Article 899 (2) and (4) of the Korean Commercial Code).

8. Possibility of Limitation of Liability of an Air Carrier by Agreement 

Airlines generally follow the International Air Transport Association’s Conditions of Carriage (the “IATA Conditions”) for their conditions of carriage and the IATA Conditions directly follow the limitation of liability (the limit) of the Montreal Convention. If the contractual limitation of liability provided under the conditions of carriage like the IATA Conditions is equal to, or in excess of, the statutory limitation of liability of the Korean Commercial Code, the validity of such limitation is less susceptible to objections. However, if the amount of limitation of liability under the conditions of carriage like the IATA Conditions amounts to less than the statutory limitation of liability of the Korean Commercial Code, such limitation may be a violation of the compelling statutes and may be deemed invalid.

9. Comparison to the Limitation of Liability of an Ocean Carrier

Under the Warsaw system, similar to an ocean carrier’s limitation of liability, an air carrier’s limitation of liability was set and the carrier was excluded from limitation of liability for death and injury of its passenger if such carrier acted by intent/willful misconduct or recklessness. However, after the adoption of the Montreal Convention, the Korean Commercial Code was amended to make an air carrier absolutely liable for the death and injury of its passenger, unlike its ocean counterpart. Furthermore, the Korean Commercial Code currently regulates the air and ocean carriers’ amount of limitation of liability and exclusionary grounds of limitation of liability for damages, including damages to non-passengers and cargo, differently.

If the rules for the limitation of liability of air carriers are identical or similar to the regulations for the limitation of liability of ocean carriers, legal interpretations and precedents regarding ocean carriers’ liabilities may act as a standard for the legal interpretations of air carriers’ liabilities. However, it is advisable to pay close attention to the differences in the rules on the liabilities of an ocean carrier and air carrier and the legal interpretations that will arise from these differences.