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Wednesday, 23 October 2002
Page: 5789


Senator O'BRIEN (7:20 PM) —Having consulted with the government in relation to this matter, I propose to incorporate the opposition's contribution to this debate on the Insurance and Aviation Liability Legislation Amendment Bill 2002 in the form of a document which does, I must admit to Senator Ian Macdonald, criticise the minister from the previous parliament.

Leave granted.

The document read as follows—

The Opposition supports of the Insurance and Aviation Liability Legislation Amendment Bill 2002

The bill proposes minor amendments to three pieces of legislation. Two of the amendments arise from the events that shook the world on September 11 last year.

There are a number of key parts of this bill.

The first part is the amendment to the Civil Aviation (Carriers' Liability) Act 1959.

This bill amends the act to correct an error that imposes a liability on foreign charter operations that is inconsistent with Australia's international obligations.

The amendment has been mooted for some time. It actually formed part of the lapsed Aviation Legislation Amendment Bill (No. 1) 2001.

This was a bill that lapsed mainly as a result of the incompetence of the Minister when the parliament was prorogued.

The bill proposes changes to two other pieces of legislation. As I said the changes arise from the events of September 11.

The first is an amendment to the Damage by Aircraft Act 1999.

The act is amended to exclude passive owners, such as lessors, from absolute liability for damage on the ground.

The events of September 11 last year threw the aviation and airport insurance industries into chaos.

Initially it was thought that Australia's fairly unique protection for industry against insurance companies withdrawing cover was a major benefit to the aviation industry; however, it soon became clear that the unique provisions hampered reinsurance processes.

This in turn impacted on the leasing and financing arrangements negotiated for aircraft operators in Australia.

Following September 11, the insurance and finance industries raised concerns about the liability of passive owners for damage on the ground, noting that the Australian practice of having owners and operators jointly and severally liable was not common international practice.

The amendment removes the liability of passive owners who do not have an active role in the operation of the aircraft immediately before the impact occurred and where another person or organisation has the exclusive right to use the aircraft, and finance or other arrangements are in place.

The amendment does not affect the strict and unlimited liability of aircraft operators.

The amendment to the Insurance Contracts Act 1984 allows for the exemption by regulation of war and terrorism risk insurance from the cancellation and variation provisions of the act.

The protection offered by the current act against cancellation simply meant that the bulk of Australia's aviation industry was not able to obtain cover once the existing contracts came up for renewal.

This industry relies on the global insurance market for cover.

Exempting war and terrorism cover from the cancellation and variation provisions of the act will place this class of insurance in the same position as the rest of the international aviation world.

It will thereby enable Australian operators to have access to global markets for insurance.

Australia is now part of a global alliance of countries pursuing a global, coordinated solution to terrorism insurance for airlines, airports and associated organisations and operations.

In the meantime, the government is correctly offering war risk indemnities to those aviation industry participants who have not been able to obtain sufficient war risk cover.

This bill is a timely response to events beyond our control and beyond the control of the industry.