The past decade has witnessed many changes on the international and economic scene. Some of these changes have a direct impact on the private law liability conventions which provide for monetary limits of liability. The first problem developed when convertibility of the U.S. dollar into gold was suspended, and the value of gold began to fluctuate, resulting in the establishment of the so-called “two-tier” gold market.1 The conventions which were drafted at a time when the official and market gold prices were, for all practical purposes, equal did not specify which price (the “official” or the free market price) should be taken as a basis for the conversion of the gold units, in which limits of liability were expressed. The free market price of gold is often 10 times as high as the “official”, and if the level of liability were to be calculated on this basis, compensation would be far in excess of that calculated on the basis of the “official” price. Thus, to avoid such problems, and as an alternative to the gold clause in liability conventions, diplomatic conferences recently introduced the Special Drawing Right (SDR) of the International Monetary Fund (IMF) as a unit of account. The SDR is seen as a better remedy for the uncertainty related to gold price fluctuations and ipso facto liability limitations.2

This note will focus on yet another problem, i.e., the effect of inflation on the adequacy of limits of liability. Inflation is by no means a new phenomenon, but the recent rate of increase in consumer prices the world over has enhanced its importance and its effect on liability limits. Additionally, the adoption of the SDR in liability conventions, which has no inherent ability to maintain its real value, and which is subject to deterioration in purchasing power over a period of time, compounds the problem.

Almost all international private law conventions that provide for monetary limits of liability also contain provisions which introduce uniform practice in various aspects of international relations.3 Such provisions are essential to simplify and unify often very