Ruling Sturgeon C-402/07 and C-432/07 Böck and Lepuschitz, 19 November 2009
A year ago, the European Court of Justice ("ECJ") published a judgment which severely limited airlines' ability to rely on a defence of "extraordinary circumstances" in defending claims for compensation under EC Regulation 261/2004 ("the Regulation") arising out of flight cancellations caused by technical problems. This year, the ECJ is at it again and has, at a stroke, introduced with immediate effect an obligation on carriers to pay compensation for delay.
Attached is a press release and judgment issued yesterday by the ECJ in two cases referred to it for a preliminary ruling on the correct interpretation of the delay, cancellation and compensation provisions of the Regulation. The cases concerned flight delays whereby the claimants arrived at their destinations 25 hours and 22 hours respectively later than originally scheduled.
In both these cases, the claimants had argued that their flights had, effectively, been cancelled rather than, as the carriers argued, delayed and that they were accordingly entitled to compensation under Article 5 of the Regulation. The ECJ was asked questions by two national courts aimed at assisting in determining whether a flight has been delayed or cancelled for the purposes of the Regulation. The ECJ, however, decided that, in order to give a useful answer to the German and Austrian courts which had referred the cases, it was also necessary to decide whether passengers whose flights are delayed may, for the purpose of the right to compensation under the Regulation, be treated as passengers whose flights have been cancelled.
The judgment is unfortunately an object lesson in not asking questions unless you really want to get the answer - the danger being that you may well get the answer you definitely did not want.
When does a delay become a cancellation?
The ECJ's judgment on this question is not really open to criticism and has confirmed what most carriers would expect: where a flight is "rolled over" into another flight, i.e. the planning for the original flight is abandoned and passengers from that flight are carried on a different flight which was also planned, the original flight is to be regarded as having been cancelled. However, a flight which departs in accordance with the original planning - even after a very lengthy delay - should not be regarded as having been cancelled. It follows that a flight delay does not become a flight cancellation just because it is subject to a long delay.
Is compensation payable for delayed flights?
Here, unfortunately, the judgment will cause a major headache for carriers. The ECJ has taken the position that the Regulation has to be interpreted consistently with the objectives for introducing this consumer protection measure in the first place. The recitals to the Regulation state that its aim is to provide a high level of passenger protection for denied boarding, cancellation and delays, and the ECJ also took the view that other aspects of the preamble to the Regulation are consistent with delay being linked with availability of compensation. The problem as the ECJ sees it is that passengers who are delayed may be every bit as inconvenienced as those whose flights are cancelled and so it would be inappropriate for one set of passengers to receive compensation and the other set not to. The trouble, of course, is that this is exactly what the Regulation says and is the way in which carriers have been applying it since it came into effect five years ago.
In the face of express wording in the Regulation which states clearly the circumstances in which compensation is payable - denied boarding and cancellation (and not delay) - the ECJ has taken the purposive approach to construction of EU law to extremes. Given that the damage sustained by passengers in the event of cancellation or delay is comparable, the ECJ has said that they cannot therefore be treated differently without the EU law principle of equal treatment being infringed. In particular, where the aim of the Regulation is stated to be to increase protection for all air passengers, the ECJ has decided that such an interpretation cannot be correct (despite the wording of the Regulation - at least on this point - being about as clear as it can be). The ECJ's conclusion is that, on a proper construction and taking the aims of the Regulation into account, passengers who are delayed are entitled to compensation under the Regulation in the same circumstances and to the same extent as passengers whose flights have been cancelled.
The ECJ has, therefore, as of yesterday, fundamentally increased carriers' financial exposure and introduced the likelihood that airlines will now be called on to pay up to 600EUR per passenger in the event of a flight delay of over three hours.
The situation could hardly be worse for airlines, but there is one respect in which it is. The ECJ has presented its judgment as a "clarification" of the rights which passengers whose flights have been delayed have under the Regulation, i.e. the ECJ is saying this is what the Regulation has always meant - ever since it came into force in 2005. So, not only do airlines face a present and future liability to pay compensation for delayed flights, they also, in theory, face retrospective claims for flight delays going back several years.
Can the judgment be challenged?
Although technically a preliminary ruling like this one is binding only between the parties to the original cases which have been referred, where the ECJ gives a judgment on questions of principle such as this, it is effectively the last word on the subject. There is the option to refer a different case to the ECJ to attempt to persuade it to reconsider its judgment and that may be a course airlines will want to consider given the huge increase to their financial exposure which this judgment entails. One downside of that approach is, of course, the time such a referral would take. It is also possible that it could simply defer the inevitable; the approach taken by the ECJ in this case (as well as its reasoning in other previous decisions on the Regulation) does not engender confidence that it will take a different view second time around. Further, the alternative option the ECJ could have taken, in view of the unequal treatment of passengers depending on whether their flights have been cancelled or delayed, was to start a process which would have led to the Regulation being opened for review and amendment. If that were to happen, it is likely that there would be pressure to introduce formal amendments in order to draft a right to compensation for delay clearly into the Regulation, leaving carriers exactly where they now find themselves. There would, however, be every possibility that Member States would object to such a course of action. Any amendment procedure would also, of course, take months if not years to conclude, as opposed to the instant remedy passengers now have where their flights are delayed.
Our view is that carriers should urgently explore every avenue open to them - both legal and political - in order to combat this unsatisfactory state of affairs.
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