The ruling of the Court of Justice of the EU delivered in November 2009 in the joined cases of Sturgeon v Condor and Bock and Lepuschitz v Air France caused great surprise and consternation in the airline and legal communities and academic circles. This was because the ruling held that EU Regulation 261/2004 was to be interpreted as meaning that airlines were liable to pay compensation to passengers whose flights are delayed in arrival by three hours or more, contrary to both the clear wording of the Regulation, former case law of the CJEU, international law (the Montreal Convention of 1999) and the legislative intent. These concerns prompted TUI Travel, British Airways, easyJet and IATA jointly to ask the UK CAA for confirmation that it would not interpret the Regulation as imposing an obligation on airlines to compensate passengers in the event of delay and, following the CAA's refusal to give such confirmation, to commence proceedings against the CAA in the English Administrative Court, which referred certain questions to the CJEU for preliminary ruling. Shortly thereafter, the Amtsgericht Cologne referred to the CJEU certain similar questions arising out of a claim by a Mr Nelson and his family for compensation in respect of a Lufthansa flight that was delayed in arrival by more than 24 hours. In view of the similarity of the questions referred, the two actions were joined.
On 15 May 2012 Advocate General Bot delivered his opinion in connection with the joined cases, concluding that: there is no reason why the Court should reconsider its interpretation in its Sturgeon ruling; the Regulation should be interpreted as obliging airlines to pay compensation to passengers whose flights are delayed in arrival by three hours or more; and such obligation is not incompatible with the Montreal Convention or with the principles of proportionality and legal certainty.
While the Advocate General's opinion only has persuasive weight, and the CJEU is not bound by his conclusions, in practice it is fairly unusual for the CJEU not to follow the recommendations in an Advocate General's opinion. The opinion is therefore deeply disappointing to airlines, and to many lawyers, who are hoping that the Court will take the opportunity provided by these two references to remedy what many see to be a grave judicial error and constitutional impropriety.
The opinion is disappointing not only for the conclusions it reaches, but also for the paucity and poverty of reasoning used in arriving at these conclusions. The Advocate General took the view that the Court was correct to hold as it did on the basis of the principle of equal treatment, and that "nothing new which might call into question the interpretation that the Court gave...has been presented by the parties to the disputes in the main proceedings"! The principal arguments which he considered and commented on were: inconsistency with the approach taken by the Court in its IATA and ELFAA ruling in 2006; the arbitrary and unjustified fixing of the dividing line at three hours; and incompatibility with the Montreal Convention and the principles of proportionality and legal certainty.
The IATA and ELFAA ruling
One of the challenges made by IATA and ELFAA to the Regulation was on the grounds of infringement of the principle of legal certainty, due to an inconsistency between the text of the Regulation, which provides for an extraordinary circumstances defence to the obligations imposed on airlines in the case of cancellation but not delay, and recital 15, which appears to envisage that a defence of extraordinary circumstances may apply in cases of delay as well as cancellation. The Court rejected this argument by IATA and ELFAA on the basis that the provisions of the Regulation dealing with cancellation and delay were "entirely unambiguous" and therefore that, while a recital to a regulation could sometimes explain the meaning of the text of the regulation, it could not in this case justify derogating from the actual provisions. The UK Government argued in the referred TUI case that this meant that, according to the Court, the Regulation does not oblige airlines to compensate passengers for delay, and recital 15 cannot be used to modify the meaning of the provisions of the Regulation.
The Advocate General disagreed with this argument, distinguishing the context of the Court's statements in the IATA and ELFAA case – ie, it was responding to IATA's and ELFAA's arguments described above about the apparent ambiguity as to whether the defence of extraordinary circumstances applies only in the event of cancellation or also in the event of delay.
It is true that the Court in that case was only concerned with the argument about the applicability of the extraordinary circumstances defence, and fair enough for the Advocate General to highlight that limited context. However, this does still not answer the question why the Court should in that case find the Regulation's provisions on delay "entirely unambiguous" but nevertheless in the Sturgeon judgment be prepared to read into them significant implied obligations which are absent from the text. Furthermore, as the Advocate General points out, the Court in Sturgeon adopted the "teleological" method of interpreting the Regulation (ie, an approach that relies on the intention behind the legislation rather than its strict wording), and inferred from recital 15 "that the notion of long delay is also linked to the right to compensation". Not only is this inconsistent with what the Court said about recital 15 in its IATA and ELFAA judgment, but it ignores the legislative intent and the simple historical reason for the ambiguity in recital 15 – the fact that at one stage during the legislative process it had been intended that the extraordinary circumstances defence should apply also in cases of delay but the recital was not been modified appropriately when this idea was dropped.
The three hour dividing line
In response to criticisms that the fixing of the dividing line for compensation at three hours delay is arbitrary and unjustified, the Advocate General first pointed out the need for rules to be clear and precise in accordance with the principle of legal certainty. He then recalled the Court's original reason for choosing three hours as the dividing line – namely, the fact that Article 5(1)(c)(iii) of the Regulation provides that passengers whose flights are cancelled on less than seven days notice shall not have a right to compensation if they are offered re-routing allowing them to depart no more than one hour before scheduled departure time and to arrive at their final destination less than two hours after the scheduled time of arrival.
While it is true that Article 5(1)(c)(iii) does provide a basis for creating a dividing line so as to treat passengers whose flights are delayed in the same way as passengers whose flights are cancelled, the analogy is in fact not quite correct. This is because passengers whose flights are cancelled and are offered re-routing in accordance with this provision will in fact arrive at their final destination up to two not three hours late. The other hour which the Court added to arrive at three hours in fact is the time by which the substitute flight can depart earlier than the originally scheduled flight.
The Montreal Convention
The referring courts asked how a requirement in the Regulation to pay compensation to passengers for delay could be consistent with Article 29 of the Montreal Convention, which provides that "In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention". Article 29 goes on to state that "...... in any such action, punitive, exemplary or any other non-compensatory damages shall not be recoverable".
The Advocate General dismissed these concerns on the basis of the finding by the Court in the IATA and ELFAA case that the Regulation and the Convention deal with different types of damage – the former with damage that is almost identical for every passenger, redress for which may take the form of standardised and immediate assistance, and the latter with individual damage, redress for which requires a case-by-case assessment of the damage caused and compensation on an individual basis. He took the view that the "flat-rate" nature of the obligation to pay fixed amounts of compensation (variable depending on journey length) in the case of delay fell into the former category, and hence there was no inconsistency with the Convention.
The Court having held as it did in the IATA and ELFAA case, it is not unreasonable for the Advocate General to follow it, as, although compensation for delay was not of course in question before the Court in that case, the same reasoning should apply. However, the problem remains that the distinction that the Court found between the two regimes is flawed, and patently so, because the remedies provided by the Regulation are by no means all standardised for all passengers or immediate. One of the remedies for passengers who suffer delay of five hours or more is reimbursement of the ticket cost, which may include not only for the part(s) of the journey not made but also for parts already made if the flight is no longer serving any purpose for the passenger. Consequently, amounts payable to passengers pursuant to this obligation of reimbursement may vary considerably, and may take some time to calculate and agree where the passenger is claiming reimbursement for flights already taken.
More serious still is the Advocate's completely glossing over one of the most important questions referred – in specific terms by the Amtsgericht Cologne – ie, does the right to compensation for delay constitute a claim for non-compensatory damages, and if so how is this consistent with the last sentence of Article 29 of the Convention? This question cannot simply be answered by reference to the Court's distinction between standardised and individual damages, and one can only speculate that the Advocate General did not answer it because he could not. If the amount of compensation is "flat-rate" and "standardised", it cannot be compensatory and hence is clearly not permitted by Article 29.
As to allegations of infringement of the principle of proportionality, the Advocate General pointed out that the Court had already considered this issue in its Sturgeon ruling and had found compliance with the principle. He also concluded that the effects of airlines having to pay compensation for delay would not be disproportionate because, on the basis of figures provided by Eurocontrol, only 0.15% of flights involve delayed arrival by three hours or more. It is also relevant for the purposes of proportionality that: the airline has a defence if the delay was caused by extraordinary circumstances; the airline has a right of recovery from any third party responsible; and the amount of compensation is reduced by 50% where the delay is less than four hours.
Of all the Advocate General's conclusions, this seems the least contentious, particularly given the limits of the principle of proportionality for the purposes of invalidating legislation. However, he makes no mention of the likely cost to airlines of having to compensate for delays, which airlines estimate to be substantial, and one would have expected the airlines to put forward in argument. And the right of recourse against third parties is likely to be of such little use in practice as to be of no significance for the purposes of proportionality.
One of the most important grounds for uncertainty about the correctness of the Sturgeon ruling is the principle of legal certainty, which the Court has in other cases said requires that "every measure of the institutions which has legal effect must be clear and precise. Legislation should not, therefore, be such as to cause confusion as to the nature of a person's rights and obligations". The Court's Sturgeon ruling appears to be blatantly inconsistent with this principle, as the text of the Regulation is perfectly clear to the effect that airlines are obliged to compensate passengers only in the case of cancellation and not in the case of delay.
However, all that the Advocate General says on this crucial point is "For the reasons set out in points 31 to 48 of this Opinion, I consider that interpretation [ie, to the effect that passengers are entitled to compensation for delay] not to be contrary to the principle of legal certainty"! Points 31 to 48 of the Opinion deal with: distinguishing what the Court said in the IATA and ELFAA case; the teleological method of interpretation and recital 15; the principle of equal treatment; and the justification for the three hour dividing line. At one stage (point 46) he does indeed mention the principle of legal certainty, and indeed describes it as "a fundamental principle of European Union law", but refers to it in order to support his position that there must be a clear dividing line between delays which qualify for compensation and delays which do not. In other words, nowhere in his Opinion does the Advocate General discuss in any way whatsoever how it can be compatible with the principle of legal certainty for the Court to be able to re-write legislation which is entirely clear so as to significantly amend it.
The questions referred included questions about the temporal effects of the ruling. The Advocate General had no hesitation in expressing the view that, if the Court gives an interpretation of an EU Regulation, then that interpretation applies with effect from the date the Regulation came into force, unless the Court sees reason to limit the temporal effects: the Court did not do so in its Sturgeon judgment, and hence there is no case for limiting the temporal effects of the ruling.
In the light of EU law on the temporal effect of rulings of the Court, it is respectfully submitted that this conclusion is entirely correct, although the financial and practical effects of this for airlines (if the Court upholds its original Sturgeon ruling) are likely to be horrendous, given that the Regulation has been in force since 2005.
The judgment of the Court is now awaited, and may perhaps be expected some time after the summer. As mentioned above, it is by no means out of the question that the Court will come to a conclusion different to that of the Advocate General, although it must be said that in practice this happens less rather than more frequently. It is earnestly to be hoped that this will be one of the minority cases, and that the Court will take the opportunity still open to it to rectify a ruling which is unsustainable on several legal grounds and brings the EU legal system into disrepute.
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