European Court of Justice confirms that airlines must compensate passengers under the Denied Boarding Regulations for delays

Posted by Daniel Scognamiglio on
Following the Opinion of Advocate General Bot in May 2012, the European Court of Justice (ECJ) has confirmed that airlines are required to pay compensation to passengers who experience a delay of three hours or more, unless the airline can show it was caused by 'extraordinary circumstances'.

What the Denied Boarding Regulations say about compensation

It was previously common ground that consumers have an entitlement to fixed compensation under the Denied Boarding Regulations (EU Regulation 261/2004) where a flight is cancelled, unless the airline can show the cancellation was a result of 'extraordinary circumstances'. This would include the 2010 Icelandic ash cloud as well as the heavy snowfall during the winter of 2010.

Article 5 sets out the airline's requirement to provide care and assistance and to pay compensation in the event of a delay. Compensation is also payable where re-routing is offered but the re-routed flight takes off at least the day after the original planned departure. Article 6 goes on to flesh out the obligations on the airline to provide care and assistance, which depends on the distance of the flight and length of delay. Importantly, Article 7 sets out the fixed amounts of compensation payable in the event of flight cancellation. The compensation payable depends on the distance of the flight, as follows:

  • 250 Euros for flights of 1,500 km or less;
  • 400 Euros for intra-community flights of more than 1,500 km and all other flights between 1,500 and 3,500 km;
  • and 600 Euros for all flights not in the aforementioned categories.

The obligations only apply to flights leaving a Member State of the European Union or to airlines that are based in a Member State.

Airlines can avoid liability to pay compensation (but not to provide care and assistance: McDonagh v Ryanair) if they can show the delay or cancellation was caused by 'extraordinary circumstances'. This could include political instability, meteorological conditions incompatible with the operation of the flight (the ash cloud), security risk and strikes.

The decision in Sturgeon v Condor

In Sturgeon, the ECJ took its agenda for promoting consumer protection one step further. It decided there was no justification for distinguishing between a long delay and a cancellation. It felt the wording of the Regulation was sufficiently wide to give rise to a right to compensation for long delays. It defined a 'long delay' as a loss of time equal to or in excess of three hours. The airline could, however, rely on the 'extraordinary circumstances' defence if it could show this was the cause of the delay. The decision came as a shock to airlines that were previously only exposed to the risk to pay compensation under the Regulations in the event of a flight cancellation.

The ECJ has now, however, confirmed that the decision in Sturgeon was correct and that the requirement to pay compensation for delay can apply retrospectively. This is of notable concern to airlines who may now be inundated with claims as the floodgates open.

The High Court referral and proceedings at the ECJ

Unimpressed by the way in which the ECJ had stretched the language of the Regulations, TUI, British Airways and Easyjet, together with the International Air Transport Association (IATA) launched judicial review proceedings against the CAA. They sought to challenge the ECJ's decision in Sturgeon on the basis that it conflicts with previous case law, involves an incorrect application of the Regulation and is inconsistent with other principles and provisions of international law. The CAA refused to confirm its interpretation of the Regulations, which is why the airlines and IATA sought judicial review.

In August 2010 the High Court referred a number of questions to the ECJ about the interpretation of the Regulations. The German Amtsgericht of Köln had already made a referral raising similar questions so the proceedings were joined.

The High Court sought clarification from the ECJ on, amongst other things, whether Articles 5 to 7 of the Regulation should be interpreted so the fixed compensation under Article 7 should be paid by airlines to passengers whose flights are subject to delay.

Adopting the Advocate General's analysis, in two joined cases (C-581/10 Nelson and Others v Deutsche Lufthansa and C-629/10 TUI Travel and Others v CAA) the ECJ has unequivocally confirmed that passengers whose flights are delayed may claim compensation under the Regulations where they suffer a loss of time equal to or in excess of three hours. In other words, compensation is payable where the passenger reaches their intended destination three hours or more after the arrival time originally scheduled by their carrier.

The upshot of the decision is that compensation is available for a very long delay and that a very long delay means three hours or more.

The Court indicated that the principle of equal treatment enshrined in European law required passengers whose flights were subject to long delays to be treated in the same way as passengers whose flights are cancelled at the last minute. The aim of the compensation is to try and redress the loss of time a passenger suffers when their flight is cancelled or delayed.

Conclusion

If airlines and tour operators feel like they have taken another blow from Europe, they may find some solace in the comfort offered by the statistics, which suggest that less than 1.2% of flights fall under the scope of the Regulations and that only 0.5% of those flights involve delays of three hours or more. They also have the 'extraordinary circumstances' defence if the delay or cancellation is beyond the airline's control and in addition the right to seek reimbursement of monies they have had to pay out from the person who caused the delay, including third parties.

Proceedings in England/Wales that were stayed pending the outcome of this referral to the ECJ can now continue to progress through to a final hearing. Airlines would be sensible to settle these claims quickly to avoid the costs of litigation in the small claims court.

Travel insurers should continue to refer policy holders back to the airline in question to seek redress and compensation for delay or cancellation before agreeing claims.

About the Author

Daniel leads our travel insurance team. He is a specialist in multi-jurisdictional disputes, travel insurance litigation and tour operator liability and is qualified as a solicitor in England and Attorney at Law (non-practising) New York.

Daniel Scognamiglio
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