Promotion of the interests of consumers and a high level of consumer protection are specified in the Treaty on the Functioning of the European Union as fundamental objectives of the EU. Initially, Commission initiatives were particularly focused on air passengers, although the Commission is now turning its attention to other modes of transport.
The programme is an ongoing one, and further initiatives are likely. At present, there are two topical subjects which merit discussion – the rules on transparency of air fares, introduced in November 2008, and the increasing number of judgments by the Court of Justice of the EU on Regulation 261/2004 on denied boarding, cancellation and long delay of flights.
REGULATION 1008/2008 – TRANSPARENCY OF AIR FARES
EC Regulation 1008/2008 introduced new rules relating to the transparency of air fares with effect from November 2008, which can be briefly summarised as follows:
The scope of the new rules is unclear. The first requirement regarding inclusion of applicable conditions applies to “air services from an airport located in the territory of a member state” which indicates that it applies to fares for all flights from EU airports, including those by carriers from outside the EU.
This would appear to be the intent of the Regulation, but it is inconsistent with article 1, which states that the Regulation concerns “the licensing of Community air carriers, the right of Community air carriers to operate intra-Community air services and the prices of intra-Community air services”. One argument in favour of the more restrictive interpretation of the Regulation’s scope is extra-territoriality, given that, if the wider interpretation were correct, the Regulation would be seeking to control the advertising and sale of tickets by non-Community carriers in third countries.
In May 2009, the Commission announced the results of the joint Consumer/Transport Directorate General investigation, initiated in November 2008, into compliance by airline websites with these new rules and also with the requirements of Directive 2005/29 on unfair business-to-consumer commercial practices.
An independent research company contracted by the Commission reviewed websites against a 14-point checklist. Of 67 airlines investigated, 55 either were given the all-clear or took remedial action to rectify any concerns, but some were identified as having outstanding problems despite having taken significant steps to rectify their websites. 12 carriers were seen by the Commission as a continuing cause for concern, and the appropriate national enforcement authorities are understood to have pursued the matter further.
The fact that the Commission named airlines which it considered to be non-compliant aroused considerable criticism. The Commission does not have an enforcement role in the context of EU consumer protection legislation, which should be a matter for national authorities.
The enforcement authorities of the member states have been encouraged by the Commission to conclude outstanding cases, and it is understood that another sweep of airline websites is planned to further assess compliance and determine whether any further action should be taken.
The Commission has stated that it will continue to liaise with member states and will publish a report on enforcement. This was expected in June 2009, but as yet has not been published. The Commission has also said that it is working with the industry to put in place an industry-wide agreement to uphold standards, but this has also not yet been made available.
REGULATION 261/2004 – DENIED BOARDING, CANCELLATION AND DELAY
It always seemed likely that some of the uncertainties resulting from the wording of the Regulation would lead to litigation, and so it has proved. There has been a significant number of cases in the national courts of member states, although because of the relatively low amounts involved, these are normally in lower courts whose judgments are not reported and/or are difficult to track. However, one of the functions of the Court of Justice of the EU is to interpret EU legislation in response to questions referred to it from national courts, and now that it has been in force for almost five years, the Court’s judgments on various issues of interpretation of the Regulation are starting to appear.
The first such judgment, delivered on 10 July 2008 in the case Schenkel v Emirates, was in fact not particularly illuminating – at least not in most member states, because the answer to the referred question was perfectly clear in most versions, although not in the German-language version of the Regulation. The question posed was whether the Regulation applied to the inbound leg of a return journey from a point in the EU to a point outside it, and back again, when the carrier is a non-EU carrier. The English-language version of the Regulation clearly provides that the Regulation applies “to passengers departing from an airport located in the territory of a Member State” and also “to passengers departing from an airport located in a third country to an airport situated in the territory of a Member State… unless they received benefits of compensation and were given assistance in that third country, if the operating air carrier of the flight concerned is a Community carrier”. However, the German-language version uses the term “flight”, and the Court therefore had to decide whether a flight meant all the flights comprised in one journey and booked at the same time. The Court concluded that this was not the case, and therefore that the Regulation did not apply to the return sector of a flight from a non-EU airport into the EU.
The Court delivered a significant judgment on 22 December 2008, in the case of Wallentin-Hermann v Alitalia, which caused considerable shock and dismay to the airline industry. The case concerned the interpretation of the “extraordinary circumstances” defence – the issue arising under the Regulation which has given rise to most litigation. It had been hoped that the meaning of this term would be clarified earlier, in a reference from a Danish court in the case of Kramme v SAS. Advocate General Sharpston delivered her Opinion on 27 September 2007, but the original claim was withdrawn before the Court of Justice could deliver its judgment and so the reference lapsed.
When an air passenger’s flight is cancelled without sufficient advance notice, the Regulation obliges the carrier (in addition to rerouting or refunding the passenger, and providing necessary care) to pay the passenger compensation of an amount varying between €250 and €600 depending on the length of the flight. However, the carrier is not obliged to pay such compensation if it can prove that the cancellation is caused by “extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken”. Given that the cancellation of a long-haul flight carrying 300 passengers could result in a possible compensation liability for the carrier of €180,000, this defence is clearly of significant value to carriers, and it is not surprising that it has been widely used by carriers.
The Court confirmed that the expression was to be interpreted strictly, particularly as it constituted a derogation from the high level of consumer protection which was one of the fundamental purposes of the Regulation. The factual scenario involved an engine defect which had been discovered the day before, during a check. The recitals to the Regulation indicate that “unexpected flight safety shortcomings” may constitute extraordinary circumstances; the question was whether such a technical problem could constitute such circumstances. The Court held that it would only do so if the event “is not inherent in the normal activity of the air carrier concerned and is beyond the actual control of that carrier on account of its nature or origin”.
Thus far, the Court’s judgment is unsurprising, and consistent with the standard meaning of “extraordinary”. However, it went on to conclude that, as air carriers are confronted with serious technical problems in the course of their activity, and for this reason their aircraft are subject to strict and regular checks:
The Court then gave examples of technical problems which could be caused by exceptional circumstances: a hidden manufacturing defect in an aircraft, or damage caused to an aircraft by sabotage or terrorism.
In order to establish the defence, the carrier must show not only that the cancellation was caused by extraordinary circumstances, but also that the circumstances could not have been avoided even if all reasonable measures had been taken. The Court held that this required the carrier to show that:
Comment on extraordinary circumstances
The Court’s treatment of technical problems caused by a failure to maintain, and technical problems which come to light during maintenance, is curious and seems to overlook the normal meaning of “extraordinary”. It is quite possible for a technical problem of a rare or unique type to manifest itself during maintenance procedures.
Also surprising is the Court’s leap from describing the reasonable measures which a carrier needs to take in order to establish the defence as “technically and economically viable”, to stating that this means deployment of all available resources except those that would entail “intolerable sacrifices”. Not only does this go beyond the normal meaning of “all reasonable measures” but it also introduces an element of subjectivity, in that what might be an intolerable sacrifice for one airline might not be for another.
The judgment has significantly circumscribed carriers’ ability to rely on the extraordinary circumstances defence. It may be that its strict approach was encouraged by the practice of some carriers, at least, of using the defence following almost any technical problem; but it is questionable, for the above reasons, whether the Court’s conclusions are in line with the normal meaning of the words used. It may be that, in future cases resting on different facts, carriers may be able to distinguish this judgment and establish a defence in respect of certain limited types of technical problem; but this remains to be seen.
In a judgment delivered on 9 July 2009 in Rehder v Air Baltic, the Court dealt with the issue of the jurisdiction in which a claim under the Regulation should be brought. The judgment was concerned primarily with interpretation of Regulation 44/2001 on jurisdiction, and the Court held that the claim must be brought in the court which has territorial jurisdiction over the place of either departure or arrival of the aircraft – depending on the claimant’s choice – pursuant to the contract of carriage.
On 19 November 2009 the Court issued a disturbing judgment in the joined cases of Sturgeon v Condor and Böck and Lepuschitz v Air France. The questions referred to it by national courts in Austria and Germany essentially concerned the difference between delay and cancellation. The Court gave some clarification on this matter, explaining that a flight which is delayed, for however long, cannot be regarded as cancelled provided it is operated in accordance with the airline’s original planning.
It then went on to hold that the Regulation was to be interpreted as conferring a right to compensation not only on passengers whose flights are cancelled (as clearly provided for by the Regulation), but also on passengers who suffer such delay that they reach their final destination three hours or more after the original scheduled arrival time. This is despite the fact that the Regulation only provides delayed passengers with a right to care (ie, refreshments and accommodation) and a right to reimbursement where the delay is for at least five hours, and only imposes obligations on carriers with regard to delays on departure, not arrival. As with cancellation, the “extraordinary circumstances” defence would be applicable if justified on the facts.
The Court’s principal justification for disregarding these clear provisions, and effectively rewriting the Regulation, is the need to interpret the Regulation broadly and in light of its purpose, having regard to the recitals and in accordance with general principles of EU law (such as equal treatment). While this approach is certainly appropriate when the meaning is unclear or ambiguous, a departure from the clear meaning of words (as is the case here) is not consistent with the Court’s previous judgments on interpretation, and it is inappropriate to rely on a recital that is not clearly worded (Recital 15) to support the conclusion. Moreover, if a provision is contrary to the general principles of EU law, the consequence is that it is ineffective – not that it is to be rewritten.
The Court seems to have ignored another, equally important, basic principle of EU law: that of legal certainty, requiring 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.”
Strictly speaking, preliminary rulings such as this do not have the status of binding precedent in subsequent cases, but in practice the national courts tend to accord them such status. National courts are entitled to ask the Court of Justice for a further preliminary ruling on similar issues, but in such case the Court will normally confirm its earlier ruling.
Two other references are pending before the Court, at an early stage: Schulze and others v Lufthansa, on whether a technical defect can constitute an extraordinary circumstance (the issue already addressed in the Wallentin-Hermann case) and Bienek v Condor, on whether a change of reservation to another flight constitutes denied boarding.