Abstract
In March 2020, the CJEU delivered its judgment in the Case C-832/18 A and Others v. Finnair Oyj concerning the application of EU Regulation 261/2004 on air passenger compensation. It considered whether passengers are entitled to compensation for cancellations or long delays of ‘re-routed’ flights to which they have been placed following cancellations of their original flight. In its preliminary ruling, the CJEU also considered whether a technical failure of a part which has been identified by aircraft manufacturer as being potentially defective but is only replaced once it is actually defective (a so-called ‘on condition’ part), constitutes an ‘extraordinary circumstance’ that could exempt airlines from their obligation to compensate passengers. By answering the first question in the positive and the second in the negative, the CJEU reaffirmed its well-established practice of a passenger-friendly interpretation of Regulation 261/2004.
Keywords
I. Introduction
In its preliminary ruling in A and Others v. Finnair Ovj, 1 the Court of Justice of the European Union (CJEU) has further expanded the scope of EU Regulation 261/2004 2 by ruling that passengers are also entitled to compensation for cancellations or delays when it comes to flights onto which they have been ‘re-routed’ following cancellation of the flight they initially intended to board. It also further clarified the notion of ‘extraordinary circumstances’ by ruling that a technical shortcoming in the form of a failure of a so-called ‘on condition’ part does not give rise to an exemption from a carrier’s obligation to compensation. This decision affirms the CJEU’s consumer-oriented approach 3 when it comes to interpretation of the Regulation. After introducing the Regulation’s key provisions, this case note will provide for an outline of the CJEU’s judgment in A and Others v. Finnair Ovj followed by a critical assessment of the Court’s decision.
II. Regulation 261/2004
EU Regulation 261/2004, henceforth referred to as ‘the Regulation’ has been put in place by the EU legislator to achieve a level of passenger protection that is higher than the one envisaged by existing international conventions. 4 While the 1929 Warsaw Convention and the 1999 Montreal Convention were primarily aimed at laying down a compromise between the economic interests of the airline industry on the one hand and the rights of the passengers on the other hand, the EU legislator felt that passengers deserved more protection than the two existing global conventions could provide them with. This then resulted in the adoption of the Regulation, specifically designed to safeguard passenger rights. 5 Having found its EU constitutional basis in the promotion of consumer interest in combination with the EU’s shared competence when it comes to the area of transport, 6 the Regulation in its essence serves as a tool to ‘protect’ passengers from undesirable conduct on the part of airlines. The EU further elevated the status of consumer protection by virtue of the 2007 Treaty of Lisbon, where the principle was included that the EU ought to take consumer protection requirements into account when defining EU policies and activities. 7
To this effect, Articles 4 and 5 of the Regulation provide passengers with the right to compensation by airlines in the event of (i) being denied boarding or (ii) cancellation, respectively. The amounts of compensation are further stipulated under Article 7. 8 Furthermore, in the event of flight delays, the Regulation requires air carriers to take appropriate care and assistance measures as set out in Article 6. 9 In its highly controversial decision in Sturgeon, 10 the CJEU has, however, expanded the scope of the Regulation by ruling that a delay upon arrival at the final destination of three hours or more is to be treated in the same way as a cancellation. Consequently, passengers whose flights have been severally delayed are also entitled to the standardized amounts of damages stipulated under Article 7, despite that the wording of the Regulation does not specifically entitle passengers of delayed flights to such compensation. While the community of aviation lawyers accused the CJEU of ‘rewriting’ legislation and thereby imposing an unnecessary financial burden on airlines, 11 the CJEU reaffirmed its decision on the subject in Nelson. 12 In its response to the defendant’s assertion that such an obligation to compensation in the event of long delays would be ‘disproportionate’ to the aims of the Regulation as it would impose an ‘excessive’ burden on the airlines, the CJEU reasoned that such negative financial consequences ‘cannot be considered disproportionate to the aim of ensuring a high level of protection for air passengers’. Given that according to the CJEU, the loss of time suffered is ‘irreversible, objective and easily quantifiable’, it considered such immediate fixed pecuniary compensation as ‘particularly’ appropriate in the light of the inconveniences that passengers suffer during long delays. 13
As to the Regulation’s scope, as long as the passenger possesses a valid ticket and confirmed reservation for a flight departing from an airport in the EU, and has checked in timely, he or she is covered by the Regulation. The Regulation applies to both EU airlines and non-EU airlines operating from an airport in the EU. It may also apply to EU airlines operating flights from a point outside the EU to a point in an EU State if the local law of the third country from which the flight departs does not provide for similar compensation and assistance. 14
With consumer focus as its main characteristic, the Regulation still draws inspiration from international law
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in providing airlines with a possible defence in the form of Article 5(3). Accordingly, no standardized compensation is due if the cancellation or delay of more than three hours upon arrival has been caused by extraordinary circumstances ‘which could not have been avoided even if all reasonable measures have been taken’. In this respect, Recital 14 sets out that: Such circumstances may, in particular, occur in cases of political instability, meteorological conditions incompatible with the operation of the flight concerned, security risks, unexpected flight safety shortcomings and strikes that affect the operation of an operating air carrier.
III. Facts of the case and the CJEU’s preliminary ruling
The request for a preliminary ruling in A and Others v. Finnair Oyj was made in proceedings between eight air passengers and the airline Finnair concerning a claim for compensation following a long delay of a re-routed flight offered by the latter. The applicants had booked a direct flight from Helsinki to Singapore with scheduled departure at 11.55 p.m. on 11 October 2013, which was cancelled due to a technical defect. Following announcement of cancellation, the passengers in question were re-routed to a Helsinki-Chongqing (China)-Singapore flight also operated by Finnair, due to arrive in Singapore at 5.25 p.m. on 13 October 2013. This connecting flight suffered a severe delay due to a failure of a rudder steering servo on the aircraft in question, and passengers only reached their final destination at 12.15 a.m. on 14 October 2013.
The applicants brought an action against Finnair seeking (i) payment of EUR 600 on account of the cancellation of the original Helsinki-Singapore flight and (ii) payment of an additional EUR 600 on account of the delay of more than three hours in the arrival of the Helsinki-Chongqing-Singapore ‘re-routed’ flight.
Finnair awarded the applicants with a compensation of EUR 600 in respect of their first claim. It refused to grant the second claim, however. According to Finnair, such a claim was to be considered as unfounded due to the Regulation not imposing ‘an obligation on the air carrier to pay compensation to a passenger whose flight has been cancelled in the event of delay in the re-routing flight subsequently offered to him’. In addition, Finnair argued that the re-routed flight was delayed due to ‘extraordinary circumstances’ as specified under Article 5(3) of the Regulation – in the case at hand, the rudder steering convo fell under the category of so-called ‘on condition’ parts, which are only replaced by new parts once defective. In this respect, the aircraft manufacturer had made the airline aware that the part could at some point become defective and for this reason, Finnair had the part permanently stocked in case such a malfunction would occur. 21
With these facts in mind, the Helsinki Court of Appeal stayed the proceedings and submitted the following two preliminary questions to the CJEU: (1) Does the Regulation entitle passengers who have received compensation for a cancelled flight to also receive further compensation for a delay of a subsequent re-routed flight where the operating carrier of the re-routed flight is the same as that of the cancelled flight and where the duration of the delay gives rise to the right to compensation? (2) If so, can the malfunctioning of a so-called ‘on condition’ part, that is to say a part that is used until it becomes defective, and the operating air carrier has prepared to replace the part in question by permanently stocking a spare part, be regarded as an extraordinary circumstance within the meaning of Article 5(3) of the Regulation?
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First question
Starting its consideration with the first (1) question, the CJEU affirmed that Finnair had indeed offered re-routing to the applicants in accordance with Articles 5(1) and 8(1) of the Regulation, which they had accepted. The passengers had, however, eventually arrived at their final destination with a delay of more than six hours after the arrival time specified in their accepted offer. In this respect, the CJEU once again acknowledged the passengers’ right to compensation when they reach their final destination with a delay of three hours or more after the scheduled arrival time. 23 It then proceeded to answer the first preliminary question in the affirmative by stating that passengers who were re-routed pursuant to Article 8(1) of the Regulation are entitled to compensation on the basis of the scope of the Regulation set out in Article 3(2) indicating that the Regulation not only applies to (a) passengers with a confirmed reservation but also to (b) passengers who ‘have been transferred by an air carrier or tour operator from the flight for which they held a reservation to another flight, irrespective of the reason’. 24
According to the CJEU, the regulation thus applies ‘in particular to a situation in which an air passenger has been transferred by the air carrier, following the cancellation of his booked flight, on a re-routing flight to his final destination’. 25
The CJEU further noted that there is no further provision in the Regulation that would in any way limit the rights of passengers in re-routing situations, in particular due to the fact that: Recital 2 of the Regulation indicates that the purpose of the Regulation is to address passengers’ ‘serious trouble and inconvenience’ caused by denied boarding, cancellation or long delay of flights. Being re-routed and subsequently suffering a long delay of the re-routed flight is to be regarded as such a serious inconvenience that should be addressed by virtue of the granting of the right to compensation; and if there would be no obligation to compensate passengers in the circumstances at hand, air carriers’ failure to comply with their duty to provide re-routing assistance under Article 8(1) would bear no consequences, which would then undermine the entire purpose
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of the Regulation aimed at ensuring a high level of passenger protection.
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It is this second consideration found in paragraph 32 of the judgment that constitutes the main rationale of the Court – this case note will elaborate on this further in the assessment under (IV).
Second question
The CJEU then proceeded to answer the second (2) question submitted by the Helsinki Court of Appeal by restating its position in respect of technical defects as extraordinary circumstances previously developed in Wallentin-Hermann – according to the CJEU, technical shortcomings inherent in aircraft maintenance do not, in principle, constitute extraordinary circumstances within the meaning of Article 5(3). 28 By repeating its consideration from para. 22 of its judgment in Germanwings. 29 The CJEU emphasized that air carriers are ‘regularly’ faced with such malfunctioning 30 and that consequently the unexpected, premature failure of certain aircraft parts does not constitute extraordinary circumstances since such a breakdown is, in principle, intrinsically liked to the aircraft’s operating system. 31 According to the CJEU, the failure of the so-called ‘on condition’ part in question that the air carrier has prepared to replace by way of permanently stocking a spare part, constitutes an event that, by its nature and origin, is inherent in the normal exercise of activity of the air carrier and is not outside its control, ‘unless such failure is not intrinsically linked to the operating system of the aircraft’, which is a criterion that the CJEU has left to the referring court to determine whether it has been satisfied. 32 By leaving the final assessment to the discretion of the referring court, the CJEU’s approach in A and Others v. Finnair Oyj differs from the one taken in Germanwings, where it ruled that a malfunctioning that is the sole result of the impact of a foreign object cannot be regarded as intrinsically linked to the operating system of that aircraft. 33 The following section will further elaborate on the differences between the CJEU’s approach in these two judgments.
IV. Assessment
First question
At first glance, the CJEU’s answer to the first question posed by the Helsinki Court of Appeal appears to be just another attempt to somehow ‘broaden’ the scope of the Regulation and provide passengers with an even higher level of consumer protection than the one envisaged by the Regulation’s wording, thereby imposing an additional financial burden on airlines. However, the compensation requested in A and Others v. Finnair Oyj does have a clear legal basis – the wording of the Regulation provides that the ‘double’ re-routing compensation ought to be awarded by virtue of both its scope (Article 3(2)) and specific compensation and re-routing obligations specified therein (Articles 5(1)(a)(c) and 8(1)(b)). It is furthermore clear that by citing its decisions in Sturgeon and Nelson, the CJEU based its decision on the well-established 34 principle that a delay upon arrival at the passengers’ final destination of more than three hours provides for the right to compensation as specified under Articles 5(1)(c) and 7(1). Drawing on the aforementioned re-routing obligation under Article 8(1) and the carrier’s subsequent failure to reach the passengers’ desired destination without severe delay, the CJEU found sufficient legal grounds to justify the stance that an additional, ‘double’, right to compensation had arisen. It is in this respect understandable that the Court ruled that the re-routed flight must be treated as a ‘separate’ flight on its own, as there would otherwise indeed be no consequences for failures to comply with the re-routing obligation listed in Article 8(1) – had the Court ruled in favour of Finnair, this would have provided airlines with a ‘leeway’ and lowered the standard of care required by the Regulation, thereby increasing the chances of additional discomfort for passengers who have been re-routed following flight cancellations. In this context, the re-routing experience that the passengers has to endure does objectively qualify as a ‘serious inconvenience’ that the Regulation has been designed to protect passengers from – by looking at the scheduled departure and arrival times, it becomes clear that the passengers arrived at their final destination about two days later than originally scheduled, which must have caused serious discomfort and stress, especially given the fact that their whole ‘journey’ with Finnair had started with a cancellation of their original flight.
Second question
It is well-established Court practice that technical defects in principle do not qualify as extraordinary circumstances as specified under Article 5(3) of the Regulation.
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The Court further clarified that a technical problem which comes to light during aircraft maintenance or is caused by failure to maintain an aircraft cannot be regarded as ‘extraordinary circumstances’. According to the CJEU, even a technical problem which has occurred unexpectedly, is not attributable to poor maintenance and is not detected during routine maintenance checks, does not fall within the definition of ‘extraordinary circumstances’ when it is inherent in the normal exercise of the activity of the air carrier. Such unexpected events are inherent in the normal exercise of an air carrier’s activity because air carriers are confronted as a matter of course with unexpected technical problems. As a general rule, the ‘extraordinary circumstances’ defence in the case of technical failure is applicable in two instances only, namely in the event of either a hidden manufacturing defect revealed by the manufacturer of the aircraft or by a competent authority, or an act of sabotage or terrorism.
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As a failure of a replaceable ‘on condition’ part does not qualify as either of the aforementioned, it is therefore highly unsurprising that the CJEU ‘hinted’ that the second question ought to be answered in the negative. As mentioned above, the CJEU ruled that the unexpected failure of certain parts of an aircraft will not constitute extraordinary circumstances, since such a breakdown is, in principle, intrinsically linked to the operating system of the aircraft. 37 Unlike in Germanwings, there is no question of a technical malfunctioning that was the ‘sole result of the impact of a foreign object’, 38 which would, on the basis of established case law on aircraft collisions with foreign objects, 39 exonerate the airline from its liability by triggering the extraordinary circumstances defence. Potentially unfamiliar with the exact technicalities of the case, the CJEU therefore drew an analogy to cases such as Wallentin Hermann 40 where technical failures not caused by external factors were the reason for the CJEU to rule that the extraordinary circumstances defence did not apply – it left it up to the referring court involved with actual factual matters of the case to decide whether the internal malfunctioning is indeed intrinsically linked to the operating system of the aircraft.
V. Discussion and conclusion
In times of severe distress for the airline industry due to the outbreak of COVID-19, this judgment could be seen as an additional, ‘new’ burden imposed on the deteriorating airline industry. After all, it affirms that under the circumstances specified therein, airlines can be held liable for double the compensation amount as specified in the Regulation in respect of a single flight booking. However, as the analysis of the Court’s judgment has shown, the basis for such a decision is more than clear – both the wording of the Regulation and previous CJEU case-law provide for an additional compensation obligation when it comes to severe delay of a re-routing flight. The concept of extraordinary circumstances under the Regulation also remains unaffected by this decision – the Court’s ruling in A and Others v. Finnair Oyj has merely affirmed the well-established Court practice of, in principle, not providing airlines with the possibility of a defence when it comes to technical malfunctions of aircraft.
With respect to attempts at possible revision of the current rules on passenger compensation in order to ‘re-strike’ the balance between the passengers and airlines, it should be noted that the Croatian Council Presidency recently proposed a relaunch of the 2013 Proposal 41 for the amendment of the Regulation, thereby wishing to ‘significantly’ increase the length of the delays passengers must face before being entitled to compensation. Under the proposed revision, the threshold would be increased from four to twelve hours for passengers on long-haul flights, from three hours to nine hours for passengers on medium-haul flights and from three to five hours for passengers on short-haul flights. 42 Although the newly initiated proposal does not suggest lowering the established compensation amounts, Croatia stressed the need for alleviating the ‘high financial burden’ for airlines and the ‘imputable’ nature of delays. 43 However, in response to an MEP’s question on whether the Commission has conducted any impact assessment ‘that can prove the necessity of such [legislative] changes and that examines the possible negative effects of weakening passenger rights in this way’, 44 the Commission, rather vaguely, stated that ‘it participates in these discussions, but does not have a formal role to play before the Council takes a position on the [2013] proposal’. 45 From this, it can only be inferred that actual reform of the 261/2004 Regulation that could potentially lead to a more equitable result for airlines is still to be subjected to a (likely very lengthy) legislative approval process by both the Council and the European Parliament. Such (rather drastic) revision of the system for compensation for delays would mean a departure from well-established principles on compensation for delays developed in Sturgeon and Nelson, whereby judgments such as the one in A and Others v. Finnair Oyj would, undoubtedly, also be ‘overturned’. While this would, without doubt, be to the detriment of passenger rights, it would ultimately lead to a restoration of a (previously) unfairly struck balance – for years, airlines have been required to pay unreasonably high amounts of compensation for delays or cancellations that have often not been in their power to prevent. Given the current state of the 2013 Proposal as evidenced by the Commission’s most recent response on the topic, 46 it is unlikely that such revision is to take place anytime soon, however.
In the meantime, as a result of the massive flight disruptions due to the global COVID-19 pandemic, the Commission has issued non-binding Guidelines 47 for the interpretation of the Regulation in the context of decisions made by public authorities to limit travel to control the COVID-19 pandemic. Consequently, these Guidelines only further clarify the notion of extraordinary circumstances when it comes disruptions caused by measures adopted by public authorities 48 – they do not discuss the possibility of there being other events that have occurred in line with the outbreak of COVID-19 that could trigger the extraordinary circumstances defence. 49 Furthermore, airlines still bear the proof of demonstrating the existence of such extraordinary circumstances – the Commission has not attempted to alleviate this burden in any way – and according to the Commission’s non-binding Recommendation, 50 the issuance of vouchers is subject to passengers’ voluntary acceptance.
While the decision in A and Others v. Finnair Oyj does not come as a surprise in the light of the aforementioned, well-established, pro-consumer approach of the CJEU, it is highly regrettable that the EU legislator has missed the chance to somehow ‘help’ airlines in difficult times such as the ones at hand by temporarily (partly) suspending the Regulation’s application. A series of non-binding measures in combination with judgments such as A and Others v. Finnair Oyj that further ‘clarify’ the Regulation’s scope to the detriment of airlines will ultimately only lead to more EU airline bankruptcies and (an even less) competitive position of EU air carriers on the global airline market, which is something that the EU should seek to avoid at all costs.