Relevant regulatory framework issues
Means of challenge
Grounds for challenge
On 17 March 2022, Order TMA/201/2022 was published in the Spanish Official Gazette, approving a new alternative dispute resolution (ADR) procedure for air passenger claims in Spain (for further details, please see "New ADR proceeding aims to improve resolution of air passenger disputes"). This article summarises the main aspects of the controversial legality of the new order.
Relevant regulatory framework issues
Before analysing the procedural and substantive issues that affect the viability of a possible challenge of the new ADR before the Spanish Aviation and Safety Agency (AESA), it is important to introduce some relevant aspects of the related regulatory framework.
In particular, it is worth recalling that the ultimate source from which Order TMA/201/2022 emanates is EU Directive 2013/11/EU on ADR for consumer disputes. As a provision of EU law and on the basis of the principle of primacy of EU law over the national laws of the member states, Directive 2013/11/EU could limit the possibilities of a possible challenge of the order before the Spanish courts.
However, this may not be appropriate, for several reasons:
- Although it is not an undisputed question, there is a legal and case law basis to maintain that the primacy of EU law does not cover potential infringements of constitutional rights of the member states. It can be argued that the order breaches the principles of equality and the right to effective judicial protection provided for in articles 14 and 24 of the Constitution.
- The points that would give rise to a possible challenge are not explicitly included in Directive 2013/11/EU, at least in most cases.
- EU directives do not have "primacy" over national law from a technical point of view, once they have been implemented, but rather have other types of effects (which would be too complex and unnecessary to deal with in this article).
On the other hand, the order develops the mandate foreseen in the second additional provision of Spanish Act 7/2017, as amended by the sixth final provision of Spanish Act 3/2020. In other words, the order is covered by an act of Parliament. Therefore, it could be thought that the possibilities of challenging the order are limited. However, this aspect should not be a real limitation of the possibilities of challenge as such, but would only affect the way in which the challenge would have to be channelled.
In Spain, from the point of view of legal technique, there are two possible mechanisms to challenge an administrative regulation such as the order, which has a lower hierarchy than an act of Parliament:
- direct challenge – this consists of filing a contentious-administrative appeal against the order demanding that it be declared null. This can be done by requesting the contentious-administrative court to raise a question of unconstitutionality of the legal provisions in question, for resolution by the Constitutional Court. This option has the advantage that it enables associations or entities that can justify a legitimate interest in the challenge to jointly monitor it (in the same process or in a separate one). As far as the new order is concerned, though, any such action should have been raised by 17 May 2022; or
- indirect challenge – this route would be followed in the context of a specific ADR procedure initiated by a passenger. In the course of this procedure, the nullity of the rule from which the challenged act emanates would be raised. However, this procedure has several disadvantages of a strategic nature (ie, it is not suitable since it would involve a private individual) and, above all, of a procedural nature. The order itself establishes that reviews of decisions made in specific ADR procedures would be carried out before the commercial courts, and these courts would not be technically empowered to annul a ministerial order, but only to decide upon the non-applicability of the order to the specific case at hand.
Considering the above, in this case it is clearly more advisable to opt for a direct challenge. Moreover, this route can be undertaken by several operators in the industry and not only by a certain airline on its own. For example, an action carried out under the umbrella of one or more airline associations could be considered. In any case, the option of an indirect challenge could be considered as well, which would be viable in specific cases in light of their own particular characteristics.
A challenge of the new order could be based on the fact that the ADR procedure might violate the principle of equality of all citizens before the law and airlines' right to an effective judicial protection under the terms of articles 14 and 24 of the Spanish Constitution.
As a preliminary matter, it should be noted that the ADR procedure established in the order has been approved within the framework of a consumer protection policy established both at EU and national level.(1)
It is within this general policy framework that the possibilities of challenge analysed in this article must be assessed. In particular, it must be assumed that the Spanish legislature and government are following a mandate already imposed by the European legislature that enables them to approve and implement a procedure in which there is no equal treatment between the parties and the principle of equality of procedural arms is not necessarily applied. To this extent, it would be an approach of "ordinary legality" that would be excluded from constitutional review, as in other areas of the legal system (eg, labour regulations or gender equality regulations).
Notwithstanding the above, the protective nature of a given regulation is also limited by the due respect to the right of all parties to an effective judicial defence provided for in article 24 of the Constitution and the principles of proportionality and the prohibition of arbitrariness of the public authorities enshrined in its article 9.3. In other words, it is not possible to contemplate an unlimited action by the public authorities in any particular area of life; rather, the regulations governing public action must always respect and guarantee that all parties are entitled to defend their position in a reasonable and sufficient manner.
It must therefore be concluded that a general challenge of the order as such would not be viable, since it is favourable and beneficial to one of the parties. However, specific grounds of challenge can be deemed as feasible, based on particular aspects of the new ADR procedure, which exceed the admissible limits and which represent a real impairment of the right of the parties to effective judicial protection and an infringement of the principle of equality.
Specific grounds for challenge
Two groups of grounds for challenge can be analysed separately – firstly, at the organic level (related to the body in charge of the new ADR proceeding), and then at the procedural level (related to the rules of the proceeding).
Grounds for challenging body in charge of new ADR proceeding
One of the most controversial aspects of the new regulations is the granting of sole competence to AESA to resolve passenger claims covered by the new ADR procedure. The relevant issue on this point is that the same authority that resolves disputes between independent (private) parties, AESA, is, in turn, the national enforcement body (NEB) designated by Spain to verify compliance with the EU Flight Compensation Regulation.(2)
In this regard, it is important to consider not only the fact that AESA plays both roles, which might be acceptable in other EU jurisdictions, but also the fact that certain Spanish national regulations governing AESA's powers to act as NEB grant this agency very broad powers of inspection, supervision and sanction, on the same subject matter and on the same facts (ie, the same flights) that will be subject to a resolution through the new ADR procedure. At this point, it is especially relevant that AESA has been granted inspection powers that allow it to issue binding requests to airlines, which have the correlative duty to cooperate, as established in articles 25.4 and 33.3 of Spanish Act 21/2003 of 7 July 2003 on Aviation Safety.
Failure to comply with this duty of cooperation gives rise to significant penalties, ranging from €4,500 to €70,000. The practical consequence of these provisions is that they allow AESA to have information and documentation on the details of any flight and any air incident, without any limitation. In fact, this authority has been widely used by AESA in recent years, so it has already collected and has at its disposal a wide range of information on a great number of delays and cancellations as provided by companies in compliance with requests for information received from AESA.
It can be argued that this is not compatible with the most elementary procedural guarantees that should be recognised to airlines to defend themselves adequately in any case followed against them through the ADR procedure. In these proceedings, AESA may (and probably will) previously have at its disposal all the information and documentation that it may have requested from the operator that is a party to the proceedings. This will have a corresponding effect on the legitimate right of the operator to decide on:
- the approach it adopts in the dispute;
- the procedural strategy it follows;
- the means of defence it proposes; and
- above all, the documentation it uses.
These possibilities would be quite limited, for practical purposes, if the decision-making body, AESA, already has the documentation and information of the incident under analysis, which it would have obtained from the airline itself. It can be argued that this is a clear breach of the principle of prohibition of self-incrimination.
It must be taken into account, at this point, that AESA has powers that allow a very active participation in the ADR procedure. Under the order, AESA can even promote and agree to the practice of evidence not requested by the parties, ex officio, without the possibility of any appeal, as the order itself explicitly states.
On the other hand, it is important to remember that AESA does not act in this type of proceedings as a judicial instance, but only as an administrative body. The order allows airlines to challenge AESA's decisions before the commercial courts. Therefore, no direct damage to the right to an effective judicial protection would be predicted from AESA's actions – especially when the subsequent access to justice is expressly recognised. However, what is relevant is the transcendental effect that the intervention of AESA – as the body that resolves the ADR procedure – has on the subsequent judicial process, which is already flawed precisely by the fact that it is AESA, with its particular authority as NEB and supervisor, that instructs and resolves the ADR procedure between the passengers and the company.
Additionally, where an airline does not voluntarily comply with a decision given by AESA in an ADR procedure within one month, the order expressly contemplates the imposition of an economic fine. Thus, even where the operator has good grounds to challenge a decision given by AESA before the commercial courts, it is compelled to comply with such decision to avoid such additional penalties. It can therefore be argued that giving AESA the powers of both an NEB and a ruler in the ADR proceeding represents an inadmissible disturbance to the right of defence of the airlines that could lead to the nullity of the order.
Procedural grounds of challenge
On the other hand, it can be argued that there are grounds to challenge the procedure established by the new order based on its procedural particularities.
Generally speaking, the very different treatment of passengers and airlines in terms of the voluntary and compulsory nature of the ADR procedure and the legal effects of the ADR decision for each of them is highly controversial. It is certainly unusual that the procedure is voluntary for passengers and compulsory for airlines and that the decision is binding on one of the parties and not on the other, depending on the outcome of the procedure. If the operator loses, the result is binding and it must pay; if the operator wins and the passenger claim is therefore proved to be unfounded, the result is no longer binding and the passenger is not obliged to pay anything, not even the procedural costs or expenses.
This different treatment may give rise to a possible challenge for violation of the principle of equality enshrined in article 14 of the Constitution if one considers that the discrimination between the two parties to the procedure lacks due justification. On this point, one could oppose the necessary protection that passengers deserve and the position of weakness in which they find themselves regarding airlines. This approach is debatable, and, on the other hand, lacks consistency in the light of the other provisions of the order: for example, the order provides that AESA's decision in an ADR procedure is not binding upon airport operators (article 7.2.d). It is unclear what the reasons for this different treatment of airlines and airport operators might be.
In any case, it may be considered that the greatest imbalance would occur in the legal approach established in the subsequent judicial instance. According to the order, if the airline challenges AESA's decision in court, the passenger is exempted from the burden of appearing in the judicial proceedings. This creates two serious disturbances to the company's right to an effective judicial protection.
Firstly, it is not at all clear whether the result of a judicial proceeding followed without the presence of the passenger can generate a binding decision against the passenger, since it has been followed in their – legitimate – absence. It is doubtful that, if the airline wins the judicial process, it can then invoke the res judicata principle against the passenger if the latter has not appeared in the court proceedings and such non-appearance was authorised by the order. In this sense, article 222.3 of the Civil Procedure Act restricts the effects of the res judicata to the parties of the process and their heirs and assignees, as a general rule.
In favour of this option could be the fact that Spanish Act 7/2017 states that the passenger will be satisfied with the outcome of the lawsuit if they do not appear in it,(3) but it must be taken into account that this last provision no longer appears in the approved ministerial order.(4) It could be considered that the order does not reiterate this last nuance because it considers it unnecessary, but it is a matter of great importance that leaves room for obvious doubts.
On the other hand, this provision allowing passengers not to show up in the judicial proceedings is disproportionately burdensome for the airline insofar as it involves a long (and dangerous) judicial pilgrimage for the operator to be able to effectively assert its legitimate rights. The fact that the passenger can choose not to appear in the judicial proceeding forces the airline to follow, in such case, a further judicial proceeding against the passenger to claim the amount that the passenger received from the airline under AESA's decision. This represents an extraordinary delay with uncertain results, since the company would have to follow two consecutive judicial proceedings to get a decision issued by AESA, which would have been proven incorrect, annulled.
In fact, this would be a delay and a complexity so great that, for practical purposes, it would prevent, de facto, that the courts of justice could effectively review the decisions of AESA proven to be against the terms of Regulation 261, however unfortunate or incorrect they may be. This is particularly so given that, in addition, the airline is not at all assured that in this last judicial proceeding to be followed against the passenger, the res judicata of the previous judicial proceeding in which the passenger would not have been a party would be applied.
On the other hand, this would entail an extremely dangerous delay. For practical purposes, it could well be the case that, at the time of the final judicial decision allowing the recovery of the amount initially paid (ie, at the end of the second judicial proceeding), the passenger is no longer solvent or there is no longer an effective way to obtain the restitution of the amount initially paid by the airline quite some time before.
On this point, the fact that the sums paid by the company must be immediately delivered to the passengers is very worrying, even though the ADR resolution can be reviewed in the judicial instance. This is a kind of provisional enforcement, which is perfectly admissible in the Spanish procedural system, but with the very important particularity that the passenger is already disregarded from the subsequent instances in court and thus the potential reversal of the initial decision is greatly hindered. There is an enormous difference between this regime and the general regime provided for in article 532 et seq of the Civil Proceedings Act regarding the reversal of provisional enforcement.
The situation of imbalance becomes apparent if it is compared, for example, with the legal regime provided by articles 44 and 45 of Spanish Arbitration Act 60/2003, for cases of concurrence of the exercise of actions for the enforcement of an arbitral award (by the favoured party) with the exercise of an action for annulment of the award (by the losing party). Specifically, even on the basis of the voluntary acceptance of arbitration, and the limitations of an action for annulment of the award, the party against which enforcement is sought may request the court to suspend the enforcement, if it has brought an action for annulment and offers security for the value of the award plus any damages that may arise from the delay in the enforcement of the arbitral award.
This, undoubtedly, is a more balanced and conciliatory regime with the right to an effective judicial protection than the one stipulated by the new legal provisions. The order not only contemplates the possibility for airlines to request the suspension of the enforceability of AESA's decision while its judicial challenge is being resolved, but also exposes airlines to face the payment of administrative penalties imposed by AESA for the mere fact of not voluntarily complying with its decision within one month.
In the same vein, it is not possible to consider the claiming the liability of AESA in the event that it becomes impossible to recover the funds from the passengers, after a court decision upholding the challenge to the decision of AESA. It remains to be seen whether AESA can refuse such a liability when there is a third party – the passenger – who is the one who has benefitted from the airline's payment of a compensation. Furthermore, it would be, in any case, a new judicial litigation (the fourth process and third trial), which is completely unfeasible both in general terms and, above all, in the particular case of this type of small claims.
Based on the foregoing, there are substantive arguments that would allow the challenge of the new order (and of the laws that it develops) both on the basis of the body designated to resolve the new ADR procedure and on certain procedural aspects that have been explained above. At a procedural level, it would have been preferrable to request the nullity of the order through a direct challenge, the deadline for the exercise of which was 17 May 2022. To the extent that no such action was raised before the deadline, then interested parties still have the possibility of indirectly challenging the new legal provisions, although this presents some additional procedural difficulties.
For further information on this topic please contact Jaime Fernández Cortés at Augusta Abogados by telephone (+34 933 621 620) or email ([email protected]). The Augusta Abogados website can be accessed at www.augustaabogados.com.
(1) For example, recitals (3) and (7) of Directive 2013/11/EU and Preamble of Spanish Act 7/2017.
(3) See DA 2nd, paragraph 3, which contemplates the right of the passenger not to appear in the proceedings and presupposing that it is referred to the decision of the entity.