Regulation 261/2004
New law on class actions
Comment


Regulation 261/2004

EU Regulation 261/2004 established common rules on compensation and assistance to passengers in the event of denied boarding, cancellation or long delay of flights. Among other things, the regulation provides for lump-sum compensation for passengers.

Since the European Court of Justice (ECJ) Sturgeon decision (November 19 2009) and its extension of the lump-sum compensation under Regulation 261/2004 to all delays exceeding three hours, there has been a considerable increase in litigation in France between passengers and air carriers. Some of this can be attributed to certain claims agencies (acting on the fringes of the law) pursuing claims on behalf of passengers.

However, with the introduction of class actions into French law, the French position may now change.

New law on class actions

On March 17 2014 Parliament passed a new consumer law, the Hamon Law (2014-344), which dealt with a number of consumer rights issues. However, the principal amendment made by the law was the introduction of class actions.

While the Consumer Code already allowed "joint representation actions" enabling an association to act for at least two consumers, this provision led to only five reported decisions over the past 20 years. The Hamon Law is intended to facilitate class actions, although serious concerns in relation to potential abuse of the system led Parliament to incorporate significant checks and balances regarding the manner in which such actions may be pursued.

The law does not set out the precise manner in which class actions are to operate, as this will be dealt with by forthcoming decrees. Nevertheless, this update considers how the new law may affect air carriers.

Key role of associations and categories of claim
The increase in litigation in France between passengers and carriers, resulting largely from the ECJ's Sturgeon decision, has been fuelled in part by independent claims agencies.

The new sections of the Consumer Code (Articles L423-1 to L423-18) introduced by the Hamon Law restrict the new class actions to "nationally representative consumer defence associations", as recognised by the Consumer Code, provided that the dispute falls within the scope of their statutes.

Under the new law, only these associations can pursue an action before the civil courts "in order to obtain compensation for the individual losses suffered by consumers in a similar or identical situation". Such losses must have as a common cause a breach by one or more professionals of their legal or contractual obligations in the context of the sale of goods or the supply of services.

As flight delay or cancellation is treated as a breach of the carrier's contractual obligations, it seems probable that this new type of class action will be available as a means of obtaining compensation in accordance with Regulation 261/2004.

This section also provides that the "group action" can relate only to the compensation of quantifiable losses resulting from material loss suffered by consumers. Thus, this definition provides that claims for losses resulting from physical injury, as well as "moral" (ie, immaterial) damages, cannot be pursued by means of class actions, which are valid only for material losses.

The question may arise of how a class action will operate in this context. A passenger is generally entitled to the reimbursement of expenses which can be quantified and proved; these would correspond to the material losses for which class actions are available under the new law. However, the regulation provides for lump-sum compensation, without specifying whether this is intended to compensate material or immaterial losses. Thus, it is unclear whether claims for recovery of such lump-sum compensation can properly be pursued by means of the new class action.

Jurisdiction
Another change for carriers relates to the jurisdiction in which claims for passenger compensation may be pursued. To date, many such claims have been pursued as ordinary consumer claims before local small claims courts, whose judges are lay magistrates.

In contrast, class actions must be brought before the first-instance civil courts and will thus be dealt with by professional, legally trained judges. The relevant decree is expected to designate specialised first-instance civil courts to deal with class actions in order to ensure some consistency in future case law and exercise some measure of control to avoid the excesses inherent in class actions, which the French legislature has feared for many decades.

Types of action and courts' powers
The law provides for two types of class action: simplified and classic.

The simplified version is restricted to cases where the identity and number of consumers represented by the consumer association are known, and where all consumers concerned have suffered an identical loss. In such cases the defendant (if found liable) may be ordered to indemnify the victims directly and individually.

In the classic, longer type of class action, again pursued by a recognised consumer association, the court will rule in the same judgment on the admissibility of the action and the defendant's liability. The court will then have to define which type of consumer may join the class and the deadlines by which consumers may opt in. Consumers entitled to join the class must do so within the timeframe (between two and six months following publication) specified by the court; consumers need not join the association in order to qualify as members of the class.

The law also deals with the manner in which individual consumers are to be indemnified where the professional is found liable. The relevant compensation may be paid directly to the consumers concerned or via the relevant claimant associations; in the latter case, there are safeguards to ensure that consumers receive the correct compensation.

The new provisions of the Consumer Code also allow the court to order compensation in kind rather than in monetary form. This appears be similar to Article 7.3 of Regulation 261/2004, which allows an air carrier to provide travel vouchers or other services instead of lump-sum compensation (albeit with the passenger's agreement).

There are also provisions for court-approved mediation.

Comment

While some of the practical aspects of the new law on class actions have yet to be defined by decree, it seems clear that the new law may lead to increased litigation for air carriers.

Although to date only 16 approved consumer associations are entitled to pursue class actions, at least two of these (the National Federation of Transport User Associations and the Federation of Consumer Unions) have already been involved in numerous actions relating to air carriers' terms of sale and carriage. Thus, such associations are expected to pursue class actions for flight delays or cancellations.

With the advent of class actions, which will nevertheless remain the exclusive preserve of recognised and approved consumer associations, a further rise in the number of claims must be expected. However, such class actions remain restricted to claims relating to quantifiable material losses. Other types of loss can obviously still be pursued, but only on an individual basis. Only time will tell whether the advent of French-style class actions will lead to a significant increase in claims against air carriers.

For further information on this topic please contact Jean-Baptiste Charles or Olivier Purcell at Holman Fenwick Willan France LLP by telephone (+33 1 44 94 40 50), fax (+33 1 42 65 46 25) or email (jbc@hfw.com or omp@hfw.com). The Holman Fenwick Willan France LLP website can be accessed at www.hfw.com.