Important changes in the twilight years of regulation 261/2004

It is ten years since the EU Directive 261/2004 was implemented in the UK. The directive was aimed at giving aviation passengers further rights of compensation in certain circumstances. 

The European Legislative bodies are currently reviewing EC261 but any amendments are unlikely to be finalised until mid 2015 at the earliest and not in force until 2016/17.

Notwithstanding that changes to EC 261/2004 are in the pipeline the Court of Appeal made two important decisions in the last month on the application of the current regulations; Dawson v Thomson Airways Limited regarding the time limit for bringing claims under EC261/2004 and the case of JET2.COM v Ronald Huzar on whether "technical problems" amounted to a defence for a claim for a delayed flight.

James Dawson v Thomson Airways Limited (19 June 2014)

Facts in the Dawson v Thomson Airways Limited case

The claim arose out of a delay to a flight from Gatwick to the Dominican Republic in December 2006. Departure was delayed by crew shortages caused by sickness and the flight eventually arrived at the destination over six hours late.  

Proceedings were commenced in December 2012, just before the six year anniversary of the incident.

The airline accepted that they would have been liable to pay compensation had the claim been brought within the two year time limitation under Article 35 of the Montreal Convention.

Area of law/issues covered by the case

The central issue was the interrelation between the Montreal Convention (which superseded the Warsaw Convention) and Regulation 261/2004. On a practical level there is a clear overlap in that both cover carriage by air and claims for compensation caused by delay. 

Under Article 35 of the Convention the right to damages is extinguished if an action is not brought within a period of two years from the date the aircraft should have arrived.

Regulation 261/2004 does not specifically provide for a time limit to make a claim.

The House of Lords decision in Sidhu v British Airways (1997) A.C. 430 established that the Warsaw Convention (now amended by the Montreal Convention) was intended to be comprehensive and exclusive, allowing for the existence of no liabilities other than those for which it provided. This has been the position adopted by a number of Jurisdictions with regard to the exclusivity of the Convention for carriage by air claims.

However, the European Court of Justice with the decisions in R (International Air Transport Association (IATA) v Department for Transport (case C-344/04) and in the case of Sturgeon v Condor Flugdienst G.m.b.H (casesC-402/07 and C-432/07) has sought to distinguish the application of EC 261/2004 from the Convention. The distinction drawn (one can only imagine it could have been by a lawyer) is that the Convention was concerned with claims for loss and damage of a specific and individual nature whereas the Regulation dealt with generic loss standardised. The case ofSturgeon went further to establish a right for standardised compensation in addition to any specific loss that could be shown to have been caused by the delay.

The specific issue as to the time period for making a claim was dealt with in a further European Court in the case of Cuadrench More v Koniinklijke Luchvaart Maatschappij N.V. (Case C-139/11). The European Court held that the time limit for bringing a claim under EC261/2004 was a matter for national law, because the provisions for compensation contained in EC261/2004 fall outside the terms of the Convention.

In the Dawson case the Defendant sought to argue that whilst the English Courts were obliged to follow the More decision of the European Court, in applying English Law the Court should follow the earlier Sidhu decision in applying the Convention time limit of 2 years.

Decision of the Court of Appeal in Dawson v Thomson Airlines Limited

It is perhaps not surprising that the Court of Appeal were obliged to follow the earlier decisions of the European Court, in particular the More decision, in that it had been previously decided that the obligations under EC261/2004 fall outside the scope of the Convention and accordingly the Convention has no application to the claim; which includes the time limit of two years for making a claim.

Conclusions

The influence of the European Court is a very topical issue and one which the current government is keen to review in the light of a number of decisions on Human Rights issues. The feeling is that if the English Courts were left to make their own decision then the outcome would have been different. The recent history of decision making by the European Court shows an intention to extend the application of EC261/2004 unfettered by the Convention.

JET2.COM Limited v Ronald Huzar (11 June 2014)

Facts in the JET2.COM Limited v Ronald Huzar case

Mr Huzar was travelling from Malaga to Manchester in October 2011. The aircraft developed an unexpected technical problem during its inbound flight to Malaga in the wiring of a fuel shut off valve.

Attempts to repair the fault were unsuccessful and a specialist engineer and spare wiring were required to be sent from Leeds Bradford Airport. An alternative aircraft was requested to return the passengers to the UK.

The lower court had made a finding of fact  that the fault was unexpected and could not have been predicted by a regular system of inspection or maintenance and that the wire which failed or was defective was within its expected lifespan. Thus the fault was neither discovered nor discoverable by a reasonable regime of maintenance or on reasonable inspection and was therefore unforeseen and unforeseeable.

Area of law/issues covered by the case

The Denied Boarding Regulations (EC261/2004) provides a system of compensation and assistance for airline passengers in the event that their flight is cancelled, subject to delay or they are “denied boarding”.

Under Article 5 (3) “An operating air carrier shall not be obliged to pay compensation…. if it can prove that the cancellation (delay) is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken”.

The previously decided case of Wallentin-Hermann v Alitalia (C-549/07 2009) had already limited the definition of extraordinary circumstances in the context of technical problems causing delay or cancellation. The European Court of Justice concluded that technical faults would not constitute extraordinary circumstances unless the “problem stems from events which, by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its control”.

Decision of the Court of Appeal in JET2.COM v Ronald Huzar

The main Judgment was delivered by Lord Justice Elias concluding that “difficult technical problems arise as a matter of course in the ordinary operation of the carrier’s activity. Some may be foreseeable and some not but all are, in my view, properly described as inherent in the normal exercise of the carrier’s activity. They have their nature and origin in that activity; they are part of the wear and tear”.

In summary:

The fact that a technical problem was unexpected or unforeseen is not sufficient to make it an extraordinary circumstance. These types of problems are to be expected in the operation of a carrier.

This decision effectively closes the possibility of defending a claim on the grounds of technical problems, as it is difficult to imagine a scenario which would not be part of the carrier's normal activity.

The Court Appeal decision represents the current interpretation of ‘extraordinary circumstances’ and will be followed by lower courts in England and Wales, in addition it may also relied upon in other EU Countries as providing guidance on the point. I do not foresee that this interpretation by the English Courts will lead to a large inflow of claims to this Jurisdiction to obtain a more favourable interpretation for passengers of the term ‘extraordinary circumstances’ as has been suggested in one of the articles I have read.

JET2.COM have indicated that they intend to appeal the decision and are currently applying for permission from the Supreme Court to appeal.

Conclusion

The current position in the UK as to what amounts to extraordinary circumstances for the purpose of avoiding paying compensation in accordance with Article 5 (3) is that other events outside of the control of the airline will still apply, such as: 

  • Acts of terrorism.
  • Political instability.
  • Weather conditions incompatible with the operation of the flight concerned; these will be freak conditions such as volcanic ash or unusually severe snow. Unsettled weather conditions may not be sufficiently outside of the norm to be consideredextraordinary circumstances.  
  • Air traffic control problems-where the carrier had taken all reasonable steps to avoid these occurrences.
  • Wild-cat strikes.
  • Hidden manufacturing defects. The current Court of Appeal case does not exclude the example given in the Wallentin-Hermann case of where it was revealed by a manufacturer of the aircraft or competent authority that the aircraft is affected by a hidden defect.

In all examples of where the carrier will seek to rely upon the defence of extraordinary circumstances, the carrier must still show that they took all reasonable steps to remedy the situation.

The decision is likely to have a profound effect on claims for airlines operating in the UK as to date the majority of contested delay compensation claims related to issues involving technical faults. 

In terms of practical consequences for airlines, there are likely to be have been a number of claims within the last six years (following the decision in Dawson) which have been rejected on the grounds of “technical issues”  which may now need to be revisited, with both financial and logistical problems.