The European Court of Justice has issued its keenly-awaited judgment in the cases of Nelson v Lufthansa and TUI and Others v CAA (Cases C-581/10 and C-629/10).  The ECJ has approved the controversial decision of the court in Sturgeon v Condor (C-402/07 and C-432/07 dated 19 November 2009) where the court ruled that, pursuant to Regulation (EC) No 261/2004, airlines are obliged to offer compensation to passengers travelling within the EU whose flights are delayed by at least 3 hours.  It reasoned that passengers who suffer long delays are essentially in the same position as those passengers whose flights are cancelled, as both suffer a loss of time.

The court’s interpretation of Regulation 261/2004 was widely criticised, not least by the airlines, and culminated in a referral by the High Court of England and Wales and the local court of Cologne in the cases of Nelson v Lufthansa and TUI and Others v CAA.  In summary, the national courts asked the ECJ to indicate whether it stood by its earlier interpretation of the Regulation.

The ECJ has now approved the decision in Sturgeon v Condor and confirmed that passengers are entitled to compensation where their flight is delayed and they reach their destination three hours or more after the arrival time originally scheduled by the airline.  Passengers will not, however, be entitled to compensation if the airline can prove that the delay is caused by extraordinary circumstances beyond the actual control of the airline.

The case serves as an illustration of the increasing emphasis placed on passenger rights. It was argued before the court that interpreting the Regulation to require delayed passengers to be compensated would impose an excessive financial burden on air carriers (which they would be likely to pass on to passengers).  The ECJ was asked to consider whether this interpretation of the Regulation was contrary to the principle of proportionality, which is one of the general principles of EU law.  The court found that it was not and noted that the importance of the objective of consumer protection, which includes the protection of air passengers, can justify even substantial negative economic consequences for certain economic operators.

The decision confirms that, except in the case of “exceptional circumstances”, airlines’ financial exposure will increase in the event of delayed arrival of three hours or more.  This could also impact upon airlines’ liability insurers depending on the precise wording and deductibles of their liability policy wordings and insuring clauses should be checked carefully.

Further reading: Nelson v Lufthansa and TUI and Others v CAA (Cases C-581/10 and C-629/10 dated 23 October 2012).