Regulation 261/2004, adopted by the European Parliament and European Council on February 11, 2004 (the "Regulation"), established common rules on compensation and assistance to passengers in the event of denied boardings, cancellations, and long flight delays.

In the Fall 2010 issue of the Airlines and Aviation Alert, we reported on the controversial Sturgeon/Böck ruling of the European Court of Justice ("ECJ"), which arguably rewrote key provisions of the Regulation by extending the obligation for airlines to pay compensation—ostensibly for cancellations and denied boardings—to flight delays exceeding three hours.

As the Regulation is enforced by national courts on the Member State level, we want to take a look in this issue at how German courts have been deciding passenger litigation cases under the Regulation and how they have been applying the ECJ ruling.

Overview of Passenger Rights Under the Regulation

To understand the trends in the case law, it is helpful first to set out the basic elements of the Regulation.

Article 4 of the Regulation addresses passenger rights and, in particular, deals with compensation in cases of denied boarding, while Article 5 deals with the cancellation of a flight. Both provisions expressly refer to Article 7, which creates the right to be compensated in the event of denied boarding or cancellation.

Article 7 sets the amounts of passenger compensation with reference to the destination and distance of the flight: € 250 for flights of 1,500 kilometers or less; € 400 for all intra-Community flights of more than 1,500 kilometers and for all other flights between 1,500 and 3,500 kilometers; and € 600 for all other flights.

Article 5, ¶3 of the Regulation provides airlines with an "extraordinary circumstances" defense—an air carrier shall not be obliged to pay compensation if it can prove that the cancellation was caused by extraordinary circumstances that could not have been avoided even if all reasonable measures had been taken.

Article 6 concerns flight delays of two hours or more (in the case of flights of up to 1,500 kilometers); three hours or more (in the case of intra-Community flights of more than 1,500 kilometers and all other flights between 1,500 and 3,500 kilometers); or four hours or more (in the case of all other flights). It specifically addresses passenger rights in case of such delays but, importantly, does not refer to Article 7. This led to the not-unreasonable judgment on the part of many observers that airlines would not be held liable for compensation in case of flights that were delayed but that did operate.

The ECJ ruling in the Sturgeon case changed that view fundamentally and, some would say, incorrectly. As interpreted by the court, passengers may now claim compensation in cases of delay under Article 6, while at the same time the extraordinary circumstances defense may also be applicable in such cases. Because this interpretation would contradict a former ruling of the ECJ, the High Court of England and Wales has submitted a new case to the ECJ in December 2010 to clarify if "the judgment of the Fourth Chamber in Sturgeon is in conflict with that of the Grand Chamber."

German Case Law

In the meantime, the issues addressed in the Sturgeon case have also been the subject of litigation in Germany. In a decision of February 18, 2010 (Case no. Xa ZR 95/06), the German Federal Supreme Court (Bundesgerichtshof—"BGH") found that delays of more than three hours are to be treated as functionally the same as a cancellation of the flight, and, thus, passengers may claim the compensation set out in Article 7 of Regulation 261/2004. Most, but not all, courts on the local and district court level have been following this decision.

Several cases in Germany have also dealt with the "extraordinary circumstances" defense that the Sturgeon case extended from cancellation to delay cases: According to the BGH, in a decision on November 12, 2009 (case no. Xa ZR 76/07), mechanical problems that are incidental to normal operations of an aircraft do not constitute, in themselves, extraordinary circumstances that would relieve the airline of its obligation to compensate passengers under the Regulation. The Court held that the fact that an air carrier has complied with all applicable maintenance rules, yet still experienced a mechanical delay, cannot in and of itself suffice to establish that the carrier had taken "all reasonable measures" within the meaning of Article 5 (3) of Regulation 261/2004. The Court repeated this holding in a case decided February 18, 2010 (Case no. Xa ZR 95/06), again finding that a mechanical problem leading to a delay or cancellation of a flight does not constitute "extraordinary circumstances," unless the problem was caused by events that, by their nature, are not part of the normal course of business of operating an airline and are truly outside the control of the concerned air carrier.

Effectively, this rules out nearly all mechanical delays. One might reasonably question what, beyond adherence to all maintenance requirements, the Court would have an airline do to establish it had taken reasonable measures to prevent a mechanically caused delay. Subsequent case law is not encouraging for airlines. To make matters worse, in the wake of these holdings, lower German courts on the local and regional level have made it clear that they expect to see extensive and detailed evidence to establish the extraordinary circumstances defense, in particular to show that a mechanical issue could not have been avoided with due care and also that no means were available to the organization (such as rebooking the passengers on different flights or substituting a different aircraft) to prevent the delay or cancellation.

To similar effect is a decision of October 14, 2010 (case no. Xa ZR 15/10) by the BGH, holding that for bad weather conditions to qualify as extraordinary circumstances within the meaning of Article 5 (3) of the Regulation, the operating air carrier faces a similar evidentiary burden. The carrier must present official proof of the weather conditions it faced—which is more burdensome than it might seem, as these records are not retained with sufficient detail to allow such proof in all cases. And it must show it exhausted all efforts to avoid a delay by any means available to it—including, for example, having available spare aircraft.

In a few cases, the BGH has declined to award compensation under Regulation 261/2004: In a decision on April 30, 2009 (case no. Xa ZR 79/08), the Court narrowed the circumstances under which passengers may claim compensation under the Regulation, holding that a passenger shall not be entitled to compensation if he misses a connecting flight due to a (minor) delay of his originating flight, even when both are operated by the same air carrier. The Court reasoned that, under the terms of the Regulation, the flights are considered two independent flights regardless of whether they may be booked as a single itinerary. Under the Regulation, compensation for the missed (the second) flight would have required that the passenger present himself for check-in no later than 45 minutes before its published departure time, and so the passenger is not entitled to relief, even though it was the earlier delayed flight by the same carrier that made him late for check-in.

Finally, in a recent decision of December 9, 2010 (case no. Xa ZR 80/10), the BGH suspended proceedings and submitted certain questions to the ECJ concerning the interpretation of the Regulation with respect to its application to flight delays. Referring to the decision of the High Court of England and Wales (CO 6569/2010), the BGH raises, inter alia, the question of whether passengers are entitled to compensation under the Regulation if their departure was delayed by periods shorter than those specified in Article 6 (1). Several German courts on the local and regional level have recently stayed proceedings in light of the expected ruling of the ECJ on this matter.

Most courts on the local and district court level have been following the Sturgeon case. But a few local courts have outright refused to follow the ECJ ruling in Sturgeon and have dismissed the claims for compensation in case of delays. The judges in these cases have held that the ECJ Sturgeon case contradicts the plain wording of Regulation 261/2004.

In short, the Sturgeon case has not settled the matter of passenger rights under the Regulation. As the cases we discuss illustrate, there are still various open and unresolved issues regarding passenger rights and, in particular, the application and interpretation of the Regulation in Germany and in the European Member States.