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EU court picks up a fight for consumers: Adam Lazowski, professor of European Union Law at the University of Westminster, explains the complexities of EU Regulation 261.

European Regulation 261 (EU261) established the rules on compensation and assistance to passengers in the event of denied boarding, flight cancellations or long delays of flights. It was bound to stir controversies from the start.

It was proposed by the European Commission in 2001 and adopted by the European Parliament and the Council in 2004. For the aviation industry the timing could not have been worse. The post-9/11 environment was particularly challenging for traditional canters, which were not only confronted with, among other issues, economic gloom and the 'War on Terror' but also the emergence of no-frills airlines.

Both for the former and the latter, strengthening of passenger rights was, at best, an expensive nuisance. Not surprisingly, a variety' of players joined forces under LATA and European Low Fares Airline Association umbrellas to challenge the legality' of this piece of EU legislation. AT as, the attempt failed and exacerbated airlines' hostility' towards EU261 even more.

Many, even in their darkest dreams, could not envisage what was to come next--a lot of litigation and a very creative interpretation of EU261 by the EU Court of justice. More than a decade after its entry into force, it is still a source of controversy. Consumers are no doubt better off. The same cannot be said for the airlines which have to pay thousands of pounds in compensation at a time when they're in constant struggle to make a profit.

So what exactly happened? EU261 provides for a suite of rights which passengers can benefit from when they are denied boarding or when their flights are delayed or cancelled. The rules apply not only to internal EU flights but those to and from third countries as long as the airport of departure or arrival is based in the European Union.

Like many domestic or EU laws, it's a product of compromise. Some of its provisions leave a lot to be desired in terms of precision and contents; so, as a consequence, the burden of interpretation and gap-filling was passed on to national courts and the EU Court of Justice.

In the case of EU261 the main bones of contention have been the circumstances surrounding exactly when the obligation to pay compensation arises, the scope of the obligation to assist passengers and, last but not least, the rights of passengers who are denied boarding.

Most controversial of all

The first issue is the most controversial of all. EU261 imposes an obligation on airlines to pay compensation to passengers whose flights are cancelled. Those whose flights are merely delayed, irrespective of the duration of a delay, are entitled to assistance only.

This was a compromise solution to balance the rights of consumers on the one hand and the vital interests of the industry' on the other. But by making such a distinction, the EU legislator was asking for trouble as, in real terms, it provided for different treatment of passengers who find themselves in comparable situations.

This very issue reached the EU Court of Justice in tire case Sturgeon and Others. Advocate General Sharpston, a court's adviser, acknowledged this fundamental problem but at the same time warned the judges not to step into the shoes of the law-makers.

The EU Court of Justice did not follow tire advice and ruled that passengers should be entitled to compensation if their flights are delayed for more than three hours, because the effects of long delays are comparable to flight cancellations.

This conclusion has merits when one takes a look at the bigger picture. For example, let's imagine two passengers due to fly from London/Heathrow to Dublin. One whose flight is cancelled receives compensation and departs on the next available service. The less fortunate one, whose flight is delayed, not only may reach the destination later than the first passenger, but will also be deprived of compensation.

It's perplexing that the authors of EU261 failed to see that such a solution is potentially in breach of the principle of equality. At the same time, it's perfectly legitimate to ask a fundamental question as to whether the EU Court of Justice was the right institution to fix the problem.

Unsurprisingly the court faced a backlash in the wake of the Sturgeon case. It was criticised by many and failed to win the hearts of the airlines. At the same time, the case was well received by consumer associations and consumers themselves, who eagerly started to invoke their rights.


In subsequent rulings the Court of Justice confirmed the Sturgeon decision, dismissed further challenges to legality of EU261 and continued with a passenger-orientated interpretation of its provisions.

Obligation to pay

Once it was agreed that airlines have to pay compensation not only for flight cancellations but also delays, the centre of attention moved to circumstances under which the obligation to pay is waived. EU261 makes it clear that when a cancellation (and a delay) takes place due to extraordinary circumstances, passengers are not entitled to compensation.

Alas, the regulation fails to define exactly what the term 'extraordinary circumstances' stands for. In this respect, too, the burden of filling the gap left by the legislator has been passed to courts. Not surprisingly the EU Court of Justice ruled that, since existence of 'extraordinary circumstances' facilitates an exception to the general rule, it should be interpreted narrowly.

Such circumstances, according to the Luxembourg judges, are events not inherent in the normal exercise of the activity of the air carrier concerned and beyond its actual control on account of their nature or origin.

The case of Wallentin-Hermann versus Alitalia determined that technical problems are not 'exceptional circumstances', and inevitably the Court of Justice received more references from national courts asking for further clarification of this term.

For instance, an engine failure (as in the case of Van der Lans versus KLM) or damage to an aircraft made by a set of mobile stairs (as in Siewert and others versus Condor) will not qualify as 'extraordinary circumstances'.

Poor management of crew shifts resulting in flight cancellations or delays may also trigger the obligation to pay compensation (as in the case of Eglitis and Ratnieks versus Latvijas Republikas Ekonomikas ministrija).

A real test came with eruption of the Eyjafjallajokull volcano in Iceland in 2010 and the consequent closure of European airspace. With thousands of passengers stranded across Europe and beyond, the losses airlines suffered seriously affected their balance sheets. The question was whether the financial losses would be further exacerbated by claims for compensation submitted by unhappy passengers.

This issue was attended to by the EU Court of Justice in case McDonagh versus Ryanair. On the one hand, the eruption of the volcano and consequent closure of the airspace was an 'extraordinary circumstance', waiving the obligation to compensate for delays and cancellations. On the other hand, the airlines still had an obligation to look after passengers in accordance with EU261.

So the judges ruled that Ms McDonagh was entitled to reimbursement of expenses incurred while she was waiting for the reopening of airspace and a flight to her destination. In this case Ryanair was caught red-faced, having left its passenger to her own devices.

The Sturgeon ruling has created a snowball effect. Not only has the notion of 'extraordinary circumstances' proved to be problematic, so has the concept of delay--does a delay on departure or arrival entitle passengers to compensation? It's particularly problematic for passengers with two or more flights on the same ticket, when a delay on departure from the point of origin (even for less than three hours) causes a domino effect that leads to long delays on arrival at the final destination.

In the case of Folkerts versus Air France, the EU Court of Justice held that, under such circumstances passengers, are entitled to compensation as long as they arrive at their destination more than three hours late.

Another issue arising was how the term 'arrival' should be interpreted. Is it the point of touchdown? Is it when an aircraft arrives at a gate? Is it when brakes are engaged or, perhaps, when passengers are allowed to disembark?

The case of Henning versus Germanwings provided an answer. The airline's service touched down 2hrs 58mins late, but the doors were opened with passengers allowed to disembark exactly 3hrs and 2mins late. In the same pro-consumer vein, as in other cases based on EU261, the Court of Justice held that the time of arrival is when the doors of an aircraft are opened, so the plaintiff in this case was entitled to compensation.



In an equally generous way the Court of Justice interpreted the notion of 'denied boarding', which includes not only the results of overbooking but also when an airline denies boarding to passengers on the grounds that the first flight included in their reservation is subject to a delay, and mistakenly expects they will not make their connecting flight.

One such example is the case of Cachafeiro versus Iberia; and in the Lassooy versus Finnair judgment the court noted that a situation where a passenger is rebooked on a later flight to ease congestion following a strike will also fall within 'denied boarding' parameters.

This snapshot of EU261 and the way it has been interpreted by the EU Court of Justice demonstrates a number of phenomena. It's a useful lesson for the EU legislator, showing that weak compromises combined with gaps left by lawmakers shift the burden to national judges and also the EU Court of Justice--which consistently supports the individual, not only in the transport area but across the board.

The jurisprudence presented above may seem like a one-sided affair whereby the judges in Luxembourg consistently strengthen consumer rights through a creative interpretation of EU261. It might be argued this is to build more pro-EU attitudes at a time when EU citizens are, particularly in the UK, faced with anti-EU propaganda in news media.

Although there are merits in this awareness-raising exercise, the Court of Justice should pay more attention to balancing different interests. Needless to say, there are two sides of this story --on one are the consumers, who are well equipped with directly enforceable rights; on the other are the airlines, operating in highly competitive markets where profit margins are fought for daily.

Another lesson emerges from this story--that key players need to be constantly engaged in lobbying member states, Members of the European Parliament (MEPs) and the European Commission to reshape the existing regime and find a fairer balance between these two objectives.

It's notable that a proposal for revision of EU261 has stalled: so for months, if not years, the regulation will continue to apply and jurisprudence of the EU Court of Justice is likely to stir further controversy.
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Title Annotation:LEGISLATION: EU261
Author:Lazowski, Adam
Publication:Airports International
Date:Apr 1, 2016
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