Compensation For Flight Delays: The European Court Abandons The Rule Of Law

In its much-awaited ruling in Joined Cases C581/10 Nelson v Lufthansa and C629/10 TUI, British Airways, easyJet and IATA v UK CAA, delivered on 23 October 2012, the Grand Chamber of the Court of Justice of the EU declined the opportunity presented by these two references to revise the controversial ruling issued by the Court in November 2009 in the Sturgeon case.

The Court confirmed that EU Regulation 261/2004 is to be interpreted as entitling passengers to compensation where, on account of a delayed flight, they arrive at their final destination three hours or more after the originally scheduled time, unless the carrier can prove that the delay was caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. In doing so it has arrogated to itself legislative powers contrary to the principle of separation of powers and paid scant regard to the principle of legal certainty, which are fundamental principles required by the rule of law.

The Court expressed the view that such an interpretation was necessitated by the principle of equal treatment, and that it was not incompatible with:- the Montreal Convention; its previous ruling in the IATA/ELFAA case; the legislative intent; the principle of legal certainty; or the principle of proportionality. It also confirmed that this interpretation was to be applied from the entry into force of the Regulation (on 17 February 2005).

The Court's reasoning and analysis

The principle of equal treatment. The Court found that the principle of equal treatment requires such an interpretation because passengers whose flights are delayed for three hours or more suffer a loss of time similar to that suffered by passengers whose flights are cancelled. The reason for the three hour threshold is that a carrier does not have to pay compensation to a passenger whose flight is cancelled if it offers the passenger re-routing bringing departure forward by no more than one hour and deferring arrival by no more than two hours.

The Court did not discuss the possible alternative approach (raised by Sharpston AG in the original Sturgeon case, and by the referring court in the TUI reference) of declaring void the supposedly unequal provisions on compensation for cancellation, even though this would have been more consistent with its approach to the effect of the principle in other cases.

Montreal Convention. The Court followed the reasoning applied in its IATA/ELFAA ruling, and took the view that fixed levels of compensation for delay constitute standardised and immediate redress for the inconvenience suffered by way of loss of time, and that such inconvenience does not constitute "damage occasioned by delay" within the meaning of Article 19 of the Convention and hence falls outside the scope of Article 29. Article 29 provides that "In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention...In any such action, punitive, exemplary or any other non-compensatory damages shall not be recoverable".

The Court further reasoned that Article 19 implies that there is a causal link between the delay and the damage and that the damage is individual to the passenger, whereas: - "a loss of time is not damage arising as a result of a delay, but is an inconvenience"; a delayed flight causes the same loss of time for all passengers on the flight, for which standardised and immediate assistance may be given; and there is not necessarily a causal link between the delay and...