It will soon be twenty years since Regulation 261[1] came into force, which introduced an unprecedented level of protection for air passengers and was supposed to provide much greater protection in cases of denied boarding, cancellation, or long delays. So, has the (in)famous Regulation 261 served its purpose?
No doubt, Regulation 261 has become the “Air Passenger Protection Constitution”, which passengers travelling by other means can only envy. To be fair, the airlines deserved such a watchdog as flight cancellations in particular used to be standard business practice and the rights of passengers were not well respected. As time passed, the European Court of Justice (“ECJ”), tasked with unifying the interpretation of Regulation 261 and shielded by the policy of enhanced consumer protection, significantly enhanced the scope of the regulation. The question now is whether, and to what extent, an appropriate balance between the interests of passengers and air carriers is still being maintained and who is actually benefiting from the current situation. This calls for discussion particularly with regard to compensation for long delays or in the case of liability, namely whether it is the contractual carrier or the operating carrier that is liable.
Our experience in recent years shows that airlines have to face the harsh reality of a rise in the need to defend bulk claims in court, facing demanding collection of evidence, and fighting a gradually stricter interpretation of Regulation 261. This is topped off with an unprecedented activity of claim farmers, which appear to be the only ones benefiting from the situation.
Claim farmers are businesses, including lawyers acting as claim agencies, that offer claim management services to the public for compensation under Regulation 261[2]. In recent years, these agencies have developed an entire industry around compensation under Regulation 261. As a result, both the airlines and local courts have been overburdened, which neither of them was prepared for. The amount of claims was (and still is) tremendous and many air carriers were caught off guard and ill-equipped as they were not used to collecting evidence on a daily basis, which has turned out to be essential for a successful defence. In addition, most of the relevant evidence comes from computer reservation systems and other internal systems operated by airlines, airport operators or air navigation service providers, which might be difficult to swallow for many courts, considering the complexity of the records, including the number of abbreviations used.
The situation has improved though, as airlines have over time become more experienced and better capable of defending themselves. This included various techniques of modifying conditions of carriage, for example, by prohibiting the assignment of claims. In case C-11/23, the ECJ, however, held that passengers should be allowed to transfer their claim to a third party given the difficulties and costs that might deter them from taking steps personally in relation to that carrier with the prospect of a limited financial return. Therefore, a clause in the general conditions of a contract of carriage prohibiting passengers from transferring their rights against the operating air carrier constitutes an inadmissible derogation.
The business of claim farmers is, therefore, unstoppable and the economy of scale still matters – the more claims they file the more likely a majority of them will be successful. Therefore, in practice, one may easily come across statute-barred claims, repetitive claims, unsubstantiated claims, or claims filed against the wrong entities.
Another pertinent matter that we have started to see in our practice, which is intrinsically linked to the mass filing of claims and notices by claim farmers, relates to the failure to notice that there is a difference between flights departing from the EU and those departing from the UK (and also the nationality of the carrier may matter). Claim farmers often fail to take into account that Regulation 261 was retained in the relevant Brexit-specific regulations and compensation for significant delays when departing from a UK airport or departing from an airport located in a country other than the UK to an airport situated in the UK if the operating air carrier of the flight concerned is a UK air carrier should be claimed under UK regulations[3] instead of Regulation 261.
While the airlines are not held liable for events caused by “extraordinary circumstances”, not surprisingly the interpretation of this term has developed over the years. The boundaries set by the ECJ are pretty narrow. In addition, the airlines carry the burden of proving that, even in the case of extraordinary circumstances, the circumstance could not have been avoided even if all reasonable measures had been taken and that it adopted measures appropriate to the situation to avoid the consequences (recently confirmed in C‑405/23).
The most recent case law appears to be more airline-friendly. The ECJ has, for example, clarified that passengers are not entitled to compensation for a delay if they did not suffer a loss of time themselves, especially if they did not present themselves for check-in. In case C‑474/22, a passenger did not go to the airport upon learning about a delay and later assigned his rights to a claims agency, while in case C‑54/23 a passenger who had learned his flight would be delayed booked an alternative flight and reached his final destination with a delay of less than three hours after the originally scheduled arrival time of the first flight. In both cases, the passengers were not entitled to compensation given that they did not experience the same loss of time since they did not present themselves for check-in or reduced the delay through alternative bookings.
On numerous occasions (e.g., C‑549/07, C‑257/14, C‑832/18), the ECJ has confirmed that the resolution of a technical problem due to a breakdown, failure to maintain an aircraft, or the premature and unexpected failure of certain aircraft parts is inherent in the normal exercise of the air carrier’s activity and does not exempt the air carrier from paying compensation. However, in C‑385/23 the ECJ held that the occurrence of an unexpected and unprecedented technical failure that affects a new aircraft model that has recently been put into service and which results in the air carrier cancelling a flight falls under the umbrella of “extraordinary circumstances” in cases where the manufacturer of that aircraft recognises, after the cancellation, that the failure was caused by a hidden design defect which concerned all aircraft of the same type and impinged on flight safety.
No doubt, passenger rights in air transport have significantly improved over the last 20 years, whether inherently through Regulation 261 or through case law. However, whether some of these rights are justifiable, compared to other modes of transportation, brings many questions: What is the level of inconvenience in the case of a passenger left stranded at a bus stop or remote train station as compared to a passenger in an airport terminal enjoying meal vouchers and shopping? Why should a passenger get significantly higher compensation for a 3-hour delay than someone who was unlawfully put into custody for 24 hours? And is this ultimately for the benefit of passengers or does it rather feed the business of claim farmers, whose interest is far from protecting passengers’ rights? Shouldn’t claim farmers be regulated, such as by prohibiting claim assignments or limiting their commission? Let’s hope these questions don’t take another 20 years to be answered.
[1] Regulation (EC) No. 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights
[2] European Commission’s Information notice on relevant EU consumer protection, marketing and data protection law applicable to claim agencies' activities in relation to Regulation 261/2004 on air passenger rights dated 9 March 2017. Available at: https://transport.ec.europa.eu/document/download/604d45f0-cc92-430e-935a-ef92bd3788cb_en
[3] The Air Passenger Rights and Air Travel Organisers' Licensing (Amendment) (EU Exit) Regulations 2019. Available at: https://www.legislation.gov.uk/uksi/2019/278/introduction
By Jiri Hornik, Partner, Kocian Solc Balastik
