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Is the European Court of Justice's consumer-friendly trend in aviation disputes changing?: Clyde & Co

On June 13, 2024, the Court of Justice of the European Union (ECJ) issued two important rulings on compensation for air passengers under Regulation (EC) No. 261/2004. Both rulings recast the assessment of the concept of “extraordinary extenuating circumstances” but do not break with established case law.



Is the European Court of Justice’s consumer-friendly trend in airline disputes changing?

Case C-385/23, Matkustaja A v Finnair Oyj

A technical defect occurred in the fuel gauge of an aircraft that had been in service for around five months. As this defect significantly compromised flight safety, the airline cancelled the planned flight and operated it the next day using a replacement aircraft. As a result, passengers were delayed by around 20 hours. The airline applied for exemption from the obligation to pay compensation provided for in Regulation (EC) No 261/2004, arguing that the circumstances were extraordinary. It considered that it had taken all the measures that could reasonably have been expected. The Court ruled:

Article 5(3) of Regulation (EC) No 261/2004 […] is to be interpreted as meaning that the occurrence of an unexpected and unprecedented technical defect in a new model of aircraft recently put into service, which leads to the cancellation of a flight by the air carrier, falls within the concept of ‘extraordinary circumstances’ within the meaning of that provision if, after the cancellation, the manufacturer of the aircraft realises that that defect is due to a hidden design defect affecting all aircraft of the same type and affecting flight safety“.

Case C-411/23 DSA v PSA

The airline was informed by the engine manufacturer of a hidden design defect affecting the engines' high-pressure compressor blades. A few days before the flight at issue, the airline had the aircraft concerned inspected and identified the design defect. The airline decided to operate the flight using a replacement aircraft, which, however, arrived at its destination more than three hours late. The airline requested exemption from payment of the amount of compensation provided for in Regulation (EC) No 261/2004, arguing that there had been extraordinary circumstances and that it had taken all the measures that could reasonably be expected of the airline. The Court found:

1. Article 5(3) of Regulation (EC) No 261/2004 […] must be interpreted as meaning that the discovery of a hidden design defect in the engine of an aircraft intended to operate a flight falls within the concept of ‘extraordinary circumstances’ within the meaning of that provision, even if the engine manufacturer had informed the air carrier of the existence of such a defect several months before the flight in question.

2. Article 5(3) of Regulation No 261/2004 must be interpreted as meaning that an air carrier may, in the context of ‘all [the] appropriate measures’ which it must take to prevent the occurrence and consequences of an ‘extraordinary circumstance’ within the meaning of that provision, such as the discovery of a hidden design defect in the engine of one of its aircraft, to take a preventive measure consisting in keeping a reserve fleet of aircraft on standby, provided that that measure is technically and economically feasible in the light of the airline’s capacities at the time in question“.

These cases concern the definition of extraordinary circumstances which exempt an airline from the obligation to pay compensation under 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.

To be exempt from paying compensation, the air carrier must prove:

  • An exceptional circumstance, i.e.

    • an event which is not part of the carrier’s normal activity
    • and is beyond the effective control of the carrier;

  • the impossibility of taking adequate measures to contain this event.

It is almost universally accepted in European case law that a technical problem does not constitute an exceptional extenuating circumstance. This fear, which corresponds to the principle that exceptions to the principle that passengers are entitled to compensation must be interpreted narrowly (ECJ, 22 December 2008, Wallentin-Hermann, C-549/07, §17), led airlines to refrain from bearing the costs of defence in cases involving possible hidden design defects. Instead, national courts invited them to take legal action against the manufacturer at a later date, without harming passengers. Because the costs for airlines were too high, few intervened in this way.

A closer analysis of past European case law shows that this widespread view is a simplification.

The ECJ had previously ruled:

  • in the event of a complex engine defect in the turbine, that “A technical problem with an aircraft that leads to the cancellation of a flight does not fall under the term “extraordinary circumstances”. […]unless that problem is due to events which, by their nature or origin, are not part of the normal exercise of the activity of the air carrier concerned and are beyond its effective control“ (ECJ, 22 December 2008, Wallentin-Hermann, C-549/07);
  • that a technical problem [engine problem linked to a defect in the fuel feed] which occurred unexpectedly, were not due to inadequate maintenance and were not detected during routine maintenance checks, do not fall under the definition of ‘extraordinary circumstances’“ (ECJ, 17 September 2015, van der Lans, C-257/14).

This is a purely case-by-case analysis and the Court adheres to a common line of reasoning recalled in the recent judgments of 13 June 2024:

  • A case-by-case assessment must be carried out by the national courts;
  • A constant analytical criterion relating to the external nature of the initial event, which is beyond the actual control of the carrier;
  • Assessment of the extent of the technical defect (e.g. whether a single aircraft or a group of aircraft of the same type is affected) (ECJ, C-257/14, §40; C-385/23, §§26, 31);
  • Recognition of the existence of a hidden defect that could affect flight safety by a third party (manufacturer or competent authority) (ECJ, C-257/14, §40; C-385/23, §39; C-411/23, §42).

Depending on the results of the examination, technical problems may constitute exceptional exculpatory circumstances, as may hidden design defects.

As regards the criterion of appropriate measures taken by carriers, the ECJ states that they cannot systematically be expected to “a reserve fleet of aircraft and their crew on standby when informed of the existence of a design defect identified by the engine manufacturer in order to prevent the occurrence of exceptional circumstances and their consequences” (C-411/23, §47). “It is for the referring court to assess, taking into account the air carrier’s financial means and its material and human resources, whether it was in a position to charter replacement aircraft under the various modalities available, namely dry lease/wet lease, or whether, in view of those resources, it was in a position to replace the engine as a preventive measure within the framework of a repair plan or to ground the aircraft until the engine had been repaired or replaced by the manufacturer.“ (C-411/23, §50).

The judgments of 13 June 2024 do not break with the previous case law of the ECJ, but provide a new interpretation of the assessment of the concept of extraordinary extenuating circumstances: regardless of when the air carrier became aware of the existence of a “hidden design flaw […] by the aircraft manufacturer or the competent authority“, this defect constitutes an exceptional circumstance within the meaning of the provisions of Regulation (EC) No 261/2004 if it “existed at the time of cancellation or delay” of the flight and “The carrier had no control over correcting this‘(C-385/23, §37; C-411/23, §40).

The Court does not change its consumer-friendly stance: “the classification of a situation such as that at issue in the main proceedings as an ‘exceptional circumstance’ […] is consistent with the objective of ensuring a high level of protection for air passengers pursued by this Regulation, as set out in its first recital. That objective means that air carriers must not be encouraged to refrain from taking the measures required by such an incident by giving priority to maintaining the punctuality of their flights over the objective of safety.‘(C-385/23, §38; C-411/23, §41).

Nevertheless, these recent judgments are welcomed by airlines facing increasingly onerous operating conditions. National courts are reminded that they must take into account the global context (C-411/23, §50) in which airlines operate (e.g. delays in aircraft production; Pratt & Whitney engine problems on some Airbus A320neo aircraft leading to flight groundings and difficulties in obtaining spare parts or aircraft).

The actual implementation of this case law by the national courts remains uncertain:

  • Can all airlines, regardless of the size of their fleet, demonstrate that a third party (manufacturer or competent authority) has acknowledged the existence of a hidden defect that could affect flight safety, especially taking into account the possible disagreements between competent authorities (e.g. disagreements between EASA and the Qatari authority concerning Qatar Airways' Airbus A350)?
  • Will national judges finally agree to carry out a truly casuistic analysis of all the exceptional circumstances relied on by air carriers, without systematically taking the shortcut that a technical problem is inherent in the normal exercise of air transport?

Only time can tell.