The European Court of Justice Reconsiders Its Interpretation of EC 261 as Providing Airline Passengers with the Right to Standardized Compensation in Cases of Delay

On March 20, 2012, the European Court of Justice (“ECJ”) heard oral argument on the challenge to its interpretation of European Union Regulation EC No 261/2004 (“EC 261”) in the 2009 decision, Sturgeon v. Condor Flugdienst GmbH. As written, EC 261 provides airline passengers the right to receive standardized compensation in the case of denied boarding or flight cancellation. In Sturgeon, the ECJ interpreted EC 261 as providing the same right to compensation to passengers who experienced flight delays in excess of three hours. The ECJ reasoned that passengers who experience a flight delay in excess of three hours should be treated the same as passengers whose flights are cancelled. In December 2010, national courts in the United Kingdom and Germany referred two cases to the ECJ for reconsideration of the issues raised in, and implicated by, the Sturgeon decision.

In the first case, TUI Travel et al. v. CAA, TUI Travel, British Airways PLC, easyJet PLC and the International Air Transport Association (“IATA”) challenged the application of Sturgeon in the United Kingdom by bringing suit against the U.K.’s Civil Aviation Authority. The U.K’s High Court of Justice referred the case to the ECJ for reconsideration of whether EC 261 should be interpreted as requiring airlines to pay compensation to passengers whose flights are subject to delays in excess of three hours and, if so, whether such interpretation is in accordance with the Montreal Convention and principles of proportionality, legal certainty and equal treatment.

In the second case, Nelson v. Deutsche Lufthansa A.G., passengers who experienced a 24 hour delay on their Lufthansa flight from Lagos, Nigeria, to Frankfurt, Germany, sought compensation from Lufthansa in accordance with the Sturgeon decision. At the national court level, Lufthansa argued that the passengers’ right to damages was governed exclusively by the Montreal Convention and that Article 29 of the Convention, which limits a passenger’s damages arising from a delay to provable compensatory damages, prohibits standardized damages awards like EC 261 compensation. The German court referred the case to the ECJ for a determination of whether the right to EC 261 compensation constitutes a claim for non-compensatory damages within the meaning of Article 29 of the Montreal Convention.

On March 20, the Grand Chamber of the ECJ heard argument on these issues from the parties and representatives of the European Council of Ministers, the European Parliament, and the European Commission. Representatives of the United Kingdom, Germany, France, and Poland also appeared at the hearing and presented their respective positions on the issues. Germany, the United Kingdom, and the European Council joined the airline industry parties in arguing against the validity of the Sturgeon decision. The French and Polish governments and the European Parliament argued in favor of Sturgeon.

In general, the parties challenging Sturgeon contended that the case was wrongly decided for the following reasons: (1) the plain language of EC 261 does not provide the right to compensation to passengers who experience flight delays; (2) flight delays differ from cancellations and the ECJ was wrong to make compensation available in both circumstances; (3) any change to the Regulation should be made by the European Commission, not the ECJ; and (4) the Montreal Convention exclusively governs passengers’ right to damages for delays in international air travel and limits passengers’ recovery to provable compensatory damages.

Taking the opposite view, the French and Polish governments argued that Sturgeon’s interpretation of EC 261 complemented the Montreal Convention liability scheme and that extending the right to compensation to flight delays accorded with the principle of equal treatment. The European Parliament also supported the validity of Sturgeon, but did so by focusing on the economic validity of the Regulation.

It is unclear what the ECJ’s ultimate ruling will be. Notably, the 13 judges comprising the Grand Chamber at the March 20 hearing included four judges who sat on the Sturgeon case, including the acting “Judge-Rapporteur.”

The ECJ’s decision not only stands to impact EC 261 litigation in Europe, but also could have a significant impact on six separate class action lawsuits currently pending in U.S. federal court in Illinois, which were commenced by U.S. residents who experienced flight cancellations and delays on flights between the United States and the European Union. The airlines involved in the class actions have asserted that Sturgeon was wrongly decided and that EC 261 compensation as applied to delays conflicts with the Montreal Convention.

The ECJ’s final decision in the TUI and Nelson cases is not expected until late 2012 or early 2013. The non-binding opinion of the ECJ’s Advocate General is scheduled to be released on May 15, 2012.