by Joanna Kolatsis, partner at Hill Dickinson LLP
The aviation industry has awaited the outcome of the Court of Appeal decision in Huzar v Jet2.com with more than a little trepidation.
The wait finally came to an end last week; Jet2 unfortunately lost their appeal.
The aviation industry is now left with yet another potentially devastating legal precedent unless they mount a successful appeal to the Supreme Court.
This case started life as a ‘simple’ county court claim for compensation under EC Regulation 261/2004 following a 27 hour flight delay.
Jet2 was successful during the initial county court hearing in Stockport but Mr Huzar’s successful appeal in the Manchester County Court gave rise to a new set of circumstances that have since become the topic of much debate.
As a result, Jet2 sought to challenge the decision in the Court of Appeal leading to the current decision.
What’s changed?
Since its inception, EC Regulation 261 has been a great source of debate among airlines, regulators and consumer groups due to the ambiguous nature of the drafting.
It has given rise to a number of cases over the years seeking clarity as to the rights contained within the regulation following denied boarding, cancelled or delayed flights.
It is important to provide some basic analysis of the other cases that have shaped the changing landscape of the regulation in the last few years:
– Sturgeon v Condor Flugdienst GmbH and Böck v Air France SA gave rise to the decision that delays in excess of three hours should trigger the entitlement to compensation under the regulation (unless the airline was able to claim that such a delay was caused by extraordinary circumstances). This was contrary to the regulation which, as drafted, did not provide for the right to compensation when delayed.
– Wallentin-Hermann v Alitaliat-Linee Aereee Italiane SpA provided that not all technical issues would be considered extraordinary circumstances under the regulation for the purposes of defence. To succeed with the extraordinary circumstances defence, the technical problem would have to be something that was not inherent in the normal activity of the carrier and beyond its control.
– Eglitis v Air Baltic developed the test in Wallentin to make it a two limb test – 1. that the delay was caused by extraordinary circumstances and 2. that the carrier took all reasonable measures to prevent the extraordinary circumstances leading to the delay or cancellation.
Airlines have been working in accordance with the decisions outlined by the Court of Justice of the European Union (CJEU) in order to determine firstly, whether the claims satisfied the criteria for compensation and secondly, whether the airlines had grounds to defend claims for compensation as a result of extraordinary circumstances.
It is the interpretation of extraordinary circumstances in Huzar that has caused the latest furore and now provides a new test to establish whether the extraordinary circumstances defence can be relied upon by airlines.
During the first appeal by Mr Huzar in Manchester, HH Judge Platts sought to take the test previously outlined in Wallentin and Eglitis further by asserting that once the technical problem is detected, it is inherent in the normal activity of the carrier to have to deal with such technical issues and that resolution of those technical problems is within the carrier’s control.
This assertion was at odds with the decisions previously laid down by the CJEU and the guidance issued by the EU National Enforcement Bodies (NEBs) last summer in respect of what constitutes extraordinary circumstances.
It should be noted that the delay itself was caused by a wiring defect which could not have been ascertained during a routine maintenance check.
Jet2 could not have anticipated this technical issue under any circumstances and it was entirely unforeseeable – this is a fact that was accepted by the Court of Appeal.
Huzar is a binding legal precedent within the English High Court and County Courts but will undoubtedly be relied upon by the other NEBs within the EU.
As a result of the decision, airlines will not be able to rely on the extraordinary circumstances defence for technical issues unless they are caused by extraneous events i.e. terrorism, ‘freak’ weather conditions (which, for the record, is unlikely to include volcanic ash), or acts of third parties like air traffic control strikes or problems.
It has shifted the goal posts yet again for airlines that are now faced with an ever decreasing circle of what will constitute extraordinary circumstances going forwards.
The CAA have provided their initial thoughts on the judgement and confirm that due to the decision in Huzar they will not be applying the guidance set out in the NEB list last summer.
This decision now throws the floodgates wide open in terms of any claims that were stayed pending the outcome of this particular case.
In addition, any new claims should be reviewed in accordance with the new criteria. The only thing that can change this now is a successful appeal to the Supreme Court.
Appeal to the Supreme Court?
If Jet2 obtain leave to appeal to the Supreme Court and they are ultimately successful in challenging the Court of Appeal’s decision, then the decision in Huzar will no longer stand.
However, if Jet2 lose either the ability to bring an appeal before the Supreme Court or fail to win their case at the Supreme Court we will be left with this binding precedent.
The CAA have commented on the fact that airlines may wish to continue to stay the outcome of any claims pending a decision about the appeal to the Supreme Court but this must be communicated to passengers properly and a record of any claims kept in order to notify passengers of the decision once the outcome is clear.
What happens now?
In an ideal world, Jet2 will be given leave to appeal this decision and hopefully win their case in the Supreme Court. However, even with this ideal scenario the landscape is due to change again.
EC Regulation 261 is currently under review although, as a result of the recent European elections, it is likely to take a further 12-18 months to be finalised (at least).
To date the proposals for the amended regulation took into account the previous tests outlined in Sturgeon and Wallentin along with an annex of extraordinary circumstances that would be acceptable when assessing a claim.
It remains to be seen what effect the latest decision in Huzar will have on the review process within Europe and whether they will now go back to the drawing board as regards the list of extraordinary circumstances.
It is important to understand the legal implications of the decision on both the industry and passengers. If the airlines are forced to pay more claims as a result of this decision the costs will be astronomical.
Airlines have had to find a way to fund the consequences of this regulation since its inception; however, following the case law that has sought to define the regulation further, it is apparent this will lead to added financial pressure on an industry that is already fraught with low margins and high operational costs.
It is evident, therefore, that this can only have a detrimental impact on the passengers looking to book airline services. Airlines will have to find a way to fund the cost of these claims which can only mean higher ticket prices in the long run.
Much has been made about the potential safety implications associated with the judgement in Huzar. It is not the intention to suggest that airlines would purposefully flout safety issues in an effort to meet punctuality targets – far from it.
Airlines cannot exist without proper safety systems and they are of paramount importance to the operation itself. However, it goes without saying that by adding increased pressure on airlines to turn aircraft around in the midst of a technical issue (now that the courts have decided it is a normal function of the aviation world) can only mean pressure on the entire operation which inevitably includes safety.
It is important to underline one issue that appears to have been overlooked by the legislators, regulators and consumer groups alike; no airline is in business in order to systematically delay its aircraft. This would be fatal to their businesses.
Any delay is costly to an airline – aircraft are expensive assets with major cost implications when they are grounded for any length of time.
To suggest that technical issues, which could not be foreseen, are inherent in the normal operation of an airline is fundamentally incorrect.
It is in every airline’s interest, and indeed a legal obligation, to keep their aircraft properly maintained at all times – any unanticipated technical issue is a problem for them.
Some can be resolved easily but others are not so simple to rectify. While it is important to balance the commercial issues with consumer interest, it is wrong to suggest that the change to the interpretation of Regulation 261 as a result of these judgements is in the best interests of the consumer.
The costs have to be accounted for somewhere and ultimately these will reach their way back to the consumer.