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The Final Destination? The Court of Appeal’s decision in Gahan v Emirates

13-October-2017
13-October-2017 18:31
in Aviation and Travel
by Christopher Loxton

The Court of Appeal holds that compensation under Regulation 261/2004 is available for delay on connecting flights which start or end outside of the EU.

1. On the 12 October 2017, the Court of Appeal delivered judgment in the joined cases of Gahan v Emirates and Buckley and ors v Emirates [2017] EWCA Civ 1530, in which both the Civil Aviation Authority and the International Air Transport Association intervened.                                                                                                                             

Flying Emirates through Dubai

2. Miss Thea Gahan had booked with Emirates to travel from Manchester to Dubai (the first leg) and then from Dubai to Bangkok (the second leg). Her first leg was delayed so that she arrived in Dubai 3 hours and 56 minutes late, missing her connecting flight, and finally arrived in Bangkok 13 hours and 37 minutes late. At first instance, she was awarded compensation under Article 7 of the Regulation in respect of the first leg but the second leg was discounted, meaning Miss Gahan only recovered €300 and not €600.  Miss Gahan appealed on the basis that her final destination was Bangkok, at which she arrived more than 3 hours late, and therefore she was entitled to recover €600.                                             

3. In the second of the joined cases, the Buckley family had booked with Emirates to travel from Manchester to Sydney via Dubai. Their first leg was delayed by 2 hours 4 minutes so that their second leg was automatically rebooked and they arrived in Sydney a further 16 hours and 39 minutes late. In contrast to Miss Gahan, the Buckleys were successful at first instance and Emirates appealed.                                                                                                                                  

4. The Court of Appeal had to consider:

(1) whether compensation for the second leg of the journey in each case was awardable under Regulation (EC) No 261/2004 (“the Regulation”); and

(2) as a result of arguments made by Emirates, whether there was jurisdiction under the Regulation itself; and

(3) if so, whether it was excluded by the Montreal Convention. Section 19 of the Montreal Convention, of which the EU and UK are signatories, limits liability for damage caused by delay [20] - [24].

Connecting flights and delay

5. The Court of Appeal allowed Miss Gahan’s appeal and dismissed Emirate’s so that compensation was available for both legs in both cases. The Court started with the basic proposition that:

‘… where a carrier provides a passenger with more than one flight to enable him to arrive at his destination, the flights are taken together for the purpose of assessing whether there has been three hours or more delay.’ [73]

6. Accordingly, what counted was the delay in a passenger reaching their final destination.  This was based on EU jurisprudence from Sturgeon v Condor Flugdienst GmbH [2009] ECR 1-10923 (C-402/07 and C-432/07), and from Air France SA v Folkerts [2013] (C-11/11), in both of which the Court of Justice for the European Union (“CJEU”) held that compensation under Article 7 of the Regulation was to be quantified by reference to the delay in arriving at the passengers’ final destination.  In the case of directly connecting flights, a passenger’s final destination was the destination of the last flight (Article 2(h)).

Jurisdiction under the Regulation

7. The Court went onto reject Emirates’ second argument that the Regulation did not apply to flights operated by non-Community carriers (such as Emirates) outside of the EU. The Court considered that the Regulation took effect:

‘… when the carrier is present in the EU and it imposes a contingent liability on the carrier at that point. The liability may never crystallise but if it does do so, it will crystallise outside the jurisdiction.’ [76]

8. The basis for jurisdiction over non-Community carriers under the Regulation was, contrary to the submission on behalf of Emirates, territorial in nature [77].  It was sufficient that the first of two connecting flights departed from the EU.  There were two reasons for this:

(a) the activity outside the EU was not relevant to jurisdiction, but to quantum. The Regulation applies to non-Community carriers because they use EU airports. Measuring delay by reference to connecting flights is simply the best way of measuring inconvenience [78]; and

(b) the decision was supported by the case of Holmes v Bangladesh Biman Corp [1989] AC 1112 which suggests that place of departure, stopping place, or destination are sufficient to avoid breaching extraterritoriality [79].

9. The Court noted that this finding might produce some anomalous results:

‘… it is possible that there is no compensation for delay on a flight which starts outside the EU and has several “legs”, some of which take place in the EU.’ [80]

10. However, the Court justified this anomaly by implying that the purposive logic of Sturgeon, which holds that long delay causes similar inconvenience to cancellation in the case of connecting flights, outweighed potential oddities [80].

The Montreal Convention and the Regulation

11. As an alternative submission, Emirates had argued that there was no jurisdiction to award compensation under the Regulation, since the Montreal Convention took precedence.

12. The Court made two preliminary points before deciding the issue:

(a) As stated in Council Decision 2001/539: (1) the EU exercises competence to regulate the activity of carrier’s activities within the EU, including those of non-Community carriers; whereas (2) the UK has competence in relation to non-Community carriers outside the EU [83].

(b) The Montreal Convention is not a pre-accession treaty to which Article 351 TFEU applies. It was ratified after the UK joined the EU. The relevance of this was questionable given the principle that Member State institutions should not act to prevent or hinder the performance by the EU of its international obligations [83].

13. Following Dawson v Thomson Airways Ltd [2015] WLR 883,the Court noted that:

‘… the jurisprudence of the CJEU as to the meaning of [the] Regulation … is binding on this Court even though it conflicts with jurisprudence of the Supreme Court and House of Lords.’ [86]

14. Although it was true that Dawson concerned a Community carrier, the principle was the same:

‘… a point of international law decided by the CJEU was binding on the national court if it was a necessary step in reaching a conclusion as to the meaning of an EU regulation.’ [86]

15. The Court found that it was bound by Lord Toulson’s findings at paragraphs 59 and 66 of Stott v Thomas Cook Tour Operators Ltd [2014] AC 1347that any issue as to the compatibility of the Regulation with the Montreal Convention had to be determined in accordance with EU law [60]. That meant the Court was similarly bound by Nelson v Deutsche Lufthansa AG [2012] (C-581/10) in which the CJEU had held that there was no overlap in scope between the Montreal Convention and the Regulation since the damage dealt with under each was different. The former provided for individual damage to be proved on a case-by-case basis. The latter dealt with fixed compensation for inconvenience which was identical for all passengers on a given flight [31]-[32].

16. Despite rejecting Emirates’ and IATA’s arguments, the Court expressed concern that the CJEU had decided in Nelson the meaning of damage for the purpose of the Montreal Convention without considering any international jurisprudence on the point. Although the Court concluded that it was barred by Stott, and the supremacy of EU law, from considering this issue for itself.  The Court went so far as to question whether the CJEU might have been ultra vires in determining the question in Nelson so that it might not be binding on Member States [89], however, the potential for a reference to the CJEU on this issue was a matter for another day [88].

What impact?

17. Whilst the Court’s decision will come as a significant blow to carriers who operate outside of the EU, it will equally come as no great surprise to lawyers in the aviation sector.  The key findings of the Court for carriers to mull over are undoubtedly [73]:

In the case of directly connecting flights, travelled without any break between them, the final destination is the place at which the passenger is scheduled to arrive at the end of the last component flight.’

18. And [80]:

‘… rights on cancellation operate by reference to the final destination, so that they include compensation for any connecting flight that is cancelled and not re-routed so as to arrive within three hours of the original scheduled time of arrival at the final destination.’

19. It remains to be seen whether carriers will consider limiting directly connecting flights, or providing different bookings and tickets for each flight to avoid the “directly connecting” moniker, or even providing substantial lag times between connecting flights to ensure sufficient buffers so that even longish delays avoid passengers missing connections.

20. Given the nature of modern air travel with carrier alliances, and many bookings sold by travel agents or online booking services allowing for passengers to plan for tight transit times, it is important carriers consider what “directly connecting flights” mean in the context of their own terms of booking and conditions of carriage. 

 

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Christopher Loxton and Ikeni Mbako-Allison

© 2017

 cl@4kbw.net