In a recent decision the Supreme Court of the United Kingdom gave guidance as to the interpretation of Article 5(3) of Regulation (EC) 261/2004 (‘the Denied Boarding Regulation’), and in doing so, highlighted some of the more general challenges facing the courts of the UK following and as a result of Brexit.
The Facts
The facts of the case are very straightforward, and hardly unusual.
Mr and Mrs Lipton were booked onto a flight operated by the appellant Cityflyer scheduled to depart from Milan Linate Airport at about 5pm on 30th January 2018. They were supposed to arrive at London City Airport just after 6pm local time. The flight was cancelled, however, because the pilot reported that he was unwell shortly before the flight, and it was not possible to find a replacement in time for it to operate. The Liptons were rebooked onto another flight, and arrived at London City Airport at about 8:45pm that evening, just over 2½ hours later than they had expected. They claimed under the Denied Boarding Regulation for compensation of €250; Cityflyer rejected their claim on the basis that the illness of the pilot constituted ‘extraordinary circumstances’ within the meaning of the Regulation, absolving them from liability.
The Denied Boarding Regulation
The Liptons’ cause of action arose from Articles 5(1) and 7(1) of the Denied Boarding Regulation, which state:
“5(1) In case of cancellation of a flight, the passengers concerned shall:
…
(c) have the right to compensation by the operating air carrier in accordance with Article 7.
7(1) Where reference is made to this Article, passengers shall receive compensation amounting to:
(a) EUR 250 for all flights of 1500 kilometres or less;
(b) EUR 400 for all intra-Community flights of more than 1500 kilometres, and for all other flights between 1500 and 3500 kilometres;
(c) EUR 600 for all flights not falling under (a) or (b).
In determining the distance, the basis shall be the last destination at which the denial of boarding or cancellation will delay the passenger’s arrival after the scheduled time.”
The Liptons were therefore entitled to the sum of €250 due to the cancellation of their flight, unless the defendant could prove that Regulation 5(3) was engaged. Regulation 5(3) states:
“An operating air carrier shall not be obliged to pay compensation in accordance with Article 7, if it can prove that the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.”
The question for the Court was whether the late reported illness of the pilot constituted ‘extraordinary circumstances’ for the purposes of the Regulation. On the one hand, some degree of staff illness is to be expected, and accounted for, in all businesses; but on the other, it was the late identification and notification of the illness which had caused the flight to be cancelled, something the airline had no control over or ability to avoid.
The trial judge had dismissed the claim on this basis, and the the appeal judge had dismissed the appeal against that decision. The Court of Appeal, however, the second-highest court in England and Wales, had allowed the appeal and awarded the Liptons compensation. The airline appealed to the Supreme Court, the highest possible UK Court.
The Court considered the purpose of the Regulation, which was consumer protection. It referred to the Recitals, and in particular Recitals 14 and 15, which state:
“(14) As under the Montreal Convention [the Convention for the unification of certain rules for international carriage by air (1999)], obligations on operating air carriers should be limited or excluded in cases where an event has been caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. Such circumstances may, in particular, occur in cases of political instability, meteorological conditions incompatible with the operation of the flight concerned, security risks, unexpected flight safety shortcomings and strikes that affect the operation of an operating air carrier.
(15) Extraordinary circumstances should be deemed to exist where the impact of an air traffic management decision in relation to a particular aircraft on a particular day gives rise to a long delay, an overnight delay, or the cancellation of one or more flights by that aircraft, even though all reasonable measures had been taken by the air carrier concerned to avoid the delays or cancellations.”
In interpreting the phrase ‘extraordinary circumstances’ the Court derived assistance from pre-Brexit decisions of the Court of Justice of the European Union. Applying the decision of the CJEU in Wallentin-Hermann v Alitalia (Case C-549/07), the Court considered that it was necessary to apply a two limb test:
(i) determine whether the relevant event is inherent in the normal activity of the carrier; and
(ii) determine whether the carrier has a requisite degree of control in relation to the occurrence of that event and its consequences.
There follows in the judgment a useful recitation of the European caselaw on the meaning of extraordinary circumstances, including authorities on mechanical defects, one-off events, and staff absence (cf paragraphs 146 to 157). In summary:
- Mechanical defects in the aircraft have never been found to amount to extraordinary circumstances: Wallentin-Hermann v Alitalia (Case C-549/07); Sturgeon v Condor Flugdienst GmbH (Case C-402/07); Jet2.com Ltd v Huzar [2014] EWCA Civ 791; van der Lans v Koninklijke Luchtvaart Maatschappij NV (Case C-257/14); A v Finnair Oyj (Case C-832/18);
- External or one off events: some of these may amount to extraordinary circumstances: Pešková v Travel Service as (Case C-315/15) (bird strike – defence made out); Moens v Ryanair Ltd (Case C-159/18) (runway closed due to petrol spillage – defence made out); Germanwings GmbH v Pauels (Case C-501/17) (tyre damaged by foreign object on the runway – defence made out); LE v Transport Aereos Portugueses SA (Case C-74/19) (unruly passenger causing flight diversion – defence made out) – but others will not: Siewert v Flugdienst GmbH (Case C-394/14) (aircraft damaged by mobile steps – defence not made out);
- Unusual weather patterns may amount to extraordinary circumstances: McDonagh v Ryanair Ltd (Case C-12/11)(Icelandic dust cloud);
- Staff absence due to strike action is not an extraordinary circumstance: Finnair Oyj v Timy Lassooy (Case C-22/11); Krüsemann v TUIfly GmbH [2018] Bus LR 1191; TAP Portugal v Flightright GmbH (Joined Cases C-156/22 to C-158/22).
Bearing in mind these authorities, the Court concluded that staff illness did not constitute extraordinary circumstances within the meaning of the Regulation because the risk of absence for that reason, with all its attendant consequences, was inherent in the normal activity of the carrier. This conclusion, it considered, was consistent with the reasoning in Wallentin-Hermann and with the caselaw following that decision.
The airline’s appeal therefore failed, and the claim finally succeeds, some 6½ years after the flight was cancelled.
Brexit: the Chronology
The Liptons’ claim was rendered less straightforward than it otherwise might have been by the fact that between their cause of action arising and the claim being heard by the Court of Appeal (and then of course subsequently the Supreme Court), the UK exited the European Union. As a result, the parties engaged in a discussion around the consequences of Brexit, which was ultimately wholly sterile, at least for the purposes of the claim in question, which would have been decided the same way whichever party’s submissions were accepted. However, the observations of the Supreme Court on this issue (albeit obiter dicta and therefore not strictly binding on lower courts) will inform the approach to be taken for some years to come to legislation and caselaw derived from the period during which the UK was a member of the EU, and it is worth examining it for an indication of the sheer complexity inherent in disengagng a legal system from the EU framework.
The chronology (insofar as it is relevant) is as follows:
1/1/73 The UK becomes a member of the European Economic Community (the precursor to the EU).
17/2/05 The Denied Boarding Regulation comes into force. It is directly applicable in the UK.
30/1/18 The Liptons’ cause of action arises.
26/6/18 The European Union (Withdrawal) Act 2018 (‘the Withdrawal Act’) receives Royal Assent.
Section 2 provides that subject to various exceptions, domestic legislation derived from EU law continues to have effect after completion day (31st December 2020);
Section 3 provides that, again subject to various exceptions, “direct EU legislation” such as EU regulations or decisions forms part of domestic law after completion day;
Section 4 provides that any rights, powers, liabilities, obligations etc which were enforceable by virtue of section 2(1) of the ECA 1972 continue after completion day to be so recognised and available;
Section 6 provides that following completion day the English courts will not be bound by decisions of the CJEU, although any question as to the effect of any retained EU law is generally to be decided in accordance with relevant retained case law (which includes CJEU judgments).
28/6/19 Trial at first instance – the claim is dismissed on the basis that the defendant has proven the ‘extraordinary circumstances’ defence.
23/1/20 The European Union (Withdrawal Agreement) Act 2020 receives Royal Assent. It introduces the concept of the implementation period, lasting to 31st December 2020.
24/1/20 The UK and EU agree the Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (‘the Withdrawal Agreement’).
31/1/20 11pm The UK ceases to be a member of the EU.
Pursuant to Article 127(3) of the Withdrawal Agreement, EU law continues to apply as before until the end of the transition period. It applies, however, not as a result of the UK’s obligations as a member state, but pursuant to its treaty obligations under the Withdrawal Agreement.
11/2/20 First appeal – the appeal is dismissed. The claim is dismissed.
31/12/20 11pm The transition period/implementation period ends.
The UK’s obligation to apply EU law under the Withdrawal Agreement ends.
However, the EU law retained under ss.2 and 3 of the Withdrawal Act (including the Denied Boarding Regulation) continues in force.
Pursuant to s.6 of the Withdrawal Act, courts other than the Supreme Court are bound by decisions of the CJEU made prior to 31st December 2020, but no court is bound by decisions of the CJEU made thereafter (although they may have regard to them in interpreting retained EU law).
The European Union (Future Relationship) Act 2020 comes into force, implementing the Trade and Cooperation Agreement and the Future Relationship Act 2020 between the EU and UK.
The Air Passenger Rights and Air Travel Organisers’ Licensing (Amendment) (EU Exit) Regulations 2019 come into force. These amend the Denied Boarding Regulation so that the sum of £220 is substituted for the sum of €250.
1/1/21 The Trade and Cooperation Agreement and the Future Relationship Act 2020 between the EU and UK comes into force.
30/3/21 Second appeal – the appeal is allowed. The claim succeeds.
The amended text of the Denied Boarding Regulations is the applicable text.
29/6/23 The Retained EU Law (Revocation and Reform) Act 2023 receives Royal Assent.
Section 1 repeals directly effective EU law rights and regulations;
Section 3 repeals the supremacy of EU law in UK.
10/7/24 Third appeal – the appeal is dismissed. The claim succeeds.
The unamended text of the Denied Boarding Regulations is the applicable text.
The enormity of the challenge resulting from Brexit is really quite intimidating. When the UK left the EU, a task which took some five years in total, including a one year transitional phase, the continuing effect of all of the EU-derived enactments and legislation accumulated over the course of the preceding 47 years was cast into doubt. The role of the CJEU and of its body of caselaw, moreover, was rendered questionable.
Both the appellants and the respondent in Lipton agreed that the Liptons’ right to bring proceedings against the airline pursuant to the directly applicable Denied Boarding Regulation survived Brexit. The question the Supreme Court grappled with over the course of many pages of learned discussion was: why? Although in the light of the agreement between the parties in Lipton the question was academic in that case, the discussion is instructive because it illustrates the challenges Member States may face when considering leaving the EU.
The difficulty arose because the parties had arrived at the same conclusion by different routes.
Brexit: the Complete Code Analysis
This argument posited that the Withdrawal Act 2018 was a complete code by which Parliament dealt comprehensively with the application in the UK of EU law following the transition period. According to the Complete Code analysis, where a set of facts occur pre-Brexit which, having regard to EU law which applied at that time, gives rise to a cause of action, the claimant’s right to pursue that cause of action is brought forward as part and parcel of the bringing forward of the law itself under whichever of ss.2, 3 or 4 of the Act is relevant. The scope of that cause of action is subject then to whatever limitations are placed upon it by other provisions of the Act.
Brexit: the Interpretation Act Analysis
Insofar as it is relevant, s.16 of the Interpretation Act 1978 states:
(1) … where an Act repeals an enactment, the repeal does not, unless the contrary intention appears,— …
(b) affect the previous operation of the enactment repealed or anything done or suffered under that enactment;
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under that enactment; …
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, [or] liability … and any such investigation, legal proceeding or remedy may be instituted, continued or enforced … as if the repealing Act had not been passed.”
The Interpretation Act analysis regarded the Withdrawal Act 2018 as bringing forward only the instrument containing the EU law, but not causes of action that had accrued by virtue of the application of the instrument prior to Brexit. According to the Interpretation Act analysis, where a set of facts occurs pre-Brexit which, having regard to an EU law which applied at the time, gives rise to a cause of action, the claimant’s right to pursue that cause of action is saved by the application of s.16 of the Interpretation Act. This would be subject, of course, to those provisions of the Withdrawal Act 2018 which limit or erode that cause of action in some way after Brexit.
Brexit: the Decision of the (Majority of the) Supreme Court
It may be thought that if the conclusion is the same, the method of arriving at it is of academic interest only. But which analysis is to be preferred might make all the difference in some cases. Most pertinently, perhaps, the choice of route affects the applicability of judgments of the CJEU to the case in question. In the Liptons’ case of course, it also affected the sum recovered – whether it should be €250 (under the unamended Regulation) or £250 (under the version amended pursuant to the Air Passenger Rights and Air Travel Organisers’ Licensing (Amendment) (EU Exit) Regulations 2019).
The Supreme Court decided (at para.66) that it was the unamended version of the Regulation that applied to the Liptons’ claim, relying on:
“…a basic principle of the rule of law which Parliament must be taken to respect, according to which it is the law in place at the time the material events occur which applies, rather than some different version introduced at a later date…”
The alternative, so the Court held,
“…would produce strange results and would undermine the important value of finality in litigation. It would mean that the relevant law applicable to two identical cases which occurred on the same date might be different, depending on the time at which the relevant claims were brought and the vicissitudes of listing hearings in the respective courts in which the proceedings were commenced. It might also encourage parties to continue litigation even if the court at first instance had been Page 27 completely correct in understanding the law which it was its task to apply to the case and had committed no legal error.”
In coming to this conclusion the majority of the Court (Llyod-Jones LJ dissenting) preferred the Complete Code analysis; s.3 of the Withdrawal Act 2018 is effective not only to bring forward into domestic law as ‘retained EU law’ the text of the Denied Boarding Regulation itself as it was operative immediately before the end of the transition period, but also accrued causes of actions such as the Liptons’ arising under direct EU legislation within the meaning of s.3.
The Court explained (at para.88):
“Regulation 261 was therefore operative immediately before IP completion day [the end of the transition period] in two ways…(i) by stipulating the law to be applied to any new fact situations which happened to arise at that time; and (ii) by requiring any causes of action which had accrued under that Regulation by reason of fact situations arising in the period of its application up to and including that time to be recognised and enforced by the domestic courts. If, notionally, the Liptons had brought their claim and it had been determined at the point in time immediately before IP completion day, Regulation 261 would have been operative to require recognition and enforcement of their accrued cause of action under that Regulation. Therefore section 3(1) has the effect that both (i) and (ii) continue to form part of domestic law after IP completion day. It follows from point (i) that the EU text of Regulation 261 continues to have prospective effect to govern new fact situations arising on and after IP completion day, subject of course to any changes introduced by domestic regulations such as the Air Passenger Regulations 2019. It follows from point (ii) that causes of action which have arisen under Regulation 261 by IP completion day continue to form part of domestic law – and so are required to be enforced – on and after that day.”
The Court observed that it did not make conceptual sense to distinguish, in this context, between legislation on the one hand, and the rights and obligations created by it, on the other; the Withdrawal Act was intended to, and did, carry both forward into UK law.
The effect of using the Complete Code route to application of the unamended Regulation is that pursuant to the provisions of the Withdrawal Act as to the application of CJEU caselaw, in the Liptons’ case (and indeed in all claims arising from pre-Brexit causes of action) the English courts would not be bound by post-Brexit CJEU judgments (although they would have regard to them), but would be bound by pre-Brexit caselaw (albeit the higher courts could decide to depart from such authorities in certain circumstances).
The Court sense-checked this result by reference to the notorious decision of the CJEU in Sturgeon (cf para.113):
“We discuss below in relation to Ground 1 the decision of the CJEU in Sturgeon v Condor Flugdienst GmbH (Joined Cases C-402/07 and C-432/07) [2010] Bus LR 1206 (“Sturgeon”). In that case the CJEU decided, somewhat unexpectedly, that the right to compensation conferred by Regulation 261 on passengers whose flights were cancelled must also be paid to passengers whose flights were delayed for a certain time. There is no doubt that this decision conferred causes of action on many passengers who had experienced a delayed flight prior to that decision but who had not thought that they were entitled to claim. Subject to any limitation period points, they could rely on the declaratory effect of that judgment by bringing a claim after Sturgeon was handed down in respect of the delay of their pre-Sturgeon flight. Suppose that the Liptons’ flight had been delayed rather than cancelled and they had made their claim based on Regulation 261 as construed by the CJEU in Sturgeon. Suppose further that after Brexit but before their claim came before the county court, the CJEU reconsidered its earlier decision and overruled Sturgeon, holding that no compensation is available for delay. Under the Complete Code analysis, by virtue of section 6(1) the new decision would not be binding but it would be open to the airline to invite this court to exercise its power under section 6(4) to depart from Sturgeon. Under the Interpretation Act analysis, the court is bound by Sturgeon and although in theory it can “have regard” to the post-Brexit ruling under section 6(2), it is difficult to see that as conferring an unconstrained power to depart from Sturgeon given that no test is envisaged (by contrast with the detailed regime in subsections (4) and following).”
Burrows LJ went on to note that it was ‘highly unlikely’ that the English courts would in fact depart from the rule in Sturgeon, describing it as ‘well-reasoned’ and ‘highly regarded’.
This reasoning and the result it produces is at least clear. But the Supreme Court’s desire to provide clarification of the process for future claims was rather undone by the facts that everything said on this topic was obiter dicta, and therefore not binding under the UK laws of precedence – and, perhaps more pertinently, by the fact that there is a strong dissenting judgment from Lloyd-Jones LJ.
The Dissenting Judgment
It is interesting to note that Lloyd-Jones LJ, in contrast to the majority, preferred the Interpretation Act analysis to the Complete Code analysis. He considered that the Withdrawal Act did not affect rights already accrued under EU law, therefore a pre-existing claim could not be affected by operation of the Act. His reasoning was quite straightforward:
“My starting point is the general principle of the common law that conduct and events are normally governed by the law in force at the time at which they took place. As a result, subsequent legislative changes in the law are not generally given retrospective effect.”
Unless it says so unequivocally, a statute cannot extinguish rights; nor, conversely, can it disturb them by folding them into ‘law’ for the purpose of retaining them. The Withdrawal Act not only does not do this explicitly, there is no reference to any possibility of it doing so either in the text of the statute itself or in the explanatory notes to it. Moreover, the language used by the Act itself, with reference to ‘legislation’ and ‘enactments’, is inapt to describe a claim such as that of the Liptons.
On this analysis, were it followed, a court considering the Liptons’ case would be bound by any relevant decisions of the CJEU handed down prior to exit day, and could take subsequent decisions into account when considering the claim.
Comment
The decision of the Supreme Court in the Liptons’ case is consistent with the decisions of the CJEU as to the narrow interpretation to be given to the term ‘extraordinary circumstances’ within the meaning of the Regulation. The focus on consumer protection indicates not only that this phrase should be interpreted in favour of consumers in this particular enactment, but also in others, most notably the Package Travel Directive 2015 (from which the English Package Travel and Linked Travel Arrangements Regulations 2018 are derived). Moreover, there is no reason why this term in particular should be interpreted narrowly; it is suggested that (in line with the decision of the CJEU in X v Kuoni Case C-578/19) all such defences in consumer legislation derived from similarly protective European legislation will fall to be similarly construed against the trader.
Of even wider applicability is the judgment of the majority of the Court that claims arising prior to Exit Day should be considered to be ‘retained EU law’; causes of action are preserved as part of the corpus of European legislation passing into domestic law. This judgment, as the Court was well aware, applies to all such claims, not just those arising by operation of the Denied Boarding Regulation. As such it is thought to affect thousands of claims of almost infinite variety.
Any other Member States considering the potential consequences of exiting the EU would do well to have regard to the knotty problems exposed by the argument in Lipton; there is no straightforward, predictable and readily applicable method of exiting one legal system from the conjoined systems the EU encompasses. The fact that even the judges within the highest of the UK courts could not agree on what the UK Parliament had in fact enacted in the course of Brexiting suggests that contrary to the rhetoric of some UK politicians it is not possible to enact an ‘oven-ready’ exit from the EU and that such a seismic shift in the landscape requires an almost superhuman legislative effort, the unforeseen consequences of which may be cause significant issues for years to come.
Sarah Prager KC
19/7/24
