Opinion on the Proposal of the European Council of 12 February 2020 for an amendment of Regulation (EG) No 261/2004

A. Legal Tech Verband Deutschland

The Legal Tech Verband Deutschland (Legal Tech Association), as the representative of legal tech companies in Germany, is committed to shaping the future of the legal system in times of digitalization through the application of legal tech and thus also to more efficient law enforcement in Germany and Europe. The improved enforcement of air passenger rights based on Regulation (EC) 261/2004 (“Air Passenger Rights Regulation”) through Legal Tech portals has proven the effectiveness and relevance of using Legal Tech solutions to improve law enforcement. The Legal Tech Association is therefore committed to shaping a progressive and innovation-friendly regulatory environment that creates legal certainty for legal tech ventures inside and outside law firms. In doing so, the association is guided by the goal of protecting law seekers, legal transactions and the legal system from unqualified legal services and strengthening the rule of law. The Legal Tech Association therefore welcomes initiatives to improve passenger rights (especially those that incorporate legal tech to improve access to justice, such as smart contract solutions or even efficient law enforcement through legal tech portals). The Legal Tech Association is in favor of an Air Passenger Rights Regulation that offers legal certainty, provides for modern, innovative access to justice, and truly protects the European traveler.

The Legal Tech Association is emphatically concerned if the improvements in law enforcement achieved through the use of legal tech solutions were to be a stapes holder for a lowering (here: de facto abolition) of the underlying substantive legal basis. This would send out the fatal signal for the rule of law that improvements in access to justice would lead to a corresponding deterioration of the rights themselves, which would be a declaration of bankruptcy both for the rule of law and for the future use of legal tech to improve access to justice.

B. Overview of the revision of the Passenger Rights Regulation

The General Secretariat of the European Council under the Croatian Presidency published an inter-institutional document (“Proposal”) on February 12, 2020, the content of which is based on the proposal for an amendment of the Passenger Rights Regulation presented by the European Commission in 2013 and predominantly follows the recommendations of the “Study on the current level of protection of air passenger rights in the EU” by the consulting agency Steer Davis Gleave (“Steer Report”) published in January 2020 and commissioned by the European Commission.

As a result, the proposal leads to a de facto abolition of the air passenger rights created by the Passenger Rights Regulation in 2005 and the level of protection of air passengers further developed by the case law of the European Court of Justice through subsequent legislative measures:

  • the massive (up to 400%) increase of the compensation-triggering time thresholds for delays and cancellations;
  • the creation of the unlimited possibility to cancel flights without a corresponding obligation to pay compensation;
  • the extensive classification of technical defects (and the resulting flight disruptions) as a circumstance beyond the control of the airline and the resulting exclusion of compensation payments;
  • the exclusion of compensation in case of departure/arrival from or at certain airports;
  • the exclusion of compensation in case of cancellation and delay of a connecting flight operated outside the EU;
  • the introduction of a 6-month preclusion period for making claims.

C. Concerns and recommendations of the Legal Tech Verband

As can be seen from the attached overview of the effects of the planned legislative measures (Annex 1), a blatant reduction in the current level of protection is to be expected, which would in fact amount to an abolition of consumer-protective air passenger rights.

This would be an anti-consumer measure that has never been seen before in this form in the European Union. This is in clear contrast to the previously pursued goal of generally improving the level of protection for consumers in recent decades.

There are significant concerns that the minimum level of consumer protection guaranteed in Article 38 of the Charter of Fundamental Rights of the European Union (GRC) would still be preserved if the proposal of the European Council, but also the proposal of the European Commission from 2013, were to be adopted. The lowering of protection is not at the discretion of the Union legislator, but must not fall below the minimum standard.

The objective of the Passenger Rights Regulation to ensure a high level of protection for air passengers and to take full account of the requirements of consumer protection in general would only exist on paper.

The Legal Tech Association therefore urgently recommends:

Concretization of the roles and integration of the functions of the organizations involved in enforcement, such as airlines / national enforcement bodies / arbitration bodies / private passenger portals (such as standardization of data formats / communication interfaces).

  • The previous level of protection of the Passenger Rights Regulation must be maintained, in particular by revising it within the following regulatory framework:
    • Retention of the previous (established) thresholds of the compensation-relevant delay duration at the final destination (for both cancellations and delays);
    • Retention of the previous (established) thresholds of the compensation-relevant delay duration at the final destination (for both cancellations and delays);
  • Codification of the case law of the European Court of Justice within the framework of a revision for the purpose of increasing legal clarity and certainty of application;
  • Concretization of the airlines’ information obligations to improve the enforcement system;
  • Concretization of the roles and integration of the functions of the organizations involved in enforcement, such as airlines / national enforcement bodies / arbitration bodies / private passenger portals (such as standardization of data formats / communication interfaces).

D. Specific comments on individual regulations

I. Aim of the Passenger Rights Regulation:

A central legislative concern of the Passenger Rights Regulation is to ensure that air carriers are given incentives to transport passengers on time, and to create an economic framework that should preclude cancellations (e.g., in the case of insufficient capacity) and overbookings (e.g., achieving an optimal load factor) of flights for economic reasons. Besides, one of the basic objectives is to reduce the annoyance and great inconvenience caused to passengers in case of cancellation, denied boarding and long delay of flights. The right to obtain a minimum level of consumer protection guaranteed by Article 38 CFR and the duty of the Union legislator to ensure it are ensured by recital 1 of the Passenger Rights Regulation.5 According to this recital, Community action in the field of air transport should aim, inter alia, at ensuring a high level of protection for air passengers. Furthermore, full account should be taken of the requirements of consumer protection in general.

The effects of the planned legislative measures (Annex 1) are in fact equivalent to an abolition of the Passenger Rights Regulation in the guise of modernization.

The guaranteed European right to consumer protection as well as the obligation of the Union legislator are violated by the proposed amendments and new regulations without any justifiable reason.

II. Exclusion of compensation claims

1. increase in the thresholds for the abolition of compensation claims in the event of cancellation and delay.

(a) Restatement of Article 5(1a)(ii)

In a departure from the previous rule, there is no right to compensation if the passenger is offered alternative transportation that allows him to reach the final destination of his flight no later than five (5), nine (9) or twelve (12) hours, depending on the respective distance of the flight route, than originally booked. The proposal thus departs from the concept of a high level of protection for passengers in three respects:

  • The airline has the power to cancel a flight at any time – and especially at very short notice – by waiving a period of advance notice in relation to the cancellation 6, provided that alternative transportation is offered. An obligation to pay compensation then does not apply.
  • The Airline has the option at any time to cancel (or advance without time limit) a flight without having to pay compensation, provided only that alternate transportation is offered and the delay at the final destination does not exceed five (5), nine (9) or twelve (12) hours.
  • The Airline has the option to cancel a flight, provided alternate transportation is offered, if the final destination is reached after five (5), nine (9) or twelve (12) hours or less.

b) New provision of Article 6 para. 2 (i) 

A codification of the ECJ’s “Sturgeon” ruling in the interest of legal clarity is to be welcomed. Only because of the equal treatment of delays and cancellations introduced by the “Sturgeon” ruling does the Passenger Rights Regulation currently exist at all before primary law.

In a departure from the ECJ ruling, the new regulation now provides that a claim for compensation shall be excluded if the delay at the final destination does not exceed five (5), nine (9) or twelve (12) hours.

c) Legal impact assessment of the proposed amendment 

Infringement of primary law

80% of all passengers would completely lose their claims for compensation in the event of an adjustment of the thresholds in the area of delays.8

According to the wording of the proposal, cancellations can be made by the airline at short notice at any time, i.e. even without the possibility of rescheduling for the passenger, provided that only alternative transportation is offered.

The behavioral effect intended by the Passenger Rights Regulation, namely to avoid or reduce cancellations and long delays, is thus eliminated. The intended purpose will no longer be achieved in the future.

There are also considerable concerns that the minimum level of consumer protection guaranteed in Article 38 GRC would still be maintained in the future if the proposal were to be adopted in this form. The Passenger Rights Regulation would violate Union primary law if the proposal were implemented. In the McDonagh decision9 , the ECJ itself pointed out the relevance of Article 38 GRC. The recitals of the Passenger Rights Regulation itself also emphasize the objective of a high level of consumer protection.

The same would apply if only in the case of flight delay longer thresholds for delay without compensation were set than currently (five (5) instead of three (3) hours for flights within the EU), as under the Commission’s 2013 proposal. In this case, Article 6 threatens to violate the principle of equal treatment within the meaning of Article 20 CFR, as emphasized in the Sturgeon judgment, due to unreasonable unequal treatment of passengers arriving on cancelled flights (but possibly with a replacement flight) and those arriving on the same aircraft significantly delayed due to operational delays.

Negation of legitimate consumer interests 

The interest and stress of passengers affected by flight cancellations and delays will not be adequately compensated in the future.

Flight cancellations and even long delays are associated with considerable inconvenience and stress for travelers. Not only for families with small children or business travelers who depend on punctual air travel, delays and their consequences often represent a highly stressful exceptional situation – and not just when there is a delay of five (5), nine (9) or twelve (12) hours, but much sooner.

According to a survey conducted by the market research institute YouGov in spring 201910 among travelers in Germany, 70% believe that there should be compensation payments for delays of less than three (3) hours. Another 24% believe that passengers should be entitled to compensation for delays of three (3) hours or more. Only 3% see a delay of more than five (5) hours as an appropriate threshold.

Four out of five Europeans support the Air Passenger Rights Regulation and do not want it to deteriorate. Air travelers in Europe have traveled under the protective umbrella of the European Passenger Rights Regulation for 15 years and expect a similar level of protection in the future.

A statistical survey by the European Court of Auditors found that of ten basic passenger rights designated, the right to compensation in the event of long delays, cancelled travel or denied boarding was the second most important passenger right (at 39.6%), just behind the right to alternative transportation (at 41.7%).

More delays and cancellations

The steering incentives intended by the Passenger Rights Regulation to largely reduce cancellations and long delays would cease to apply if the thresholds were increased. One of the fundamental objectives of the Passenger Rights Regulation would no longer be achieved in the future.

The United States currently offers no protection or compensation due to delays. This is one reason why flights in the U.S. have significantly more delays on average than those in Europe. This clearly shows that the steering incentives created in the Passenger Rights Regulation achieve the desired effect and encourage airlines to be more punctual.

2. exclusion of compensation claims in case of cancellation and delay in the presence of unexpected flight safety deficiencies.

The proposal contains in Article 5 (1a) (iii) and in Article 6 (2) (ii) a new additional fact for exculpation from the compensation obligation in the case of so-called “unexpected flight safety shortcomings”.

A large proportion of all delays are caused by technical problems. The majority of delays that are currently subject to compensation would be eliminated in the future.

With the introduction of this exclusion, airlines would only be liable to pay compensation for technical defects in exceptional cases, if at all. This is despite the fact that the case law of the European Court of Justice has up to now generally assigned technical defects to the airlines’ sphere of risk, since these are precisely part of the usual occurrences and can be controlled by the airline.

By creating a new indeterminate legal concept, a loophole is opened for airlines to thwart the enforcement of compensation for passengers. Contrary to the intention of the Union legislator to ensure legal certainty, a new open-ended exculpation would be proposed to the detriment of passengers by exploiting information asymmetry and lack of expertise on the part of consumers.

3. exclusion of compensation claims in case of cancellation and delay of a connecting flight operated outside the EU

In a departure from the previous case law of the European Court of Justice in 201816 , both Article 5(1a)(iv) and Article 6(2)(iii) are intended to exclude compensation claims when the cancellation or delay occurs on the connecting flight operated entirely outside the EU.

A large number of multi-leg long haul flights are excluded from the scope of application to the detriment and contrary to recital 1 of the Passenger Rights Regulation, which states that Community action in the field of air transport shall aim, inter alia, at ensuring a high level of protection for passengers, and result in passengers being adversely affected.

4. exclusion of compensation claims in the event of cancellation and delay on arrival/departure from certain airports.

Furthermore, according to Article 5 (1a) (v) and Article 6 (2a) (iv), a claim for compensation is also to be excluded if the cancelled or delayed flight departs from or lands at a specific airport.

There are also considerable concerns with regard to such a provision that the minimum level of consumer protection guaranteed in Article 38 GRC would still be maintained.

The regulation is vague. It is already not clear whether both the airport of arrival and the airport of departure must meet the requirements of the listed airports or whether it is even sufficient that either the airport of arrival or the airport of departure meet the requirements.

Contrary to the intention to ensure a high level of protection for the passenger while taking into account consumer rights to the fullest extent, it is in no way clear, transparent and understandable for the respective passenger when an airport has an average passenger traffic of more or less than one million persons per year or when it is an airport located in an outermost region of the EU (“situated in an outermost region of the EU”). On the basis of which annual figure is the average calculated? From how many kilometers is an airport located in the outermost region of the EU? Would the airport in Lisbon then also be such an airport?

Regardless of this, there is no justifiable reason to exclude passengers who use one of the above-mentioned airports from the scope of protection and to treat them unequally compared to other passengers, contrary to the requirement of equal treatment under Article 20 GRC.

5. no justification of adjustment

The proposed adjustments violate the minimum level of consumer protection guaranteed by Article 38 GRC both individually and, in particular, in the aggregate of the multitude of grounds for exclusion. There is no justification.

a) Decrease in delays and cancellations.

In 2018, 38% of passengers entitled to claim under the Passenger Rights Regulation successfully enforced their claim against airlines. In 2011, this figure was only 8%.17 The improvement in enforcement, i.e., in particular, improved access to justice, is primarily due to air passenger rights portals such as Flightright, which have ensured improved awareness of rights as well as more efficient enforcement.

Evaluations by the passenger rights portal Flightright have shown that both delays and cancellations in 2019 have fallen to the level seen in 2017, following a year of delays and cancellations in 2018. This is due to the fact that the steering effects caused by increased financial burdens on the airlines in 2018 led to adjustments in the flight schedule at the airlines. The decline in compensation-relevant delays is also confirmed by airlines such as Ryanair.

In particular, with regard to cancellations, the Steer Report also confirms that the Passenger Rights Regulation has been effective in terms of avoiding commercial cancellations, but not yet effective enough with regard to cancellations for which the air carrier is responsible, at least until 2018. Adjusting the thresholds without a timeframe for providing re-routing information removes any incentives to avoid cancellations in the future.

No adjustment is necessary as the Passenger Rights Regulation provides appropriate means.

b) Financial burdens are reasonable for airlines

The financial burdens caused by the Passenger Rights Regulation (for example, because of the obligation to pay compensation) are reasonable. On the one hand, the possible costs of a cancellation or overbooking are intended to have a quite deliberate steering effect on the behavior of the airlines; on the other hand, passengers are to be compensated on a lump-sum basis for the inconveniences and burdens insofar as these fall within the airline’s sphere of risk. Apportioning the compensation payments to the ticket price would result in additional costs of around €1. This is also the conclusion reached by the Steer Report. Costs for support services, re-routing or reimbursement of the fare, and costs for damaged baggage are factors that arise even without the existence of the Passenger Rights Regulation and are therefore not a relevant component in the cost estimate.

In comparison, the air traffic tax for domestic flights and flights to EU countries increases from 7.50 euros to 13.03 euros per ticket. Flights up to 6000 kilometers become more expensive from 23.43 euros to 33.01 euros.23 For long-haul flights over 6000 kilometers, the air traffic tax increases by 17.25 euros to now 59.43 euros.

None of the insolvencies that occurred in 2017 to 2019 is otherwise based on the enforcement of rights under the Passenger Rights Regulation.

c) Violation of the rule of law

A possible (partly colocated) overloading of conciliation boards and other governmental bodies handling the cases cannot justify a de facto abolition of air passenger rights. It is not compatible with the principles of the rule of law that consumer rights should be abolished because they are exercised and this leads to recourse to state agencies. To clarify: If this were a justification, it would also mean that if police departments were overburdened, the criminal code would have to be adapted to the extent that only serious theft would be punished. Then one would likewise counteract an overloading. Restricting or even abolishing these rights would lead to the erosion of trust in the rule of law and its institutions, especially because the airlines, which are obligated under the Passenger Rights Regulation, are the cause of such systemic stress peaks due to poor morale in settling claims and the large number of delays and cancellations.

d) Consumer protection as a decisive element

In its numerous decisions on the Passenger Rights Regulation in recent years, the European Court of Justice has focused primarily on the fact that the Passenger Rights Regulation aims to ensure a high level of protection for passengers regardless of whether they are affected by denied boarding or cancellation or delay of a flight, since they are all affected by comparable annoyances and major inconveniences associated with air travel (Recital 2). A balancing of the interests of the airlines, the state enforcement and arbitration bodies, which are precisely intended to ensure compliance with and enforcement of the rights under the Passenger Rights Regulation, and the interests of consumers in a high level of protection must be in favor of consumers. This is because, on the one hand, both costs for airlines and recourse to enforcement bodies are explicitly provided for by the Passenger Rights Regulation as appropriate means of ensuring a high level of protection for passengers, and, on the other hand, they have also achieved their goal of creating incentives for airlines as well as providing passengers with compensation for the inconvenience they have suffered. Moreover, recourse to state institutions is the logical consequence of an existing and created right and the epitome of a functioning constitutional state.

III. Enforcement Regulations 

An improvement in the enforcement regulations is to be welcomed in principle, but here too non-transparent restrictions are imposed to the detriment of passengers.

1. No restriction on the choice of enforcement options

In deviation from the previous regulation, Article 7 (3) of the proposal stipulates that payments are to be made upon “passenger’s request”.

Although the provision appears to serve only to clarify that a passenger’s request is required when a delay or cancellation has occurred – as distinct from involuntary denied boarding – such a provision must not preclude third party representation or third party assignment for the purpose of enforcing claims. It must be made clear that the passenger remains free to decide whether and how to assert his or her claims. The claim arising from the Passenger Rights Regulation is not a highly personal right. Otherwise, the high level of protection opened up by the Passenger Rights Regulation would be closed again by the back door. 2.

2. No disproportionate preclusion period

A uniform regulation in the sense of legal certainty with regard to the statute of limitations regulation appears to make sense due to the multitude of national regulations. However, Article 16a(2) of the proposal provides for a limitation period of only 6 months. It is already unclear whether filing a claim suspends the statute of limitations, interrupts it, or completely precludes any other assertion of a claim after the 6 months have expired without success. Once again, the amendment appears to be aimed at curtailing the law rather than at ensuring the security of the application of the law. In view of the fact that the regular limitation period in Germany is 3 years and in France even 5 years, such a limitation to 6 months is completely disproportionate.

3. No exclusion of business travelers

According to Article 16a (3) p. 3 of the proposal, Member States shall be granted the right to decide whether access to national enforcement bodies or out-of-court dispute resolution shall only be granted in the relationship between consumer and airline. In any case, this should not exclude that air travelers who have taken a flight for business reasons are also excluded from access to such enforcement possibilities.