By Michael Chatzipanagiotis
Blogpost 26/2024
1. Introduction
Air carriers typically use clauses which prohibit the project of passenger claims. Such clauses have a generic scope however had been primarily launched to discourage the project of claims beneath Regulation 261/2004 on air passenger rights (Air Passenger Rights Regulation – APRR) to business firms. The equity of such clauses beneath the Directive 93/13/EEC on Unfair Phrases in Client Contracts (UCTD) has been disputed. In its judgment in C-173/23 Eventmedia Soluciones SL v Air Europa Líneas Aéreas SAU ECLI:EU:C:2024:295 (Judgment), the European Court docket of Justice (ECJ) dominated on some features of the obligation of nationwide courts to evaluate of their very own movement the unfairness of contractual phrases within the context of air carriage beneath the 1999 Montreal Conference on the legal responsibility of the worldwide air service (MC99).
The MC99 establishes uniform guidelines on sure features of the legal responsibility of air carriers for worldwide carriage by air. It is likely one of the most widespread worldwide conventions and can also be open for signature by Regional Financial Integration Organizations, such because the EU (Article 53(2)). The MC99 was signed by the (then) European Neighborhood on 9 December 1999 and entered into power on 28 June 2004. Ever since, the MC99 provisions have been an integral a part of the EU authorized order (C-344/04 IATA and ELFAA, para. 36), save for the provisions on cargo, for which competence rests with the EU Member States. Therefore, the ECJ is competent for the interpretation of the MC99 provisions on passengers and baggage.
This publish presents the judgment of the ECJ, together with its authorized background. Subsequently, feedback are supplied concerning (1) the ex officio evaluation of unfairness of contractual phrases beneath the UCTD and (2) the validity of clauses prohibiting project of passenger claims beneath the APRR, in response to the case legislation of the ECJ and nationwide courts. The conclusion of the publish evaluates the significance of the judgment for the analysed matters.
2. Details and authorized background
2.1 Details
An air passenger suffered a delay within the transport of his baggage on a flight from Madrid (Spain) to Cancún (Mexico). He assigned his declare for damages in opposition to Air Europa, an air service, to Eventmedia, a business firm. Eventmedia introduced an motion in opposition to the air service earlier than the referring court docket, i.e., Business Court docket No 1, Palma de Mallorca, Spain.
Air Europa disputed Eventmedia’s standing to convey proceedings, since a clause within the contract of air carriage supplied that ‘the rights to which the passenger is entitled shall be strictly private and the project of these rights shall not be permitted’.
The referring court docket specified that the legal responsibility of the air service is ruled by Article 19 MC99 and deemed the dispute as contractual. Consequently, in response to the referring court docket, the project of the declare for damages referring to such a delay fell throughout the prohibition of project established by the clause at concern. The nationwide court docket, referring to the ECJ case legislation beneath the UCTD, was unsure whether or not it might study of its personal movement the unfairness of the clause for 2 causes. First, the applicant within the proceedings, Eventmedia, was neither a celebration to the contract of carriage nor did it have the standing of a client beneath Article 2(b) UCTD as solely pure individuals could also be ‘shoppers’. Second, because the client was not a celebration to the proceedings, the court docket couldn’t contemplate the buyer’s intention to rely, after having been knowledgeable by that court docket, on the unfair and non-binding nature of the clause at concern.
2.2 Authorized background
Based on the settled case legislation of the ECJ (e.g. C-567/13 Baczó and Vizsnyiczai, paras 40-42; C-377/14Radlinger and Radlingerová, para. 48), within the absence of EU guidelines governing the matter, it’s for the home authorized system of every Member State, in accordance with the precept of procedural autonomy, to designate the courts and tribunals having jurisdiction and to put down the detailed procedural guidelines governing actions for safeguarding rights which people derive from EU legislation. On that foundation, the detailed procedural guidelines governing actions for safeguarding a person’s rights beneath EU legislation have to be no much less beneficial than these governing related home actions (precept of equivalence) and should not render virtually unimaginable or excessively tough the train of rights conferred by EU legislation (precept of effectiveness).
Relating to the precept of effectiveness, the ECJ has mixed it with the efficient software of Artwork. 6(1) UCTD. Thus, the Court docket has repeatedly held that nationwide courts are required to evaluate of their very own movement whether or not a contractual time period falling throughout the scope of the UCTD is unfair, to compensate for the imbalance which exists between the buyer and the vendor/provider, the place the courts have out there to them the authorized and factual components essential to that finish (C-243/08 Pannon GSM, paras 22-24, 32; C-377/14 Radlinger and Radlingerová, para. 52).
Nonetheless, the ECJ has additionally clarified that nationwide courts, in finishing up that obligation, ought to inform the buyer of the results of the potential unfairness of the time period, specifically that the time period is invalid and that such invalidity could have an effect on the validity of the entire contract beneath Article 6(1) UCTD (C-269/19 Banca B., para. 29). On this regard, nationwide courts ought to account for the likelihood that the buyer could determine to not assert the unfair standing of the time period (C-243/08 Pannon GSM, para. 33).
3. Points
Two questions had been referred to the ECJ by the nationwide court docket.
First, whether or not the nationwide court docket was required to look at of its personal movement the unfairness, beneath Articles 6(1) and seven(1) UCTD, of a clause that prohibits the project of passenger claims in opposition to the air service, the place a declare has been introduced in opposition to the latter by a business firm as an assignee of that passenger’s declare.
Second, if the reply to the primary query is affirmative, might the court docket disregard its obligation to tell the passenger of the results of the unfairness, on condition that within the case at hand there was no ‘client’ litigating?
4. Judgment
4.1 Preliminary concern
As a preliminary concern, the ECJ clarified that the applicability of the UCTD to a dispute is determined by the capability of contractual events, not on the capability of the litigants. Therefore, the truth that the litigation in query was between two business entities didn’t exclude the dispute from the scope of the UCTD, because the contract of carriage had been concluded between the air service and a pure one who was (seemingly) performing outdoors his skilled capability (paras 17-26).
4.2 On the primary query
Continuing to reply the primary query referred to it, the ECJ noticed that the UCTD goals at defending shoppers vis-à-vis sellers/suppliers on the premise the shoppers are in an inferior place concerning their information and bargaining energy (para. 27). The UCTD goals at restoring such imbalance by rendering unfair contractual phrases not binding on shoppers (para. 28).
The Court docket then referred to its established case legislation on the obligation of nationwide courts to look at of their very own movement the unfairness of contractual phrases in client contracts. Such an obligation relies on the efficient software of Artwork. 6(1) UCTD (paras 28-29). Furthermore, it’s primarily based on the precept of effectiveness within the context of the procedural autonomy of the EU Member States beneath Artwork. 7(1) UCTD, however the precept of equivalence (paras 30-32).
Relating to the precept of equivalence, the ECJ reiterated that Article 6(1) UCTD ranks equally with home guidelines of public coverage. Whether or not a nationwide court docket has an obligation to evaluate ex officio the unfairness of a time period beneath the UCTD is determined by whether or not that court docket, beneath nationwide procedural guidelines, has discretion or an obligation to look at ex officiothe violation of nationwide guidelines of public coverage (paras 33-35). That is for the nationwide court docket to determine (para. 36).
As to the precept of effectiveness, the ECJ noticed that, within the case at hand, there was a dispute between two business entities. Thus, there was no imbalance of energy and information between them. In consequence, there was no obligation of the nationwide court docket to look at of its personal movement the potential unfairness of the clause in query (paras 38-39). As well as, the precept of effectiveness doesn’t require an ex officio evaluation of the unfairness of the time period, if the authorized entity as an assignee has or had, beneath the nationwide procedural guidelines, a real alternative to depend on the unfairness of the contractual clause (para. 40).
4.3 On the second query
The ECJ noticed that the second query regarded the suitable of every litigant to a good listening to. This entitles every celebration to the litigation to be told of the problems that the court docket has raised of its personal movement and supply its views thereon (paras 44-45). Thus, if the nationwide court docket ex officio finds a contractual time period to be unfair, it should notify the litigation events thereof, and supply them with the chance to current their views and refute the views of the opposite celebration (para. 46). On this method, the nationwide court docket additionally fulfils its obligation to think about the potential consent of the assignee to using the time period in query regardless of its unfairness (para. 47) – though this was clearly not the case within the current proceedings (para. 48). Quite the opposite, the nationwide court docket didn’t need to inquire the buyer’s opinion because the client was not a celebration to the dispute (para. 49).
5. Feedback
This judgment gives useful steerage on the obligation of the nationwide court docket to evaluate ex officio the unfairness of a contractual time period. Furthermore, it’s fascinating to check this judgment with the ECJ judgment in C-11/23 Eventmedia Soluciones concerning the validity of such clauses beneath the APRR.
5.1 Ex officio evaluation of unfairness
The judgment reveals two features of the evaluation of unfairness beneath the UCTD: a considerable and a procedural one. Each features are influenced by the imbalance between the buyer and the vendor/provider, which lies on the core of the UCTD and which nationwide courts are required to revive by constructive motion (C-240/98 to C-244/98 Oceano Grupo and others, para. 25). On the substantial degree, nationwide courts should declare an unfair time period non-binding to the buyer and, on the procedural degree, they have to assess of their very own movement the unfairness of the phrases related to the dispute. Therefore, the substantial and procedural features are distinct, albeit interconnected (see Judgment, para. 24).
The substantial side pertains to the scope of the UCTD and the standards of unfairness. In consequence, it’s immaterial for the applicability of the UCTD whether or not the events to the litigation are authorized entities, so long as: (1) the contract has been concluded between a vendor/provider and a ‘client’ (Judgment, paras 17, 24-25); and (2) one celebration to the litigation is an assignee of a client or an organisation having a legit curiosity beneath nationwide legislation in defending shoppers (UCTD, Article 7(2)).
The obligation to an ex officio evaluation is a procedural concern. It accounts for the truth that shoppers could also be unaware of the potential unfairness of contractual phrases or incapable of invoking them, as a result of they deem their participation to the trial unworthy in view of the excessive litigation value in comparison with the worth of the dispute (C-240/98 to C-244/98 Oceano Grupo and Salvat Editores, para. 26). In precept, this obligation of the nationwide court docket arises provided that the buyer participates within the litigation as a plaintiff or a defendant, as a result of in such instances the substantial imbalance of the contractual events is transferred to the litigation degree. Nevertheless, there are instances during which a authorized entity is a litigant within the place of the buyer, by way of project from the buyer or as a result of it has legit pursuits in defending shoppers. In such instances, the ECJ considers that there isn’t a imbalance between the litigants as a procedural concern (C-413/12 Asociación de Consumidores Independientes de Castilla y León, paras 48-50; Judgment, para. 38). The ECJ bases such view on purely formal standards: ‘shoppers’ are pure individuals performing outdoors their commerce or career and are irrefutably deemed to have restricted information and expertise (see C-110/14 Costea, paras 16-18, 20-21, 26-27); whereas a authorized entity is irrefutably thought of to be extra subtle and doesn’t want such a excessive degree of safety.
In regards to the capability of ‘client’, the ECJ appears to use a type of presumption in favour of such capability, when a pure particular person contracts a business entity. Within the absence of proof on the contrary, pure individuals are deemed to have acted outdoors their skilled capability (C-519/19 Delay Repair, para. 56; Judgment, para. 19). Nevertheless, such proof must be robust and never primarily based on remoted elements (see C-774/19 Private Trade Worldwide, paras 49-50).
Nonetheless, in distinctive instances, the nationwide court docket could also be beneath an obligation to evaluate ex officio the unfairness of a contractual clause, though no ‘client’ is celebration to the litigation. Because the Court docket notes in para. 40 of its Judgment, such an obligation exists additionally when the assignee, regardless of being a business entity, had no ‘real alternative’ to lift the problem of unfairness. This refers back to the rights of the assignee beneath nationwide legislation. That may be the case, if e.g. beneath nationwide legislation the project didn’t embody the entire contract of air carriage, however solely part of it, and the clause prohibiting the project had not been a part of the project (see C-519/19 Delay Repair, paras 47, 63). The explanation for this exception seemingly lies within the shut connection between the substantive and procedural features of the buyer rights beneath the UCTD.
5.2 Validity of clauses prohibiting project of passenger claims beneath the Air Passengers Rights Regulation
Many air carriers have launched clauses prohibiting the project of passenger claims to 3rd events. Though such clauses often have a generic scope, air carriers had in thoughts primarily claims primarily based on the APRR once they launched them. This Regulation, amongst others, gives for compensation to passengers in instances of cancellations of flights and denied boarding of passengers (Articles 4(3) and 5(1)(c) APRR). The ECJ has interpreted the Regulation as offering such a proper additionally in instances of delays in arrival to the ultimate vacation spot exceeding three hours. The quantity of compensation is standardised and is determined by the gap of the flight to its last vacation spot (Article 7 APRR). The standardised compensation quantities, mixed with the very restricted prospects of exclusion of the service legal responsibility (Article 5(3) APRR), has led to the creation of business entities, to which passengers could assign their claims and which undertake to implement passenger claims earlier than nationwide courts in opposition to a share from the compensation acquired (contingency payment, see right here for an summary). This has resulted in a major improve of passenger claims in opposition to air carriers, which has elevated the price of carriers concerning the quantities paid not just for compensation but additionally for judicial prices. Air carriers have reacted by introducing non-assignment clauses of their contracts with passengers.
Relating to passenger claims primarily based on the APRR, nationwide courts have assessed beneath the UCTD, on numerous events, the unfairness of clauses prohibiting project. The outcomes have been combined. The primary concern within the proceedings has been whether or not the prohibition of project obstructs the passenger’s (or client’s) path to compensation, together with entry to courts. In England, the Court docket of Appeals affirmed the judgment of the trial decide, who discovered such clause to be truthful (Bott and Co Solicitors Lyd v Ryanair DAC [2019] EWCA Civ 143, at [71]-[73], reviewed on different grounds [2022] UKSC 8). Quite the opposite, in Germany, such clauses have been discovered unfair in a protracted line of case legislation (e.g. LG Nürnberg-Fürth, 30.7.2018; LG Frankfurt am Foremost, 25.11.2021), together with the Federal Court docket of Justice (BGH 1.8.2023, paras 8, 10, 14, affirming LG Memmingen, 28.9.2022, para. 14).
Earlier this yr, the ECJ already clarified, in C-11/23 Eventmedia Soluciones (paras 39-46), that clauses prohibiting project of claims primarily based on the APRR are invalid beneath Article 15 of the Regulation, which prohibits any limitation of passenger rights. Therefore, the dialogue on the unfairness of such clauses beneath the UCTD has no sensible significance to the APRR. The UCTD has sensible significance, nevertheless, for claims beneath the MC99. Articles 29 and 33(4) MC99 make clear that problems with authorized standing are ruled by the home legislation of the contracting States, which, within the context of EU legislation, entails the applicability of the UCTD.
6. Conclusion
In conclusion, the current judgment is noteworthy, as a result of it clarifies vital features of the obligation of nationwide courts to evaluate of their very own movement the unfairness of contractual clauses beneath the UCTD. Furthermore, mixed with case legislation of the ECJ and the nationwide courts on the APRR, it sheds some gentle on the appliance of the UCTD to passenger claims beneath the MC99.