COVID-19: Air carrier liability

The outbreak of COVID-19 - or Corona virus - has already had serious global implications. Events have been cancelled, public and service functions are being shut down, employees are sent home and transport is being restricted both internationally and domestically. Denmark is no exception, and the Danish government has decided to shut the Danish borders for all incoming traffic, unless the traveler can document a "creditable" purpose. The restriction took effect on 13 March and will initially be in force until 13 April 2020. In this newsletter we will give an overview of the air carriers' liability towards the passengers for delays or cancellations following from COVID-19 measures under Danish and EU regulations.
A "creditable" purpose may be delivery of goods, meaning that freight transportation should not be overly affected, or visiting sick family members etc. However, ordinary business or leisure travel will generally not be considered as "creditable" and travelers will be rejected at the border. 

Further, the Danish foreign ministry has strongly advised against all unnecessary travels abroad and has recommended all Danish nationals travelling abroad to return to Denmark as soon as possible. 

One of the sectors most heavily affected by these measures is the aviation industry, whose very commercial basis has suddenly been severely restricted. At the same time, the restrictions implemented by the Danish government (among others) have necessitated mass cancellations and delays that have affected a large number of passengers. This poses the questions if and to what extent air carriers may be liable towards the passengers under applicable rules. 

In this newsletter we will give an overview of the air carriers' liability towards the passengers for delays or cancellations following from COVID-19 measures under Danish and EU regulations.

REGULATION 261/2004

Regulation 261/2004, which is directly applicable to most flights to and from Denmark, provides passengers with a right to compensation in case a flight is cancelled or delayed for more than three hours. However, if the cancellation or delay was caused by an extraordinary circumstance which could not have been avoided even if all reasonable measures had been taken, the carrier is exempted from the obligation to pay compensation, cf. Article 5, 3). 

Is the COVID-19 outbreak an extraordinary circumstance?

The first question is whether COVID-19 qualifies as an extraordinary circumstance. The short answer is: Most likely yes, but we still do not know for sure. The long answer follows below. 

Regulation 261/2004 does not contain specific guidance on whether pandemics qualify as extraordinary circumstances. The closest guidance in the Regulation is to be found in Recital 14, which mentions "political instability" and "security risks" among others as examples of extraordinary circumstances, and Recital 15, which mentions "air traffic management decisions" impacting the flight. But none of these examples come close to encompassing the current global situation following the COVID-19 outbreak, which goes far beyond anything envisioned by Regulation 261/2004. 

We do, however, have relevant guidance from the European Court of Justice ("the ECJ") from the last global event which affected the aviation sector in a (somewhat) similar manner: The eruption of the Eyjafjallajökull volcano in Iceland in 2010. In its decision in case C-12/11, the ECJ decided that the volcanic eruption did amount to an extraordinary circumstance under the Regulation and therefore potentially exempted air carriers from the obligation to pay compensation to passengers. 

In other case law, the ECJ has ruled that extraordinary circumstances are circumstances which "stems from events which, by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its actual control" (case C-549/07). Further, in case 315/15, the ECJ has ruled that the air carriers "must not be encouraged to refrain from taking the measures necessitated by such an incident by prioritising the maintaining and punctuality of their flights over the objective of safety".

In light of these decisions, it is difficult to argue that the COVID-19 outbreak does not qualify as an extraordinary circumstance, in particular where the delay or cancellation is a direct consequence of a decision from the authorities to restrict travels to or from a country in order to minimize the potential infection, such as the current situation in Denmark. 


Further, on 18 March 2020, the European Commission sent out its Commission Notice Interpretative Guidelines on EU passenger rights regulations in the context of the developing situation with COVID-19. In this, the Commission has explained its interpretation of the Regulation in relation to COVID-19:

This condition [extraordinary circumstances] should be considered fulfilled, where public authorities either outright prohibit certain flights or ban the movement of persons in a manner that excludes, de facto, the flight in question to be operated. This condition may also be fulfilled, where the flight cancellation occurs in circumstances where the corresponding movement of persons is not entirely prohibited, but limited to persons benefitting from derogations (for example nationals or residents of the state concerned). (…)

 

Where the airline decides to cancel a flight and shows that this decision was justified on grounds of protecting the health of the crew, such cancellation should also be considered as “caused” by extraordinary circumstances.

 

As such, in the Commission's interpretation, the COVID-19 pandemic does qualify as an extraordinary circumstance under the Regulation in so far as the cancellation in question was necessary due to restrictions from government or the safety of passengers of crew. 

However, even if the COVID-19 outbreak is considered as an extraordinary circumstance, air carriers will still have to prove that the delay or cancellation could not have been avoided even if all reasonable measures had been taken, before compensation can be refused. Given the widespread and almost immeasurable impact on the traffic situation, there are of course very real and practical limitations to what the air carriers can offer under the circumstances and the threshold for meeting this criterion should therefore not be very high. 

Assistance to passengers

Even if all criteria in Article 5, 3) are met, air carriers are still under an obligation to assist affected passengers in accordance with Articles 8 and 9, which provide for a right to reimbursement or rerouting at a later date and a right to care in the form of meals, hotel accommodation (if necessary) and transport between airport and hotel. This has also been confirmed by the Commission in its Interpretive Guidelines. 

Of course, the implications of the pandemic may itself entail limitations as to what can actually be done for the passengers; hotel accommodation may be under restrictions or have limited availability, rerouting may be impossible and so on, but the obligation to do as much as reasonably possible remains. 

Cancellation two weeks before departure

It is also worth mentioning that air carriers will not be obligated to pay compensation to passengers if they are informed of the cancellation at least two weeks before departure, cf. Article 5, c), (i). This is regardless of whether COVID-19 will be regarded as an extraordinary circumstance or not. As many countries, including Denmark, are setting restrictions on transport for weeks into the future, this exemption may prove to be of particular importance in the current situation.

THE MONTREAL CONVENTION AND THE DANISH AVIATION ACT

The Montreal Convention governs, among other things, air carriers' liability in case of delays, damage to goods or personal injury and the Convention applies concurrent with Regulation 261/2004. However, unlike Regulation 261/2004, the Montreal Convention only provides for liability for an actually suffered economic loss. 

In relation to the COVID-19 outbreak, the liability for delays is of particular interest, as the restrictions set by authorities in the various member states may have significant implications for the transport of both passengers and goods.

Under Article 19 of the Montreal Convention, the carrier is liable for damage caused by a delay in the carriage of passengers, baggage or cargo unless the carrier can prove that it took all measures that could reasonably be required to avoid the damage or that it was impossible for it to take such measures. Article 19 corresponds to section 109 of the Danish Aviation Act (which is modelled on the Montreal Convention). 

In case of delays caused by restrictions implemented by the authorities impacting the transport of passengers or goods, there is arguably very little - if anything - the air carriers can do to avoid the delays and the requirements in Article 19 will therefore likely be fulfilled in relation to most delays relating to the COVID-19 outbreak. 

However, it is important to note that this may only be the case for transport agreements entered into before the COVID-19 outbreak began to affect the aviation sector in earnest. With respect to transport agreements made after the out-break began, the parties will to some extent be expected to have taken into consideration the impact and consequences of the outbreak and it will therefore be more difficult to lift the burden of proof for exemption under Article 19. 

In any event, the air carrier's liability will be limited to 45,346 SDR per passenger for delays in the carriage of persons, SDR 1,288 per passenger for delays in the carriage of baggage or 22 SDR per kilogram for delays in the carriage of cargo, cf. Article 22.

THE TRAVEL PACKAGE DIRECTIVE AND THE TRAVEL PACKAGE ACT

The Travel Package Directive (Directive 2011/83/EU) and the corresponding Danish Travel Package Act, provides for passenger rights and obligations for package travel package organisers. In the following, the Articles mentioned refers to the Directive while the sections referred to are section in the Act. 

Under the current circumstances where travel restrictions are being imposed and travelers are not to travel at all, or if they have already left on vacation, are to remain at their destination in quarantine or to travel home before time, many travel package organisers are forced to change the travelers' travel plans one way or another. 

If the travel organiser significantly changes one of the "main characteristics" of the travel package before departure, the travelers are entitled to either accept the proposed change or to terminate the travel contract and receive a full refund of all payments, cf. Articles 11 of the Directive and section 18 of the Act. The main characteristics include among others the travel destination and the period of stay. If it is necessary to make such changes to the travel plans, the travelers must be duly informed as soon as possible. 

Further, the travel organiser can terminate the contract before departure, if the organiser is prevented from performing the contract because of unavoidable and extraordinary circumstances and notifies the traveler of the termination without undue delay before the start of the package, cf. Article 12 and section 20. The travelers are still entitled to receive a full refund of all payments, but the organizer will under these circumstances not be obligated to pay any further compensation.

While the term "extraordinary circumstance" in the Travel Package Directive does not necessarily mirror the same term in Regulation 261/2004, the main principles must be considered to be the same. As such, the COVID-19 pandemic will most likely be considered as an extraordinary circumstance in relation to the Travel Package Directive as well, namely in cases where the lack of conformity of the agreed travel package was due to restrictions imposed by the authorities to limit the risk of infection. Please refer to the explanation under paragraph 2.1 above.

For the travelers who have already departed, the organizer will still be responsible for the performance of the travel service. Any subsequent lack of conformity between the agreed conditions of the travel package and the actual performance will entitle the passengers to an appropriate price reduction for the period in which the lack of conformity was present, cf. Article 14 (1) and section 24. 

If the lack of conformity substantially affects the performance of the package and the organiser has failed to remedy it within a reasonable period, the traveler may terminate the contract without paying a termination fee. Whether the lack of conformity is "substantial" depends on the specific circumstances but the decisive factor will generally be if the purpose of the travel was forfeited due to the alterations. If not, the lack of conformity will generally not be seen as substantial and will not entitle the traveler to terminate the contract. 

If the contract is terminated, the organiser must refund all payments to the traveler and - if the travel package included transportation - offer alternative transport back to the travelers' point of origin, cf. Article 13 and section 25. If such transportation is impossible due to unavoidable and exceptional circumstances - which may well be the scenario for many travelers during the COVID-19 pandemic - the organiser must provide for accommodation for the travelers for at least three nights, cf. Article 13 (7) and section 26. 

Finally, any lack of conformity in the agreed travel package may entitle passengers to damages and/or compensation, unless the organiser can prove that the lack of conformity was due to unavoidable and extraordinary circumstances, cf. Article 14 (3) and section 28. As mentioned above, these requirements will most likely be met under the present circumstances. 

Travel package organisers will therefore have a solid argument not to pay further damages or compensation, as long as the changes in the travelers' arrangements were a direct consequence of the COVID-19 outbreak.

NOW WHAT?

The magnitude of affected flights and passengers as a result of the COVID-19 pandemic is very near unprecedented and will almost inevitably result in claims for compensation and damages from both passengers, travelers and cargo customers. In that respect, it is important to be aware of the applicable limitations to liability under both Regulation 261/2004, the Montreal Convention/the Aviation Act and the Travel Package Directive/Travel Package Act.

Kromann Reumert has a dedicated COVID-19 task force standing by to assist if you have questions concerning air carrier or travel organiser liability.

 

In Danish: Kromann Reumert COVID-19 task force

In English: Kromann Reumert COVID-19 task force

 

Updated 27 March 2020