Case C-227/12, Koninklijke Luchtvaart Maatschappij (KLM) – avoiding customer compensation for delayed flights

Can the Dutch State compel airlines to pay customer compensation for delayed flights?

Facts
KLM customers for a flight leaving from The Philippines to Holland were delayed by 6½ hours, apparently because of a ‘bleed loss body issue’. On another flight, ArkeFly’s customers wishing to fly from Holland to Canada were delayed by 6½ hours, this time because of an bird strike which had happened several days earlier. Both the KLM and ArkeFly refused to pay its customers any compensation for the delays which they had experienced.

The relevant Dutch Minister of State felt that these companies were failing to comply with EU law as it stood after the CJEU’s decision in Cases C-402/07 and C-432/07 Sturgeon. In light of the CJEU’s judgment, and the principle of European Union loyalty, the Minister felt obliged to take action against those companies. The Minister duly issued enforcement orders and attached financial penalties for any failure to comply with the administrative orders. The level of sanction was however set at an amount that equaled the amount which the companies would have been obliged to pay under the Sturgeon case. The Minister decided not to set the penalty higher and touch the profit and financial advantage which the claimant airlines continue to enjoy.

The claimant airlines challenged the Ministerial decisions and objected to the choice of administrative legal instrument used to penalise them, because the decision to attach periodic penalties to the sanction was one which they viewed as excessive. They brought an action against the state. They submitted that the Sturgeon case was invalid, or in the alternative, not binding in so far as the applicability of Article 7 of EU Regulation 261/2004 was concerned. This was because Article 7 relates not to the harm suffered from delay but specifically and exclusively to the harm suffered on the basis of cancellation. The CJEU’s judgment, which had applied Article 7 to amongst other things harm resulting from delay, amounted to the CJEU acting in breach of the principle of legal certainty.

Furthermore, both of the airlines added, there was a need to create legal unity between the Montreal Convention and the EU Regulation. Article 7 of the Regulation takes as its starting point that the right to financial compensation is available where the passenger himself requests this. It surely could not be the case that compensation must be paid to passengers whom, for whatever reason, would not appreciate this.

Questions Referred
According to the Curia website, the District Court of Amsterdam (administrative law sector) has asked the CJEU:

Should Articles 7 and 16 of the Regulation […] together with the principle of Union loyalty, be interpreted in such a way that those Articles (in conjunction with national law) create for an administrative authority like the defendant the competence or the obligation to take enforcement action in respect of air carriers where they have failed to pay passengers compensation for delays, even where those passengers themselves have recourse to the courts in that regard, as laid down in Article 33 of the Montreal Convention? 

If the previous question is answered in the affirmative, does the imposition of administrative orders for periodic penalty payments such as those at issue here also form part of the possibility of enforcement?

Does it make any difference in that regard whether:

the air carriers have drawn passengers’ attention to those rights?

in the case of an alleged lack of compliance with Article 14 of the Regulation, an order for periodic penalty payments imposed on the air carriers was preceded by the imposition of a sanction due to non compliance with that Article?

the passengers concerned have made known to the air carriers whether or not they wish to receive that compensation?

the defendant has not chosen the instrument of an order for coercive administrative action (where, in the case of the air carriers’ non compliance with the order, the defendant himself pays the passengers out at the air carriers’ expense), but rather, the instrument of an order for periodic penalty payments (where, in the case of non compliance with the order, the air carriers are liable to the defendant for an amount equal to the total compensation payable, which amount accrues to public funds)?

Comment
These are test cases for a great many similar ones currently in the Amsterdam District Court. They all date from the day that the CJEU handed down its judgment in Cases C-402/07 and C-432/07, Sturgeon. These two test cases from the Amsterdam District Court are however separate to the reference made by the Breda District Court in June 2011, which is docketed as C-315/11. The reference from Breda not only involves ‘compensation for delay’ but also the KLM. And the KLM is involved in a further preliminary reference from a Spanish court to the CJEU, docketed as C-139/11, with that reference involving compensation and limitation periods.

Update
The President of the Fifth Chamber removed this case from the register by an order dated 23 April 2013.