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Court Rules EU 261 Claim Cannot Be Enforced in Canada as Breach of Contract

View PDF: 2019-08 (Aug-30)

A recent decision from the Ontario Small Claims Court marks the first time a Canadian court has considered whether European air passenger rights legislation may be enforced outside Europe.

In an unreported decision released on July 11, 2019 in Barcelos v. Azores Airlines (SATA), Deputy Judge Prattas held that the Plaintiff’s claim for compensation for a delayed flight under European air passenger rights legislation could not be enforced by a Canadian court.

The Parties

The Plaintiff, Marco Barcelos, was a passenger on a flight operated by the Defendant, SATA Internacional – Azores Airlines, S.A. (SATA) between Toronto, Canada and Pico Island, Azores, Portugal.

The Plaintiff claimed the flight was delayed  and sought compensation for that delay under a European Union (EU) regulation that establishes rights for airline passengers travelling to and from Europe who experience delay, cancellations, and denied boarding – namely, Regulation (EC) No 261/2004 of the European Parliament and the Council of 11 February 2004 (EU 261).

The Plaintiff was represented in the proceedings by a company called Click2Refund, which operates on a contingency basis pursuing claims on behalf of passengers for compensation under EU 261.  Click2Refund has lawyers in North America and Europe who advance claims for compensation on behalf of passengers.

The Claim

The Plaintiff framed the action as a breach of contract claim.

The contractual relationship between SATA and its passengers is governed by SATA’s Tariff, wherein SATA sets out the rights and obligations of the parties when a passenger purchases a ticket for a flight.

In its Tariff, SATA states that it “fully complies” with EU 261. The Tariff also specifies certain rights available to the Plaintiff in the case of delayed carriage. Notably the Tariff does not list compensation for long delay as a right available to the Plaintiff.

The Plaintiff claimed that because the Tariff states that SATA “fully complies” with EU 261, the entire regulation and associated case law interpreting it from European courts is incorporated into the contract and can be enforced as a breach of contract in an Ontario court.

This argument was necessary to the Plaintiff’s claim because the neither the Tariff nor EU 261 itself provide for compensation in the case of long delay.

This is why the Plaintiff also relied on the decision in Sturgeon v. Condor Flugdienst GmbH and Bock v. Air France (case Nos. C-402/07 and C-432/07), Judgment of November 19, 2009 from the European Court of Justice (CJEU).

The CJEU in Sturgeon found that the compensation scheme under EU 261 for cancelled flights should also apply in the case of long delays.

The Motion to Dismiss

In response, SATA brought a motion to stay or dismiss the claim.

SATA argued that the claim should be dismissed for three reasons:

(1) The words “fully complies” do not incorporate EU 261 and associated European case law into the Tariff such that they become enforceable as contractual promises in a Canadian court;

(2) If EU 261 and the Sturgeon decision are not incorporated by reference into the Tariff, they are not directly enforceable outside Europe; and

(3) The court should decline jurisdiction over the dispute on the basis that European bodies and courts are clearly the more appropriate forum.

The Position of the Parties

SATA took the position that the plaintiff’s claim disclosed no reasonable cause of action for breach of contract because the wording of the Tariff did not incorporate the text of EU 261 and the Sturgeon decision by reference.

The Defendant pointed the Court to language expressly incorporating the Montreal Convention into the Tariff, arguing that if SATA had intended to incorporate EU 261 and the Sturgeon decision into the Tariff it would have used the same language.

The Plaintiff argued that the words “fully complies” demonstrated an intention to include in the Tariff EU 261 and associated case law interpreting long delays to require the same compensation as cancellations.

The Plaintiff did not take issue with the Defendant’s submission that EU 261 and associated European case law were not directly enforceable in Canadian courts.

Finally, with respect to the issue of jurisdiction, the Defendant argued that despite certain factors connecting the claim to Ontario, the claim should be litigated in a Portuguese court or before the Portuguese enforcement body specifically set up to enforce compliance with EU 261, the Autoridade Nacional da Aviação Civil (ANAC).

The Plaintiff argued that a number of connecting factors were present in this case, making Ontario the appropriate jurisdiction, including that:

(1) The Plaintiff resides in Ontario;

(2) The defendant carries on business in Ontario; and

(3) The flight delay occurred in Toronto, Ontario; and

(4) The contract of carriage had its start and end point in Toronto, Ontario.

The Decision of the Small Claims Court

Given that the claim was framed as a breach of contract, Deputy Judge Prattas began by looking at the wording of the Tariff itself, concluding that “on its plain wording no monetary compensation for delay is provided” in SATA’s Tariff.

Deputy Judge Prattas agreed with SATA that the words “fully complies” in the Tariff did not incorporate EU 261 and the Sturgeon decision by reference such that the obligation to compensate passengers for long delays became a contractually enforceable promise outside Europe.

The Court cited an American decision as persuasive authority for the proposition that in order to incorporate EU 261 and EU case law into a Tariff, the wording of the Tariff must demonstrate  a “clear and specific” intention to do so.

In Dochak v. Polskie Linie Lotnicze LOT S.A., 189 F.Supp.3d 798 (2016), the United States District Court in Illinois held that EU 261 was not incorporated by reference into a Tariff using the following language, because the Tariff did not demonstrate the requisite intention:

“In the event of denied boarding and of cancellation or long delay of flights, passengers are entitled to rights provided for in the Regulation (EC) No 261/2004 of the European Parliament and of the Council, in accordance with the rules and to the extent set forth by this Regulation.”

Likewise, the Court held that the words “fully complies” did not demonstrate an intention to incorporate EU 261 and EU case law into SATA’s Tariff. Rather, the Court held that “SATA’s reference to ‘fully compl[ying]’ with EU 261 should be interpreted as an acknowledgement that these rights exist and may be enforced in the appropriate forum.”

Deputy Judge Prattas stated that he found merit in the argument that EU 261 could not be directly enforced in Canadian courts, as the wording of EU 261 did not support an argument that Canadian courts were “competent courts or bodies” under Article 15(2) of the EU 261.

Finally, on the question of the appropriate forum, the Court held that “ANAC is clearly the proper body to receive the plaintiff’s complaint/claim.” Deputy Judge Prattas  further held that “[g]iven the principle of international comity espousing ‘respect and deference to other states’ and the specific provision of Article 16 of EU261 specifying that disputes are to be resolved by EU Member States through the National Enforcement Body and its respective courts, I would be hard pressed to maintain jurisdiction in this case.”

Comment

This decision will be of interest to carriers operating flights between Canada and Europe, as it holds that a Tariff that does not expressly incorporate EU 261 will not open a carrier up to breach of contract claims brought in Canada for declining to pay EU 261 compensation.