May airlines use T&Cs to prohibit passengers from assigning their rights to claim damages? - CJEU in Air Europa Lineas Aéreas (C-173/23)

In today's Air Europa Lineas Aéreas judgment (C-173/23) the CJEU looked into the application of the Unfair Contract Terms Directive (UCTD) to contracts concluded between air passengers and air carriers. Specifically, the passenger in case suffered damages as a result of a delay in receiving his checked-in baggage. He assigned his claim for damages against the air carrier (Air Europa) to a third party (Eventmedia). The air carrier disputes the transfer of rights to Eventmedia, claiming that assignment of passenger rights is prohibited by a clause in its general conditions of carriage (para 12). The referring court had sufficient evidence to declare this clause unfair ex officio but had doubts whether it could do so procedurally. First, the consumer was not part of the judicial proceedings, as he was represented by the assignee of his rights (whose standing was contested). Second, if the court declared the clause unfair the consumer, still remaining outside the judicial procedure, would not have received a chance to object to the application of this finding. 

Ex officio unfairness testing after consumers assigned their claims

First, the CJEU reminds that it has already previously declared (in the DelayFix case - C-519/19) that the UCTD's application is based on the capacity of the parties when they were concluding a contract (B2C) rather than the identity of parties entering into a dispute (paras 17-18). Therefore, the UCTD applies to more cases than just the ones, in which a dispute is between B2C contractual parties (para 25).

The CJEU reminds further that the ex officio judicial mechanism aims to compensate for the imbalance between consumers and professional parties (para 29). Other procedural issues remain in the discretion of the Member States, provided that they comply with the principles of equivalence and effectiveness (para 31).

To comply with the principle of equivalence here, the national court needs to determine whether national law allows it to ex officio assess whether a contractual term is contrary to national rules of public policy. If the answer is affirmative, the unfairness assessment also needs to take place ex officio (paras 34-35). This conclusion is not impacted by the consumer's presence in the judicial procedure, as if conditions for the applicability of the UCTD have been fulfilled (e.g., contract concluded B2C) its provisions benefit from having been assigned an equivalent status to domestic rules of public policy.

The assessment differs regarding the observance of the principle of effectiveness, as this considers the specifics of each procedure and the role that the contested legal provision plays in it. Specifically, " (...) whether a national procedural provision makes the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its special features, viewed as a whole, and, where relevant, the principles which lie at the basis of the national legal system, such as the protection of the rights of the defence, the principle of legal certainty and the proper conduct of proceedings (...)." (para 37). Here then the fact that the procedure occurs between two professional parties weakens the need to provide as much protection against unfair terms, as if a consumer was one of the parties in the dispute, as there should be more balance between parties in the dispute (para 38). The principle of effectiveness does not require then the national court to test unfairness ex officio (para 39), unless the professional assignee of the consumer's claim had no real chance to rely on the unfairness in the procedure (para 40).

Consequences of unfairness in light of audi alterem partem when consumers are not part of the judicial process

When national courts find a term unfair ex officio, they follow the rules of audi alterem partem, of a fair hearing, by apprising parties in the dispute of court's findings and giving them an opportunity to debate these and to be heard (para 44). This applies also in case the dispute is between the assignee of the consumer rights and it is this assignee that needs to be informed of the unfairness finding, alongside the trader (para 46). As the consumer is not a party to the dispute, they do not need to be informed of the court's finding of unfairness and do not need to address it (para 49). It is the assignee of their rights that may object to it instead (para 47), although, obviously, they are unlikely to do so as they would then lose standing in the procedure (para 48).

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The first part of the judgment has enormous practical relevance, as air passengers commonly assign their rights for compensation to third parties. It is, therefore, important for the effectiveness of passenger protection framework that air carriers could not block this process by prohibiting the transfer of rights in their general terms and conditions. This judgment will help assure this further, following the previous judgment in the DelayFix case (see our comment here), as professional assignees of consumers' claims will be able to raise unfairness of the prohibition of transfer of rights themselves. If this is prohibited or hindered, they could then rely on the breach of the principle of effectiveness and expect national courts to test unfairness ex officio (pursuant to para 40). This way assures more legal certainty than relying on the ex officio unfairness testing due to the principle of equivalence, as it could differ between the Member States whether ex officio testing of measures of public policy was allowed.