Place of performance for multi-leg journeys - CJEU in LOT Polish Airlines (C-20/21)

Last week, on 3 February 2022, CJEU issued another judgment interpreting Article 7 Regulation 261/2004 on air passenger rights this time in combination with the interpretation of Article 7 Regulation 1215/2012 (Recast Brussels Regulation) in the case LOT Polish Airlines (C-20/21). The dispute concerned the jurisdiction of a national court over a claim for compensation of a delayed flight. 

The flight in case consisted of two legs of a journey with Lufthansa AG - Warsaw (Poland)-Frankfurt am Main (Germany)-Malé (Maldives). The first flight was operated by LOT Polish Airlines and its delay led the passengers to miss the second flight and arrive in Malé with more than 4 hours of a delay. The passengers claimed compensation for a delayed flight with a local court in Frankfurt am Main (Amtsgericht Frankfurt), which then disputed its jurisdiction as neither a place of departure or arrival listed in the contract of carriage (para 10). The referred question asked whether Frankfurt could be perceived as a place of performance pursuant to Article 7(1)(b) Regulation 1215/2012, which allows to determine domicile in contractual disputes regarding provision of services with reference to the place in which services were provided or should have been provided.

Previously, the CJEU has already confirmed the applicability of the jurisdiction rules governing contractual disputes to air passengers, regardless of the fact that their claims may be directed at operating air carriers with whom they did not conclude a contract (flightright and Others). The CJEU now reiterates the rules on determining jurisdiction for disputes where there are several places in which services were provided to looking for a place with the closest connecting factor between the contract and the court having jurisdiction (para 22). This tends to be the place where the 'main provision of services is to be carried out' (see Rehder). This should not be limited to the place of first departure and last arrival for a journey that consists of various legs (para 23). However, in the current case as the dispute arises from the delay of the first flight and the claim is raised against the air carrier operating that first flight, it seems that the place of first departure remains closely linked to the dispute and hence courts of that place should have jurisdiction (para 25). Consequently, the CJEU considers the courts of the place of arrival of the first leg of the journey not to have jurisdiction (para 27). The claim should be brought to courts of Warsaw rather than Frankfurt then, which is also considered to guarantee predictability and legal certainty for both parties (para 26).

Where will the courts 'catch' mobile consumers?

As part of our effort to look back to last year and cover any cases that we might have missed at the height of the pandemic, the CJEU's order in case C-98/20 mBank S.A. v PA on Regulation 1215/2012 (Brussels I Recast) deserves a mention.   

The case involved the interpretation of Article 18(2) according to which '[p]roceedings may be brought against a consumer by the other party to the contract only in the courts of the Member State in which the consumer is domiciled,’ and raised the question of the time at which the consumer's domicile is to be determined. 

PA was a 'mobile' consumer who has concluded a consumer credit agreement with mBank in the Czech Republic where he/she was domiciled at the time when the contract was concluded, however, he/she subsequently moved and had her/his address in Slovak Republic at the time when mBank sued the consumer for payment default. 

The CJEU ruled that the concept of 'consumer's domicile must be interpreted as designating the consumer's domicile at the date on which the court action is brought. In justifying this approach the court looked at the literal interpretation of the provision that refers to ‘the Member State in which the consumer is domiciled (emphasis added)’; to requirements of legal certainty in situations where consumers could have changed their domicile even several times in the course of the given legal relationship and a similar solution offered by 1968 Brussels Convention. Importantly, the court also notes, this solution is consistent with the purpose of the special jurisdiction established for consumer contracts, that is, to protect the 'economically weaker and less experienced' party to the contract.

Compensation for delayed flights also for package travellers - CJEU in Primera Air Scandinavia (C-215/18)

Going through the backlog: last week, on 26 March, the CJEU issued a judgment in Primera Air Scandinavia (C-215/18). The judgment has not yet been published in English, thus our readers may be especially keen to find out what did the Court decide in this air passenger rights case where air travel was included in a package travel contract (about the opinion in the case read here).

Compensation for a delay of a flight included in a package travel contract

The CJEU follows the reasoning presented by AG Saugmandsgaard Øe and decides that air passengers may claim compensation for a delayed flight from the operating air carriers pursuant Regulation 261/2004 also if their air travel follows from a package travel contract that they have concluded with a travel agency (paras. 31-37). As a reminder, Package Travel Directive does not contain a similar right to compensation which could lead to awarding passengers with double compensation for the same loss. This differentiates this judgment from the one in the case of Aegean Airlines where passengers wanted to claim reimbursement of a flight ticket's price, which right they also had on the basis of the PTD.

Jurisdiction 

Brussels I Regulation (Regulation 44/2001) specifies which court has jurisdiction over disputes resulting from a contractual relationship, as well as provides for special jurisdiction rules for consumer contracts. One of the questions raised asked whether a claim for a compensation may be perceived as a contractual one, considering that there was no contract between the operating air carrier and the consumer, but rather between the consumer and the travel agent. The CJEU again follows the AG's reasoning and previous case law (see flightright) in applying broad interpretation to the notion of a 'contractual' claim. It is namely not relevant whether the parties in the proceedings had a contractual relationship, but instead whether the claim between them follows from a voluntarily adopted obligation of one of these parties towards the other one (paras. 45 and 48-49). Therefore, jurisdiction rules applicable to contractual claims (art. 5 Brussels I Regulation) are applicable here. However, special jurisdiction rules from section 4 on consumer contracts do not apply here, as for their applicability it is actually necessary that a contract was concluded between consumers and the defendant (paras. 59-60).

Conclusion

In the given case, as the flight was conducted between Czech Republic and Iceland, the claim could be raised in one of these two countries, as they both may be seen as places of performance of the contract. This is convenient for the passenger who was domiciled in the Czech Republic. However, if the passenger in case was domiciled e.g. in France, they would not be able to benefit from a possibility to file a claim in French courts, following the special rules on jurisdiction for consumer contracts.

This judgment is very interesting, but it needs to be mentioned that the current COVID-19 crisis shows us that in practice air passenger rights might not be very helpful. Airlines who had to cancel flights en masse in the past weeks, keep on choosing not to reimburse passengers' air tickets but rather issue them with vouchers for future flights. That is a clear breach of Regulation 261/2004. Of course, accepting the voucher does not take away consumers rights to further claim the reimbursement, but whether such claims will be successful, even if consumers decide that the hassle is worth the trouble, remains to be seen. Some authors of this blog may be the guinea pigs in the upcoming legal battles and will keep you posted!

Split jurisdiction for claims under Reg 261/2004 and Montreal Convention - CJEU in Guaitoli and Others (C-213/18)

Since the adoption of Regulation 261/2004 on air passenger rights, its compatibility with the Montreal Convention has been questioned (see e.g. case IATA, C-344/04). In a judgment issued today in the Guaitoli and Others case (C-213/18) the CJEU once again had to address how EU law impacts claims for compensations made by air passengers, when the air traffic is subject to regulation by international treaties, as well. This time it was the application of Brussels I bis Regulation (on jurisdiction) that was particularly problematic.

Facts

Passengers in this case were flying with easyJet (headquarters: UK) from Italy, where they lived, to Greece. Their flight to Greece was first delayed and eventually cancelled, and they have not been provided with any assistance (e.g. meals or drinks), reimbursement or compensation. The passengers filed a claim with the Rome District Court for compensation pursuant to provisions of Regulation 261/2004 as well as material and non-material damages following breach of contractual obligations by the air carrier. For national courts it proved problematic that part of the passengers' claim was covered by EU law and part by international law. The result of such a combined case could have been that different courts could be applicable to adjudicate over different parts of the same claim.

Short recap of the law

Art. 7 Regulation 261/2004 determines that passengers of cancelled flights may claim compensation from an operating air carrier. Such compensation may be claimed pursuant to EU law rules on jurisdiction, which used to be set by Brussels I Regulation, and now are regulated by Brussels I bis Regulation (Regulation 1215/2012). Generally, in cases of claims for breach of contract, the courts for the place of performance of the obligation that has been breached would have jurisdiction (Art. 5(1)(a) Brussels I Regulation and Art. 7(1)(a) Brussels I bis Regulation). The place of performance of air transport services has been previously determined as either the place of departure or of arrival of the air plane, subject to the applicant's choice (see e.g. case Rehder, C-204/08).

Art. 12 Regulation 261/2004 allows passengers to claim compensation for 'further damages', which are interpreted as compensation for other damage than the loss of time. Such other damages resulting from a delay in air carriage may then be claimed pursuant to Art. 19 Montreal Convention. Article 33 Montreal Convention specifies that an action for damages pursuant to the rules of this Convention should be brought either 'before the court of the domicile of the carrier or of its principal place of business, or where it has a place of business through which the contract has been made or before the court at the place of destination'.

Main questions

1. The national court inquired which jurisdiction rules are applicable in case of such a joint claim, and whether the claim should be split and adjudicated by different courts. This is relevant as Article 33 Montreal Convention sets out its own jurisdiction rule, which differs from the rule in Article 5 Brussels I Regulation.

2. It was relevant for the national court to establish whether Art. 33 Montreal Convention, if applicable, determined allocation of jurisdiction on a Member State level, or also locally with a given Member State.

Answer

The CJEU has no doubts that the national court should indeed be determining its jurisdiction separately to claims raised within the same case on the basis of Regulation 261/2004 and separately when these are supported by the Montreal Convention (paras. 37 and 43). This follows from separate regulatory frameworks of both instruments (see also case Flight Refund, C-94/14).

In an equally straightforward answer the CJEU affirms that the Montreal Convention determines jurisdiction of courts also between the courts of a given Member State, as it follows from the wording of Art. 33 (para. 51) as well as the purpose of the rule (paras. 52-54).

Conclusion

This is not a surprising judgment, but it is a judgment that complicates the enforcement of consumer claims against air carriers. Unless a passenger chooses to sue the operating air carrier before the court of the carrier's domicile, the jurisdiction may be split between two courts. The preference is thus given to the rights of a defendant. This general procedural rule may, however, be troublesome when carriers refuse to follow their compensatory obligations flowing from EU and international law, knowing that the chances of consumers enforcing their rights (and at different courts, possibly, too!) are slim.

Financial expertise does not preclude qualification as consumer – CJEU in Petruchová (C-208/18)

Yesterday, the CJEU issued a judgment in the case C-208/18 Jana Petruchová v FIBO Group Holdings Limited (the case has not yet been published in English; the link refers to the French version). The case concerns an individual contract for difference (CfD) concluded between the claimant and the defendant and, particularly, the definition of a ‘consumer’ in the context of financial investments under Article 17(1) of the Brussels Regulation. The preliminary question referred to the CJEU was whether Article 17(1) of the Brussels Regulation should be interpreted as meaning that a person who engages in the trade of foreign currency exchange is a consumer or whether the individual’s financial knowledge and expertise, the complex nature of the contract, and the risks involved determine that that person is not a consumer. A summary of the facts of the case and an analysis of AG Tanchev’s opinion can be found here.

It is noteworthy that the defendant never argued that the claimant was acting in the sphere of her professional activities (para 46). In fact, the claimant was, at the time of the conclusion of the contract, a university student, which leads the CJEU to immediately ascertain that the contract was not concluded within the scope of the claimant’s professional activities. Instead, the argument is that the professional nature of the contract is not the only criterion that matters when determining whether a party qualifies as a consumer. However, just like AG Tanchev, the CJEU rejected this argument. The CJEU declared that factors such as the amounts involved in the financial transactions, the risks of financial losses associated with such contracts, the financial knowledge or expertise that the person might have or its active engagement in such financial operations are irrelevant in the qualification of a person as a consumer (para 59). In this sense, the CJEU reaffirmed that the crucial test is whether the contract relates to the person’s professional activities or whether the contract’s goal is to satisfy the individual’s personal needs (para 56).

This conclusion is not surprising, since the CJEU had already established (for example, in the Schrems case) that the concept of consumer has an objective character and that it is not connected with subjective aspects such as the particular knowledge that the individual has about the object of the contract (para 55).

Furthermore, the CJEU concluded that even though the definitions of a ‘consumer’ present in other EU legislative instruments are interpretively relevant (para 61), the fact that financial instruments are excluded from the scope of the Rome I Regulation is irrelevant in this case, since the two Regulations pursue different goals (para 64). The qualification of an individual as a ‘retail client’ is also irrelevant for the qualification as a consumer (para 77).

Are expert retail investors consumers? The Opinion of AG Tanchev in C-208/18

Last week AG Tanchev delivered his Opinion in case C-208/18 Jana Petruchová v FIBO Group Holdings Limited involving a very interesting question on the notion of consumer in complex financial transactions.

The facts

On 2 October 2014 the claimant, a resident of Ostrava, Czech Republic entered into a contract (a 'Framework Agreement') with the defendant, FIBO Group Holdings Ltd, a brokerage company established in Limassol, Cyprus. The purpose of the Framework Agreement was to enable the claimant to make transactions on the FOREX market by placing orders for the purchase and sale of the base currency which would be executed by the defendant. To that end, the Framework Agreement enabled the conclusion of individual contracts for difference (CfD's) between the claimant  and the defendant. With the CfD’s the claimant bought and sold the base currency (in the present case USD) and made profit on the difference in the exchange rates applicable to the sale and purchase of the base currency in relation to the quote currency (here JPY).

On 3 October 2014 the claimant entered into a CfD with the defendant. At 15:30:00 she placed an order to buy a certain amount of USD.  The trading system promptly informed her that the up-to-date exchange rate that she accepted and confirmed the order to buy. However, long queues of orders built up in FIBO’s trading system as a result of a jump in the rate of the USD against quote currencies. Consequently, the required amount of USD was purchased later, at 15:30:16, at a slightly less favorable exchange rate and for a higher price. At 15:48:11 on the same day, the claimant instructed the defendant to sell the purchased amount of USD making a gross profit in the equivalent of USD 4 081.33. However, had the claimant’s order to purchase the base currency been executed in a timely manner, not with a delay of 16 seconds, she would have made a profit of USD 13 009.23 that is three times higher of what she actually achieved.

On 12 October 2015 the claimant sued the defendant for unjust enrichment, lodging the claim before the Regional Court, Ostrava; contrary to the Framework Agreement that provided for the jurisdiction of Cypriot courts. The court enforced the jurisdiction clause, and rejected the applicability of Article 17(1) of Brussels Regulation that would enable the claimant as a consumer to bring her claim in a Czech court. This was because, according to the court, the claimant did not enter into the CfD at issue in order to meet her private needs, she had the knowledge and the expertise required to conclude CfD's, and she had been warned that CfD's were not an appropriate instrument for ‘retail clients’ within the meaning of Directive 2004/39. In any event, the view of the court was that  Article 17(1) of the Brussels Regulation had to be interpreted in the same manner as Article 6(1) of he Rome I Regulation, and that consequently financial instruments were excluded from the scope of Brussels Regulation. The appellate court confirmed the lower court's decision, but the Czech Supreme Court disagreed, and turned to the CJEU.

The question

The Supreme Court asked the CJEU whether a natural person who engages in trade on the FOREX market must be regarded as a consumer within the meaning of Article 17(1) of the Brussels Regulation or whether, by reason of the knowledge and expertise required to engage in that trade, the complex and atypical nature of the contract at issue, and of the risks involved, that person cannot be considered a consumer.

The answer 

In delivering his option, AG Tanchev first of all clarified that although Art. 17(1) the Brussels Regulation provides a special jurisdiction for consumer disputes, it does not define the notion of a consumer. The provision only provides that a person, the ‘consumer’, must conclude a contract ‘for a purpose which can be regarded as being outside his/her trade or profession’ (para. 35). Following the CJEU's settled case law, AG Tanchev explained that  Article 17(1) of Brussels Regulation should be interpreted independently by reference principally to the general scheme and objectives of that Regulation, rather than by reference to other, related EU legislation (para. 36, see also parts E and D of the Opinion). Finally, AG Tanchev highlighted that the notion of a consumer must be strictly construed, taking into account the nature and objective of the kind of the contract rather than the subjective position of the consumer in the contract under scrutiny (para. 37).

Looking at the only requirement of Art. 17(1) of Brussels Regulation, the purpose of the contract that must be non-professional, AG Tanchev is immediately inclined to say that the claimant in question is a consumers, given that at the time of conclusion of the Framework Agreement and of the CfD at
issue, the claimant was a university student and although she was also working part time, the CfD was not concluded within her (part-time) profession. This was not disputed between the parties. However, before he would have made his final recommendation, AG Tanchev carefully scrutinized the arguments raised by the Czech courts and the elements of the question referred to for preliminary ruling.

Relevance of knowledge and expertise
AG Tanchev discarded the relevance of knowledge and expertise for defining the notion of a consumer within the meaning of Art. 17(1) of Brussels Regulation. First of all, accepting that CfD transactions require special knowledge will make these a commercial transaction, would effectively exclude these types of contracts from the scope of the Regulation, and this would be contrary to the intention of the Regulation that does not provide for the exemption of any financial contracts/instruments. Secondly, it is also irrelevant that the claimant had some previous experience with CfD's as the Regulation does not require evidence of no prior knowledge and experience in the field. It only requires that a contract is concluded outside the person's trade or profession (paras 43-45). Finally, taking into account the claimant's level of knowledge and information would give priority to the claimant's subjective situation as opposed to the nature and objective of the contract (para 46). This approach would be contrary to the CJEU's established case-law in interpreting the notion of a consumer (referring here primarily to Schrems and Costea).


Relevance of the value of transaction
AG Tanchev also rejected the argument that the high values involved in the transaction make them a commercial transaction rather than a consumer contract. According to the AG Tanchev, in the absence of any specific threshold in the Regulation, this approach would be contrary to legal certainty, making the applicability of the Regulation subject to a variable and not precisely defined factor (para. 51)

Relevance of the amounts of profit made by the transaction 
AG Tanchev discredited the argument that a person should not be considered a consumer if the profit made on the FOREX market accounts for the greatest part of the person's income. According to the AG, it would be contrary to equal treatment if persons achieving the same profit would enjoy different classification (and hence protection) depending on amount of profit relative to their income (para. 52).

Relevance of the consumers involvement 
AG Tanchev also discredited the argument that the claimant should not be considered a consumer because she actively placed orders on the Forex market. Art. 17(1) of Brussels Regulation does not require that the consumer acts in any special way, it neither requires the consumer to stay passive nor to be active (para. 53).

Relevance of the risks involved in the transaction

Finally, AG Tanchev also rejected the importance attached to the risks involved in the transaction, primarily because risks are inherent in the conclusion of CfDs. Therefore, should classification as a
consumer be denied on account of the risks taken, CfDs would systematically fall outside the scope of Article 17(1) of the Brussels Regulation, and this would be contrary to the express provisions of the Regulation that only exempts certain type of transport contracts from its scope (para. 56). On the contrary, the high risks involved in the transaction justify the protection of Brussels Regulation to persons dealing with CfDs (para 57).

Relevance of the number and frequency of transactions 
Finally, the AG considered the relevance of the number and frequency of the transactions executed. Although recognizing that a person carrying out financial transactions regularly over an extended period of time and for significant amounts of money would classify those transactions as a (secondary) profession (para. 58), referring to interpretations of national courts AG Tanchev finally rejected the relevance of this criteria. Reliance on individual circumstances would lead to uncertain outcomes, and would also be inconsistent with the CJEU's approach to look at  nature and objective of the contract rather than the subjective situation of a person in question (paras. 59-63).

Concluding thoughts

This is an interesting case that once again raised the problem of delimiting consumers from non-consumers, now in the context of Brussels Regulation. Taking a 'black letter' approach to interpreting Art. 17(1) of Brussels Regulation, AG Tanchev provided a protective view to the notion of the consumer. However, given his approach of looking at the Regulation isolated from other EU legal instruments, the entire system of protection that comes with the notion of a consumer in EU law might not have been triggered. In fact, taking this approach, could we end up in classifying an individual under one act as a consumer and under another EU  legislation as a business, and would this be a problem? Secondly, do you agree with AG Tanchev's approach in not limiting the scope of the notion of a consumer? Should wealthy consumers likely to engage financial advisers and/or knowledgeable consumers who are able to make prudent decisions deserve the special EU consumer protection regime? More generally, we could also ask whether certain categories of consumers such as high-net-worth individuals need this protection, whether the many protective rules of EU consumer law, primary those on information provision slow down their business, especially their financial dealings? What do you think?