In summer 2024, the Court of Justice within the Court of Justice of the European (CJEU) in Case C-385/23, Finnair (Fuel tank design flaw) that Finnair may rely on ‘extraordinary circumstances’ in the Air Passengers Rights Regulation and not pay passenger compensation because of a hidden defect in the design of an aircraft.
The referral and the facts
The case was referred to the Court by the Supreme Court of Finland (Korkein oikeus), in which it asked the following question:
‘Can an air carrier rely on extraordinary circumstances within the meaning of Article 5(3) of Regulation No 261/2004 on the sole ground that the aircraft manufacturer discovered the existence of a hidden design defect detrimental to flight safety and affecting the entire aircraft type, even though that discovery was not made until after the flight was delayed and cancelled?‘
Article 5(3) of the Air Passengers Rights Regulation (Regulation 261/2004) states:
‘An operating air carrier shall not be obliged to pay compensation in accordance with Article 7 [of the Regulation], if it can prove that the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.’
In the facts of the case, a passenger was booked on a flight between Helsinki (FInland), and Bangkok (Thailand) in March 2016. The aircraft for that service was the Aribus A350, which was a new aircraft that had entered into service only months before. The air carrier, Finnair, refused to pay the passenger compensation after the flight was cancelled. An alternative aircraft was found to ferry passengers to their destination, but it did not take off until the following day, and passengers did not arrive at their destination until 20 hours after the initially scheduled time.
The fuel gauge problem uncovered by Finnair had never been identified before by the aircraft manufacturer (Airbus), and neither had the aviation safety authority. Following a detailed investigation, it was discovered that there was a hidden design defect in all Airbus A350 aircraft.
Finnair claimed that the issue was an ‘extraordinary circumstance’, and thus, would not be paying the passenger the €600 compensation as provided for in the Regulation, that would apply to a flight such as the one in question. It said the circumstance was extraordinary because it had taken all the measures which could reasonably be expected of it.
Case before three instances of Finnish courts
At first instance before a District Court (Käräjäoikeus) in Finland, the District Court ruled for the passenger, stating that that failure was inherent in the normal exercise of the activity of an air carrier, and the mere fact that the aircraft manufacturer had not given Finnair instructions on how to react in the event of such a failure affecting a new type of aircraft did not make the event in question an exceptional one. On appeal, at the Court of Appeal (Hovioikeus) of Finland, that court ruled for Finnair, since, in its view, contrary to the District Court, the issue was not inherent in the normal exercise of Finnair’s activity, and by its nature or origin, it was beyond Finnair’s actual control.
Given the diverging views of the lower instance national courts, and the lack of absolute clarity from existing CJEU case-law, it made a reference for a preliminary ruling to the CJEU.
Judgment
In its judgment (delivered without an Opinion of an Advocate General), the Court of Justice stated that,
‘Article 5(3) of that regulation, read in the light of recitals 14 and 15 thereof, releases an air carrier from that obligation to pay compensation if the carrier can prove that the cancellation is caused by ‘extraordinary circumstances’ which could not have been avoided even if all reasonable measures had been taken and, where such circumstances do arise, that it adopted measures appropriate to the situation, deploying all its resources in terms of staff or equipment and the financial means at its disposal, in order to prevent that situation from resulting in the cancellation or long delay of the flight in question‘ (para. 22).
Following the Court’s long-standing view across all areas of EU law that all exceptions are to be interpreted narrowly, it went on to state that,
‘in the light of the specific conditions in which carriage by air takes place and the degree of technological sophistication of aircraft, since the functioning of aircraft inevitably gives rise to technical problems, breakdowns or the premature and unexpected failure of certain aircraft parts, air carriers are confronted as a matter of course in the exercise of their activity with such problems…[i]t follows therefrom that the resolution of a technical problem caused by a breakdown, a failure to maintain an aircraft or the premature and unexpected failure of certain aircraft parts is considered to be inherent in the normal exercise of the activity of the air carrier’ (paras. 28-29, non-emphasis added).
But, however, given the circumstances that Finnair faced in this particular circumstance, it stated that,
‘However, technical failures in a situation in which the manufacturer of the aircraft comprising the fleet of the air carrier concerned, or a competent authority, reveals, after those aircraft entered into service, that the aircraft are affected by a hidden manufacturing defect impinging on flight safety, are not inherent in the normal exercise of the activity of the air carrier and, therefore, are capable of falling within the concept of ‘extraordinary circumstances’ (para. 30).
On the obligations of an aircraft carrier (Finnair) versus those of an aircraft manufacturer (Airbus), the Court stated that,
‘it actually falls within the remit of that carrier to identify and correct that defect, with the result that the carrier cannot be considered to exercise control over the occurrence of such a defect.’ (para. 34).
Conclusion
Accordingly, the operative part of the judgment was that Article 5(3) of the Regulation,
‘must be interpreted as meaning that the occurrence of an unexpected and unprecedented technical failure affecting a new aircraft model recently put into service which results in the air carrier cancelling a flight is covered by the concept of ‘extraordinary circumstances’, within the meaning of that provision, where the manufacturer of that aircraft recognises, after that cancellation, that that failure was caused by a hidden design defect concerning all aircraft of the same type and impinging on flight safety‘.
A victory, in this case, for Finnair.
This judgment of the Court of Justice will be one of the last it has delivered under the Air Passengers Rights Regulation. Following the 2024 reform of the Statute of the CJEU, such cases on that Regulation referred to the CJEU under the reference for a preliminary ruling procedure will be heard by the General Court.
Text of the judgment
The judgment of the Court of Justice of the European Union in Case C-385/23, Finnair (Fuel tank design flaw) delivered in June 2024 can be read here.