KKO:2021:69 – Obligation of air passengers to give a prior notice of breach in due time in order to receive compensation for flight delay

Diary number: S2020/266
Issued on: 27.9.2021
ECLI:FI:KKO:2021:69

Legal context

Dispute in the main proceedings

The air carrier’s (Finnair) flight from Helsinki to Chongqing, China, on 9 January 2013 had been cancelled, which had resulted in a delay of more than 24 hours before the passengers reached their destination. The passengers had delivered their first claim for compensation to the air carrier on 26 February 2015. According to the passengers, the air carrier had failed to give them written notice of their right to compensation.

Since no such compensation was paid by the air carrier the passengers sued the air carrier and demanded that it be obliged to pay EUR 600, plus interest, to each of them as compensation for cancellation (“standard compensation”), as referred to in Regulation (EC) No 261/2004 of the European Parliament and of the Council establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights (“the Regulation”).

The dispute before the Supreme Court concerns whether the air passengers had the obligation to submit a prior notice in reasonable time in order to retain the right to standard compensation, as referred to in the Regulation, and what effect, if any, did the failure of the air carrier to inform the passengers of their right to compensation under the Regulation have on the passengers’ obligation to submit a claim.

Standard compensation for delay under the Regulation

According to Art. 5(1)(c) of the Regulation, in case of cancellation of a flight, the passengers concerned shall have the right to compensation by the operating air carrier in accordance with Article 7. The right to standard compensation arises also if a scheduled flight is delayed and the passengers re-routed to another flight which arrives to the destination with a delay of at least three hours from the original schedule (Nelson et al., judgment 23 Oct 2012, joined cases C 581/10 and C 629/10, EU:C:2012:657, para. 31). In such a situation, under Art. 7(1)(c) of the Regulation, the passengers shall receive compensation amounting to EUR 600 for a flight out of the EU of more than 3,500 kilometres.

Air carrier’s obligation to inform the passengers under the Regulation

According to Art. 14(2) of the Regulation, an operating air carrier denying boarding or cancelling a flight shall provide each passenger affected with a written notice setting out the rules for compensation and assistance.

According to Art. 15(2) of the Regulation, if a passenger is not correctly informed of his or her rights and for that reason the passenger has accepted lesser compensation than that provided in the Regulation, the passenger is entitled to take the necessary proceeding before the competent courts or bodies in order to obtain additional compensation.

Obligation to submit a claim under EU law

The Regulation contains no provisions regarding a time limit for the submission of a claim for compensation nor on whether a passenger must give prior notice to the air carrier claiming the latter having breached its obligations in order to retain the right to submit a claim for compensation.

According to the established case-law by the Court of Justice of the European Union, the imposition of preclusive time limits is compatible to the requirement of effectiveness, because such limits promote legal certainty. Such time limits do not, in general, render the exercise of rights under EU law practically impossible or unreasonably difficult.

The CJEU has held that, as the Regulation contains no provision on time limits for bringing action for compensation under Articles 5 and 7, it is for the domestic legal system of each Member State to lay down such time limits. These time limits must observe the principles of equivalence and effectiveness (judgment 22 Nov 2012, Cuadrench Moré, C-139/11, EU:C:2012:741, paras. 24–26).

Domestic rules governing claims for compensation

It is not stipulated in, with the exception of so-called package travels, Finnish domestic legislation that an air passenger is obligated to submit a claim in order to acquire compensation.

In many treaties concerning international travel or transport, as well as in many national jurisdictions, an obligation is imposed on a contracting party to give prior notice to the other contracting party of any breaches or delays in the performance of the contract.

According to established case-law by the Supreme Court, a contracting party invoking a breach must generally give the other party prior notice of its position within a reasonable time. This obligation is considered to be a general principle of contract law also in the other Nordic Countries (See. Högsta domstolen, dom 15 Mar 2018, Turkish Airlines mot EC m.f., mål nr T2659-17 and Norges Høyesterett, dom 14 Dec 2020, Nilsen mot Finnair, sak nr. 19-186250SIV-HRET; these cases had different outcomes as regards the obligation to submit a claim for standard compensation).

This being said, the obligation to give notice is, however, not absolute in breach situations. The main exception, both in legislation and in principle, is gross negligence or dishonourable or infamous conduct of the party in breach (see e.g., KKO 2018:11 para. 35 and KKO 2008:8, para. 11).

Reasoning of the Supreme Court

Obligation to give prior notice in the present case

As a settled general principle of contract law, the obligation to give notice is generally applicable also in situations such as the present one. Thus an air passenger should give prior notice or submit a claim for compensation within a reasonable time in order to retain his or her right to compensation. Such an obligation is not per se incompatible with the principle of equivalence in EU law.

In the present case, the flight had been completed as a service, albeit rerouted and delayed, and therefore it is not a persistent delay situation which would make the giving of prior notice redundant. This conclusion is grounded also by the fact that an air carrier is not subject to an automatic obligation to provide compensation under Article 5 or 7. Rather the passenger should first submit a claim for compensation.

The claimants aver that there is no need for prior notice in the event of cancellation or delay of the flight, as the air carrier is anyway aware that it is in breach of its obligations and can anticipate that claims for compensation will be submitted.

The air carrier has stated that prior notice of passengers is of crucial importance. Once a passenger gives notice of a defect in the performance of the contract, the air carrier must always carry out a passenger-specific and flight-specific investigation and an assessment of the possible ground for its liability. The longer the delay, the more difficult this task is. The air carrier avers that it must be able to rely on the passenger being content with the performance of the service or, for example, on that the delay has been meaningless to the passenger, if he or she has not given prior notice within a reasonable time. The obligation to give prior notice is relevant also in that the air carrier may in turn be entitled to claim compensation from a third party responsible for the defect.

The Supreme Court concluded that the obligation of an air passenger to submit a claim for compensation or to give prior notice of breach of contract to air carrier within a reasonable time is not unnecessary on the part of the air carrier nor otherwise contrary to the general objectives of passivity sanctions, nor does it impose an unequal burden on different contracting parties.

The Supreme Court agreed with the court of appeal and district court that in order to retain their right to compensation under the Regulation, the air passengers had had the prima facie obligation to give prior notice to the air carrier or to submit a claim for compensation within a reasonable time.

Significance of the air carrier’s failure to provide information

Normally, prior notice must be given within a reasonable time of the contracting party becoming aware of the breach, or of such time when that party ought to have become aware of it. In the present case, the claimants had argued that the time limit had no relevance, as they had had to determine their rights as passengers under the Regulation on their own initiative because the air carrier had failed to inform them of these rights. The obligation to give notice cannot arise merely from the fact that it could be seen that there had been a failure to perform the contract, but it is a requirement also that a contracting party understands that the breach is such that it gives rise to the liability of the other contracting party to pay compensation.

The standard compensation of the Regulation, the level of which is passed on the distance of the travel, is meant to compensate the passenger for the waste of time and other inconvenience caused by the cancellation or delay of the flight. The inconvenience that is intended to be covered by the standard compensation is such that, in general, liability for compensation for it arises only exceptionally. Also in this view, the requirement that the passengers be adequately informed of their right to standard compensation is emphasised. The obligation of the air carrier to provide information is underlined also by the fact that the liability to pay a standard compensation for delay is not based directly on the Regulation, but rather on the case-law of the Court of Justice of the European Union.

It is settled case-law that provisions conferring rights on air passengers must be interpreted broadly (judgment 22 Apr 2021, WZ v. Austrian Airlines, C-826/19, EU:C:2021:318, para. 61 with citations). The objective of the Regulation is to strengthen the protection of air passengers by redressing the damage suffered during air travel in a standardised and immediate manner (Sturgeon et al., paras. 49 and 51). For instance, it is required by Article 14(2) of the Regulation that, in case of cancellation, the air carrier provides the passengers with written notice of the rules governing compensation and assistance. Under the relevant case-law, as regards the clarity of the obligations imposed on air carriers, the principle of legal certainty requires that air passengers should be able to ascertain unequivocally what their rights and obligations are (Nelson et al., para. 66). The interlinkage of the obligation of the air carrier to provide information and the effective exercise of passengers’ rights appears also in para. 20 of the Preamble to the Regulation.

When discussing the provisions in Article 8 and 9 of the Regulation concerning the care of and assistance to air passengers, the Court of Justice of the European Union has evaluated the criteria for receiving compensation under the Regulation otherwise than by reference to Article 7. The CJEU has held that the Regulation does not prevent the award of compensation in a situation where the air carrier has not performed its obligations under Article 8 and 9 even if the air passengers have not invoked these provisions. The Advocate General had stated that domestic legislation resulting to the preclusion of compensation if the claimant does not make a specific reference to the provisions of the Regulation would be incompatible with union law, if its effect would be to deprive the claimants of their rights under the Regulation (judgment 13 Oct 2011, Sousa Rodríquez et al., C-83/10, EU:C:2011:652, para. 45 and opinion of Advocate General Sharpston, Sousa Rodríquez et al., C-83/10, EU:C:2011:427, para. 61, as cited by the CJEU). Moreover, the CJEU has held that it is for the operating air carrier to bear, on its own initiative, the cost of transferring the passenger to another airport under Article 8(3) of the Regulation even though this liability is not specifically mentioned in that provision (WZ v. Austrian Airlines, para. 63).

The case-law thus supports the conclusion that the failure of the passengers to give prior notice or to submit a claim for compensation in due time does not preclude the standard compensation under the Regulation being paid, if the air carrier itself has failed to perform its obligations under the Regulation intended to safeguard the interests of the passengers. Any other conclusion would undermine the availability of standard compensation under the Regulation and hence the effectiveness of EU law. Moreover, the provisions in Article 15(2) of the Regulation can be stated to reflect the principle that a failure by the air carrier to meet its obligation to provide information to the passengers cannot result in the curtailment of the rights of those passengers.

Ruling by the Supreme Court

The Court of Appeal had determined that the air carrier had failed to meet its obligation to provide information to the passengers under Article 14 of the Regulation. The issue at hand is whether those passengers should in the present case have notified the air carrier of their claims arising from the delay in accordance with the established domestic general principle of contract law governing the time limits of such prior notices.

Taking due note of the objective of the Regulation which is to improve the level of protection of air passengers and the concomitant concept of standard compensation, the significance of the obligation of the air carrier to provide information to the due process rights of the passengers, and the interlinkage, noted in European case-law, of the air carrier’s obligation and the effective exercise of passenger rights, the Supreme Court held that once the air carrier had failed to fulfil its obligation to provide information under Article 14, the claimants were no longer required to give prior notice in order to invoke their right to standard compensation.

Accordingly, the Supreme Court concluded that the passengers had not forfeited their right to standard compensation even though they had invoked this right as late as two years 2 months after the delayed flight.