Insights

In a preliminary ruling delivered by the Court of Justice of the European Union (the “CJEU” or the “Court”) on the 23 March 2021 in the case of Air Help Ltd vs Scandinavian Airline System (hereinafter “SAS”), the Court had to consider whether a strike organised by an air carrier intended to secure pay increases constitutes an ‘extraordinary circumstance’ under Article 5(3) of Regulation No. 261/2004 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”).

In the particular case at hand, a passenger (hereinafter “S”) booked a flight from Malmo to Stockholm on 29 April 2019 to be operated by SAS. On the day of the flight, the passenger was informed that the flight was cancelled due to a strike by SAS’s pilots in Denmark, Sweden, and Norway. The strike in question began on 26 April 2019 and continued until 2 May 2019, which resulted in the cancellation of more than 4,000 flights. Being a passenger negatively impacted by the strike, S assigned his right of action against SAS to claim compensation for the cancellation of his flight to Air Help Ltd. On 2 May a new collective agreement with the pilots’ trade union was concluded and SAS commenced its operations.

Air Help Ltd brought proceedings against SAS for the payment of compensation due under the Regulation, together with default interest accrued thereon, before the Swedish District Court. SAS argued that in terms of Article 5(3) of the Regulation, it was not obliged to pay compensation, since the cancellation of the flight was caused by extraordinary circumstances, which it could not have avoided even if all reasonable measures had been taken.

SAS argued that the strike was an ‘extraordinary circumstance’ since it was not inherent in the normal exercise of its activity and was beyond its actual control. The decision by four trade unions to hold a simultaneous strike does not fall within the normal exercise of SAS’s activity, which consists of providing air transport services. Furthermore, strikes are very uncommon in the Swedish labour market and the strike at issue, which in principle involved every SAS pilot, was one of the biggest strikes ever recorded in the air transport industry. In this regard, SAS also referred to the Swedish law on workers’ participation in decisions which provides that a proposed industrial action is to be notified to the opposing party (in this case SAS) and the National Mediation Office in Sweden. SAS could not, therefore, reorganise its activity to be able to operate the planned flights. Moreover, as the strike at issue was lawful, SAS could not order the employees to return to work.

Air Help Ltd contended the argument raised by SAS that the strike constituted an extraordinary circumstance on the basis that the conclusion of collective agreements falls within the ordinary course of business of an airline and labour disputes may arise during negotiations, including industrial actions. Moreover, in the light of the evolution of SAS pilots’ salaries in the preceding years, this labour dispute could have been foreseen by SAS.

The Swedish District Court was uncertain whether the concept of ‘extraordinary circumstances’ encompasses a strike, which has been announced by workers’ organisations following the giving of notice and has been lawfully initiated. Therefore it referred the matter to the Court for a preliminary ruling.

Primarily the CJEU re-affirmed the well-established principle that a passenger is entitled to compensation from the operating carrier of a cancelled flight unless duly notified within the timeframes established by the Regulation. The exception to this general principle is Article 5(3), which exonerates the operating carrier from such an obligation if it proves that the cancellation is caused by an extraordinary circumstance. The Court noted that it is incumbent on the operating carrier to demonstrate 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, to prevent that situation from resulting in the cancellation of the flight in question. The operating carrier cannot, however, be required to make sacrifices that are intolerable in the light of the capacities of its undertaking at the relevant time.

Referring to established case-law, the Court explained that the concept of ‘extraordinary circumstances’ refers to those events which, (i) by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and (ii) are beyond that carrier’s actual control. These two conditions are cumulative and their fulfilment must be assessed on a case-by-case basis. Nevertheless, since the fundamental purpose of the Regulation is to afford a high level of protection for passengers, the derogation provided in Article 5(3) is to be applied strictly. In this instance, one must determine whether a strike entered into upon a call by a trade union of the staff of an operating air carrier, in compliance with the conditions laid down by national legislation, in particular the notice period imposed by it, which is intended to assert the demands of that carrier’s workers and which is followed by one or more categories of staff whose presence is necessary to operate a flight is capable of constituting an ‘extraordinary circumstance’ within the meaning of Article 5(3).

The Court reiterated that the right to take collective action is a fundamental right laid down in Article 28 of the Charter of Fundamental Rights of the European Union (the “Charter”) and that right is protected by EU law and national laws and practices. A strike remains one of how collective bargaining may manifest itself and, therefore, must be regarded as an event inherent in the normal exercise of the activity of the employer concerned, including, in this case, an operating carrier. When carrying out their activities, operating carriers will be faced with disagreements or conflicts with all or part of their staff.

Therefore, a strike whose objective to obtain from an air transport undertaking an increase in the pilots’ salary, a change in their work schedules, and greater predictability as regards working hours, constitutes an event that is inherent in the normal exercise of that undertaking’s activity, in particular where such a strike is organised within a legal framework.

Also, considering that the right to strike for workers is guaranteed by the Charter, the launch of a strike must be regarded as foreseeable for any employer, particularly where notice of the strike is given. In the case at hand, the Court noted that the strike was foreseeable since the trade union had terminated the collective agreement meaning that SAS could not be unaware that the pilots intended to put forward their demands. This meant that SAS had, in principle, the means to prepare for the strike and mitigate its consequences.

Accordingly, the Court held that a strike action which is entered into upon a call by a trade union of the staff of an operating air carrier, in compliance with the conditions laid down by national legislation, intended to assert the demands of that carrier’s workers, does not fall within the concept of an ‘extraordinary circumstance’ within the meaning of Article 5(3).