Airline challenge of passenger protection rules crashes and burns

The Supreme Court of Canada has ruled that airlines that fly in and out of this country can be required to compensate passengers for international disruptions.

The unanimous decision dismissed an appeal by a coalition of airlines which claimed Canada’s regulatory scheme of passenger protections violated international law, specifically the Montreal Convention.

The Convention, signed by Canada in 2001, lays out the conditions under which an action for damages may be taken against an airline. The airlines argued that the Canadian Transportation Agency (CTA)’s regulations, which mandate compensation in a standardized manner for international flight delays, cancellations and denial of boarding, as well as refunds of baggage fees, contravened the Convention’s exclusivity principle, which prevents actions for damages for conditions and limits that are not part its Article 29.

The Federal Court of Appeal dismissed the challenge, with the exception of provisions related to temporary loss of baggage, because the compensation provided didn’t qualify as action for damages. The airlines appealed that decision to the country’s top court.

“The regulations do not provide for an ‘action for damages’ because they do not provide for individualized compensation,” Justice Malcolm Rowe wrote for the Court.

“The entitlements provided for are not tied to harm suffered by claimants as a result of injury caused by another. Rather, the regulations create statutory entitlements as part of a consumer protection scheme that operates irrespective of the harm (if any) suffered by the claimant.”

Rowe added that as a result, the regulations don’t rise to the liability contemplated by Article 29 of the Convention.

Gábor Lukács from Air Passenger Rights, who self-represented as an intervenor in the case, calls the ruling a victory for consumers.

“The Court decision breathes new life into the initiative to revamp the [Air Passenger Protection Regulations], and correct its many shortcomings,” he says.

“Canada needs an EU-style regime, which has been tested and works.”

Lukács is particularly happy with the part of the decision that affirms Canada didn’t agree to forgo its ability to provide minimum standards of treatment for passengers when it signed the Convention. Rather, those costs are a condition of licensure for carriers with access to the Canadian market.

As well, he says the recognition of the regulations as a consumer protection measure will help passengers down the line in court battles.

John Lawford is special counsel at the Public Interest Advocacy Centre, which also intervened in the case. He says the broader implications of this decision is encouraging for consumer protection in Canada.

“Airlines are live with this in Europe and many other countries, and it underlines that most passengers don’t want to bring the kind of individualized personal claim where they prove their damages and go to a court and argue with lawyers from airlines,” he says.

“They just want some acknowledgement of their dignity and their loss of plans and time if they’re delayed or cancelled.”

Lawford says this is a gentle nudge for airlines to reconsider their practices and the human element, and notes that passengers still need to make a claim with the CTA. All passengers on a flight aren’t compensated automatically.

There are a number of consumer protection regimes that operate similarly to the CTA regulations, including telecom and banking, which are meant to cover high-volume, low-value claims.

“The decision endorses that model,” Lawford says. “If it had gone the other way, it would have undercut what we have worked on the last twenty years.”

Lukács thinks it was interesting that the decision referenced the Canada Transportation Act as it exists today and not its state when the challenge was first launched, or even when the Federal Court of Appeal decision was written, particularly the complaint resolution process which did not exist at those earlier points.

He says that distinguishing between the regulatory scheme and actions for damages was an “interesting way” of dealing with problems with the Convention, but he argued in his factum that it should be dealt with under Article 27, which expressly permits carriers to contractually waive defences available under the Convention.

“That would have been my preferred way of solving it,” Lukács says.

“It is far less contrived than what the Federal Court of Appeal ruled, which was focused more on how the damages are being enforced. The Supreme Court of Canada has moved away from that.”

He is left wondering how this impacts human rights concerns onboard flights, such as passenger discrimination, which remains an ongoing issue.

Michael Dery, the chair of the Canadian Bar Association’s air and space law section, says the Court’s decision signals the waning importance of the Convention, even though it continues to exist in tandem with the regulations.

The Convention was meant to be the be-all and end-all for international travel, but that’s being eroded by consumer protection regulations that are now filling the space. Other countries are doing the same, he notes.

“We don’t see a lot of Convention claims anymore,” he says. “They have reduced because people are simply pursuing compensation under the regulations.”

Dery says the regulations at issue in the decision are being revamped again, with the industry currently waiting on the new draft from the CTA. Had the Supreme Court ruled the other way and struck down the regulatory scheme, that process may have been derailed.