What now?

Does Brexit mean a new regime or as you were on air passenger rights? SUE BARHAM MRAeS, Partner at Holman Fenwick Willan, takes a look at the legal implications of Brexit on airlines operating in the UK.

Much has been written since 24 June as to the potential impact of Brexit on the aviation industry but, while it is easy to point to the legal framework within which international aviation currently operates in the EU and the options for what that framework might look like post-Brexit, anything which goes beyond informed speculation as to the future is much more of a challenge.

Business as usual?

Which post-Brexit model to choose? (Heathrow Airport) 

On the one hand, it seems unthinkable, whatever the terms of the UK’s withdrawal from the EU, that the UK airline industry will not continue to enjoy the same traffic rights within and across the single European market from which it has benefited since the 1990s. Without that, the route networks and businesses of both legacy and, especially, low-cost UK carriers will be severely impacted. On the other hand, important though it undoubtedly is, aviation is not the only industry whose needs must be urgently addressed both before, during and after withdrawal negotiations. It is inevitable that wider factors, including how the politically fraught question of freedom of movement will be addressed in such negotiations, will have an influence.

It is worth bearing in mind, for example, that the two models for continued access to EU open skies which have been touted as most likely and appropriate for UK airlines post-Brexit – the Norwegian model based on the UK becoming part of the European Common Aviation Area, or the Swiss model based on a bilateral agreement between the UK and the EU – come with the added application of the fundamental EC Treaty principles. In Switzerland’s case it is because the air transport agreement is one of a package of inter-dependent agreement while; in Norway’s case through the latter’s membership of the European Economic Area. The question of whether, and how, the UK might continue to adhere to a version of those principles is potentially difficult to divorce from the UK aviation industry’s wish post-Brexit for European operations to continue as before.

Balance of rights

Could Brexit provide an opportunity for UK airlines to escape EU passenger compensation rules? (ricoeurian)

Liberalisation of aviation in the EU in the 1990s, the growth of low-cost carriers and greatly increased access for the travelling public to affordable air travel also spawned an explosion in EU consumer protection regulation and a much enhanced focus on the rights of air passengers. Questions have been raised in some quarters as to whether, whatever the uncertainties and disruption that Brexit creates, it might also provide an opportunity to row back from some of the more broad-ranging regulation which comes with membership of the EU. For example, is this the chance for the UK airline industry – and indeed those non-EU carriers who operate to the UK – to be relieved of some of the increasingly onerous and expensive liabilities under EU air passenger rights legislation, most notably EC Regulation 261/2004 on denied boarding, cancellation and delays?

It is beyond question that the vast majority of airlines strive hard to look after the needs of their passengers on the relatively rare occasions flights are disrupted, cancelled or delayed. Many airlines rightly pride themselves on their customer service and actively build their reputation upon it. However, it is also beyond question that the vast majority of airlines to whom it applies would happily see the back of EC Regulation 261/2004 in its current form. Compensation obligations in particular have been extended by the courts (not least the Court of Justice of the European Union) far beyond what anyone envisaged when the Regulation came into being 11 years ago. Over that time, the ground has shifted from an airline being penalised under the Regulation if it delayed or cancelled flights or denied boarding to passengers for commercial reasons of their own choosing, to a fluid and extraordinarily broad concept of what events may be deemed to be within the airline’s control and for which it must pay compensation. When English County Court decisions ordering compensation to be paid for delays caused by bird strikes and lightning strikes raise only a world-weary eyebrow and a frustrated sigh in the industry, it is clear just how far the scales are now weighted in favour of the consumer. Does Brexit provide an unexpected way out of this either for the UK industry or for airlines operating to the UK?

A controlled brake

What effect will Brexit have on the UK airline industry? (Gatwick Airport)

In purely strict legal terms, once the UK withdraws from the EU – ceasing to be a party to the EC Treaty and repealing the European Communities Act 1972 – those EU laws which currently have legal force in the UK will cease to apply. So, absent from anything to go in its place, Brexit would indeed mean the end of Regulation 261. Consumer protection, however, is not a concept invented by the EU and one suspects strongly that, if Regulation 261 ceased to apply, the UK Government would put similar legislation in its place, either of its own accord or following lobbying pressure, and that any new law would likely look very similar to Regulation 261. One only has to consider the air passenger rights rules implemented in countries as disparate as India, Bahrain, Brazil and the Philippines to see that Regulation 261 is frequently taken as the model starting point for such laws. Nevertheless, this novel situation could theoretically present an opportunity for the UK industry to influence any new passenger rights legislation with a view to watering down the worst excesses of Regulation 261 and, in particular, the CJEU judgments which have extended its scope, and thereby put some brake on the claims industry which has grown up and its financial impact on airlines.

However, as noted earlier, it is apparent even at this early stage and long before Article 50 of the EC Treaty has even been triggered, that continued access to EU traffic rights is essential for the UK airline industry. Taking either the Swiss or Norwegian model, access to the single European market tends to come at a cost and, for aviation, one of the costs is the requirement to adopt as part of their national law a broad suite of EU aviation regulations which currently apply to airlines operating in the EU, from safety regulation and licensing, to noise rules and to consumer protection, including Regulation 261.

It is difficult to predict at this point precisely where the relative bargaining strengths will lie in withdrawal negotiations. It is worth remembering, for instance, that EU airlines will wish to preserve their own traffic rights to the UK which are threatened by Brexit, so the negotiating will by no means be only one way. There are also interests of non-EU airlines to keep in mind, some of which benefit from the access to European routes through code-shares with UK airlines. Plus there are potential nuances. Switzerland, for example, by virtue of its aviation agreement with the EU, must apply Regulation 261 (though even on that there are differing legal views on whether that applies to flights other than those between Switzerland and the EU). Swiss Courts are not, however, clearly bound by judgments of the CJEU which post-date its agreement with the EU including, for example, Sturgeon on compensation for delayed flights. An approach, however, which allows the UK to disregard the more unpopular CJEU passenger rights judgments is very unlikely to be an option, while one can expect consumer rights interests to lobby strongly for UK passengers not to lose their current rights in any new regime.

While a Brexit which enabled airlines operating from the UK to avoid paying Regulation 261 compensation for flight delays might start to look attractive to industry, it is questionable whether there will ultimately be any will for the UK to adopt a national piecemeal approach to regulation in an industry where the benefits of international uniformity of laws have long been recognised. In short, it is far too early to start tearing up our well-thumbed copies of Regulation 261.

 

(On 27 October 2016 at the RAeS HQ , London, 'The Brexit Question' will be debated in a special one-day conference organised by the Royal Aeronautical Society. For more details see here.)  


16 September 2016