Book now, regret later
Lars Rosenberg Overby
The European Court of Justice (ECJ) has rendered a decision that is likely to be of interest to those involved in the carriage of passengers in the European Union and European Economic Area.
The case (C-570/19) concerned the ferry operator Irish Ferries, which had planned to open a new route between Dublin in Ireland and Cherbourg in France. For this purpose, a new-built ferry had been ordered from a German shipyard for delivery on 26 May 2018. After having received the yard’s confirmation that the ferry would be delivered on time, Irish Ferries opened for bookings as per 12 July 2018. Later the shipyard gave notice of delay and so Irish Ferries had to cancel a number of passengers. Subsequently, a second notice was given due to problems with sub-contractors and another batch of passengers had to be cancelled. In the end the new-built ferry was delayed by 200 days and some 20,000 passengers were affected but no one was informed of cancellation less than seven weeks in advance.
Irish Ferries offered the passengers the choice between a refund, rerouting at Irish Ferries’ expense or transport by other routes (including part land transportation). The latter included compensation for extra costs, though there was some controversy as to whether everybody had been indemnified for fuel costs for their cars. Irish Ferries said that this was in accordance with the applicable EU regulation 1177/2010 concerning the rights of passengers when travelling by sea and inland waterway.
Of these 20,000 passengers:
- 15 per cent accepted a refund;
- 3 per cent chose the ‘land bridge’ route; and
- 82 per cent travelled by alternative routes being rerouted by Irish Ferries.
The Irish National Transport Agency (having authority to supervise compliance with the regulation) disagreed and asserted, among other things, that the passengers were only entitled to compensation for the delay and that this compensation was to be calculated by reference to the total ticket price including all extra services. Eventually, the dispute was referred to the Irish courts which, in turn, put a number of questions to the ECJ.
The ECJ ruling is the first ruling on this regulation and more than ten unresolved issues were addressed in the judgment. As Irish Ferries experienced, lost revenue comes in addition to the costs of honouring the passenger rights in the regulation. The mandatory nature of the regulation makes contracting out complicated.
Among the issues decided in the judgment, the following are likely to increase the risk of ferry operators that accept bookings a long time ahead of scheduled departures without being certain that they will actually have the necessary capacity available:
- Regulation 1177/ 2010 (Articles 18 or 19) applies even if the affected passengers are given at least seven weeks’ notice of cancellation;
- if the contract is rerouted the right to compensation for delay shall be decided by reference to the original contract;
- when there are no ‘like-for-like’ alternatives, rerouting over land is an alternative which passengers are entitled to;
- a passenger who accepts a refund is not entitled to any of the benefits in the regulation;
- a passenger who is entitled to rerouting is also entitled to compensation for delay;
- the ticket price that is used as a reference when calculating delay compensation includes additional services; and
- the delay in delivery caused by the shipyard does not qualify as an ‘extraordinary circumstance’ that relieves the carrier of its obligations.
No shipyard in its right mind accepts liability of open-ended consequential damages, and liquidated damages are capped as a matter of course. Consequently, the carrier will not be able to transfer the risk of responsibilities towards passengers to the shipyard in the new building contract. When the capacity is chartered in, the risk will usually also be borne by the carrier. Consequently, carriers trading in the area where the regulation applies (see Article 2 (1)) are well advised to have regard to the passengers’ rights under the regulation.