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Supreme Court orders Iberia to cease using abusive terms and conditions

On 13 November 2018 the Supreme Court (Civil Chamber) issued its judgment(1) following cessation proceedings against a Madrid Provincial Audience judgment of 17 July 2015. The proceedings stemmed from a 2011 collective action against Iberia, Líneas Aéreas de España SA, which the Spanish Consumers and Users Organisation had filed with the Madrid Commercial Court in order to obtain the annulment of several clauses of Iberia’s standard terms and conditions.

Facts

Both the Madrid Commercial Court and the Madrid Provincial Audience considered that some of Iberia’s terms were abusive and therefore declared them null and void. Both bodies ordered Iberia to cease using these clauses and to publish the rulings in the media. Iberia partially accepted the Madrid Provincial Audience’s decision, but lodged an appeal in cessation before the Supreme Court in respect of certain findings. However, the Supreme Court dismissed Iberia’s appeal.

Decision

Iberia first challenged the alleged abusiveness of Clause G1 of its terms and conditions, which stated as follows:

The carrier undertakes to make every effort to transport the passenger and their luggage with reasonable diligence. In case of need, the carrier can be replaced by another carrier, use third party aircraft or modify or suppress scales provided in the ticket. The carrier, unless otherwise indicated on the ticket, does not assume the responsibility of guaranteeing connections with another flight at the destination point.

The Madrid Provincial Audience considered that the phrase ‘in case of need’ was abusive, as it allowed Iberia to unilaterally modify relevant aspects of its air transport contracts without clearly specifying the reasons for doing so. Iberia insisted that this phrase must be interpreted in light of the best efforts and reasonable diligence commitment and that it therefore created a discernible, objective standard which could be identified with a genuine supervening impossibility.

However, the Supreme Court considered that the clause was too broad and could not be remedied by a strict interpretation. According to the Supreme Court, an airline’s basic obligation is to transport passengers from one point to another in accordance with the contractually agreed terms. Under the EU Flight Delay Compensation Regulation (261/2004), airlines have a duty to minimise the impact of supervened circumstances that may render such transportation impossible. Using the European Court of Justice’s strict interpretation of the term ‘extraordinary circumstances’ as a starting point, the Supreme Court concluded that:

  • Iberia’s general terms and conditions could not exonerate it from this basic responsibility; and
  • the phrase ‘in case of need’ was too generic and wide, as it could cover situations which exceed what can be considered extraordinary circumstances.

A second point of dispute concerned the last sentence of Clause G1, whereby Iberia generally rejected liability for missed connections unless otherwise specified in the relevant ticket. The Supreme Court plainly rejected Iberia’s allegations. While the court accepted that the airline may not always be liable, the clause was found to be too broad and left the decision exclusively to Iberia, thereby damaging consumers’ rights.

Iberia also challenged the Madrid Provincial Audience’s declaration that its no-show clause (contained in Clause G2 of its terms and conditions) was abusive. The clause read as follows:

Depending on the type of fare, type of service, stay at destination, offer, etc., you can make your reservation for one way or for return flights. Without regard to the fare which may be applied, if any one of the purchased routes is not used, the remaining routes included in the same ticket will be automatically cancelled.

Iberia argued that the no-show clause was a basic element of its pricing policy because the sale of individual or separate routes generates a higher revenue than the sale of bundled routes, such as return tickets. The Supreme Court acknowledged that the decision to offer different prices is a legitimate option for an airline to take, but considered that consumers’ use of only one of several purchased flights would not harm Iberia, as a passenger’s absence does not entail a cost increase. The Supreme Court further stated that airlines suffer damage only where a ticket is sold at a price which is lower than that of any one route taken individually – and even then only if the carrier suffers actual damage and the passenger has bought the ticket with the purpose of taking only one of the routes.

The Supreme Court considered that there are many reasons why a passenger may be a no show and that these can stem from unforeseen events. Consequently, the clause was deemed to contravene the good faith requirement, as it created a significant imbalance between the rights and obligations of the parties, particularly where a consumer had already been charged full price.

Comment

This decision is interesting for a number of reasons. First, the phrase ‘in case of need’ is included in the terms and conditions of many carriers – not just in air transportation, but also in other means of transport. The same can be said for the issue of liability for connecting flights, as many carriers include similar terms in their contracts with passengers. Following the Supreme Court’s findings, carriers should review such terms in order to ensure that they are compliant. A decision finding such terms to be abusive would automatically entail that they are null and void and prevent an airline from using them even if they are appropriate under the specific circumstances of the case.

As regards the no-show clause, the Supreme Court confirmed an opinion that has frequently been sustained by the lower courts. However, it remains to be seen if this position can be upheld in the future, as no shows are among the issues which are being debated in the proposed amendment to EU Regulation 261/2004. While the initial versions of the draft regulation stated that the cancellation of a flight due to a no show would be treated as a denied boarding, more recent versions seem to indicate that the regulator’s position may be more flexible in this respect.

For further information on this topic please contact Sergi Giménez Binder at Augusta Abogados by telephone (+34 933 621 620) or email (s.gimenez@augustaabogados.com). The Augusta Abogados website can be accessed at www.augustaabogados.com.

Endnotes

(1) Judgment 631/2018.

Pablo Giménez Moreno, PhD student, assisted in the preparation of this article.

This article was originally posted on ILO by Augusta Abogados on December 19, 2018.

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