CONSTRUING REGULATIONS AFTER BREXIT: COURT OF APPEAL GUIDANCE: THE CASE OF THE ABSENT PILOT
I am grateful to my colleague Michael Rawlinson QC for sending me a copy of the Court of Appeal judgment in Lipton -v- BA City Flyer Limited  EWCA Civ 454. The judgment of Lord Justice Green contains a comprehensive review of how regulations and statutes should be approached following Brexit.
“As at this point in time a new set of legal arrangements are in place which governed the relationship of the UK to EU law. The Court cannot therefore assume that the old ways of looking at EU derived law still hold good. We must apply the new approach. There is much that is familiar but there are also significant differences.”
The Court was considering an appeal on the issue of whether a aircraft pilot’s illness was an “extraordinary circumstance”. If it was then the defendant did not have to pay compensation for a flight that was delayed due to illness. The Court of Appeal overturned the decisions below and found that this was not an extraordinary circumstances but was foreseeable. The judgment of Lord Justice Green contains a detailed analysis of the way in which the courts should approach issues of construction following the UK’s departure from the EU.
THE JUDGMENT OF LORD JUSTICE GREEN
This judgment contains a detailed consideration of the way in which the courts should approach statutory construction following Brexit.
LORD JUSTICE GREEN
I agree with the judgment of Lord Justice Coulson, for the reasons that he has given, and I also would allow the appeal. This appeal boils down to a conclusion that it forms part of the normal operating system of an airline that it should make provision for the sickness of its staff and in particular key staff such as pilots. The risk of non-attendance of workers is an inherent risk which any airline needs to cater for. The unavailability of a pilot is a predictable event and if it occurs the risk that a scheduled flight might not be able to take of is self-evident. It is not out of the ordinary and as such if it occurs and becomes the cause of a delay then the duty to compensate arises.
8 THE APPROACH TO BE ADOPTED FOLLOWING EXIT FROM THE EU BY THE UK
In this appeal the Court has had to construe a Regulation emanating from the Parliament and Council of the EU. This is Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91 (“Regulation 261/04”). In coming to a conclusion we have had to construe the recitals to Regulation 261/04 to discover its object and purpose which includes an emphasis on consumer protection and determine how these affect the proper interpretation of the substantive provisions of the measure. We have also had to consider whether there is guidance to be had from the Montreal Convention for the Unification of Certain Rules for International Carriage by Air, which is a treaty whose underlying policy is incorporated by reference into the recitals of Regulation 261/04 and thereby into the meaning of its substantive provisions. We have had to consider judgments of the Court of Justice of the EU (“the CJEU”). We have also had to consider whether a provision of the Trade and Cooperation Agreement signed on 26th December 2020 between the UK and the EU had any relevance.
Submissions and argument advanced to us during the appeal proceeded very much as it would have done in 2019, when the UK was a member of the EU, or even in 2020 when the transitional period (“the Transitional Period”) governing the extrication of the UK from the EU was still in force (until 11pm 31st December 2020). However, the hearing took place in February 2021 when the transitional Period had expired. As at this point in time a new set of legal arrangements are in place which governed the relationship of the UK to EU law. The Court cannot therefore assume that the old ways of looking at EU derived law still hold good. We must apply the new approach. There is much that is familiar but there are also significant differences.
8.1 The new legislative structure following the exit of the UK from the EU and the expiry of the Transitional Period.
Terms governing the departure of the UK from the EU were agreed on 17th October 2019 and came into legal effect on 1st February 2020. This was the Withdrawal Agreement which established the terms of the United Kingdom’s withdrawal under Article 50 TEU (“the Withdrawal Agreement”). The Withdrawal Agreement was implemented into domestic law by a series of measures including the European Union (Withdrawal) Act 2018. This was subsequently amended by the European (Withdrawal Agreement) Act 2020. (“the E(WA)A 2020”) and the European Union (Withdrawal) Act 2018 Exit Day Regulations 2019.
For convenience I refer to the European Union (Withdrawal) Act 2018 in its amended form as the “EU(W)A 2018” .
On 26th December 2020, the UK also entered into a free trade agreement with the EU entitled the “Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part” (“the TCA”). This was incorporated into domestic law by the European Union (Future Relationship) Agreement 2020 (“the EU(FR)A 2020”) which received Royal Assent on 31st December 2020.
8.2 The status of an EU regulation
This appeal has concerned a judgment which addressed the scope and effect of a measure of EU law, i.e. Regulation 261/2004. This is a measure adopted prior to the exit of the UK from the EU and the expiry of the Transitional Period. It was adopted pursuant to Article 80(2) of the Treaty Establishing the European Union (“the TEU”). It is a typical “regulation”. Under EU law it is directly applicable in the sense that it takes effect in the domestic law of the Member States of the EU (which obviously no longer includes the UK) without the need for any domestic law measure of implementation or transposition. It had the force of law by virtue of section 2(1) European Communities Act 1972 (“the ECA 1972”). By the time of the appeal the status of the measure had changed.
Section 3(1) EU(W)A 2018 has the effect of retaining “Direct EU legislation”:
“Direct EU legislation, so far as operative immediately before IP completion day, forms part of domestic law on and after IP completion day’
Under section 3(2) this includes any EU regulation, EU decision or EU tertiary legislation “as it has effects in EU law immediately before IP completion day”, which is the end of the Transitional Period.
Regulation 261/04 was operative prior to IP completion day and therefore continues to have force. Under section 3(4) it is only the English language version of the direct EU legislation that is brought into effect in English domestic law.
Under section 5(1) the principle of supremacy of EU law does not apply to any enactment or rule of law passed or made on or after IP completion day. However, under section 5(2) the principle:
“… continues to apply on or after IP completion day so far as relevant to the interpretation, disapplication or quashing of any enactment or rule of law passed or made before IP Completion Day.”
This means that so far as Regulation 261/04 is concerned the doctrine of supremacy applies. It therefore applies and takes precedence over any other measure of domestic law which might be inconsistent.
8.3 Relevance of general principles of EU law
Under Section 5(4) the Charter of Fundamental Rights is not part of domestic law or on or after IP completion Day. However, under section 5(5) this does not affect the retention in domestic law on or after IP completion day of “…any fundamental rights or principles which exist irrespective of the Charter”. Further, under section 5(5) any:
“… references to the Charter in any case law are, so far as necessary for this purpose, to be read as if they were references to any corresponding retained fundamental rights or principles.”
Schedule 1 paragraph (2), entitled “General principles of EU law”, makes general principles part of domestic law provided they were recognised in relevant case law prior to IP completion day:
“No general principle of EU law is part of domestic law on or after IP completion day if it was not recognised as a general principle of EU law by the European Court of Justice in a case decided before IP completion day (whether or not a essential part of the decision in the case)”.
8.4 The relevance of judgments of the CJEU
Section 6(1) is concerned with the interpretation of retained EU law. It deals both with the binding effect of EU law and with the non-binding persuasive effects of such law. Under the section the English Court is not bound by any principles laid down, or any decisions made by the CJEU, on or after IP completion day and may not refer any matter to the European Court. However, the court can “have regard to” anything done on or after IP completion day by the CJEU or another EU entity or the EU “so far as it is relevant to any matter before the court or tribunal”.
Section 6(3) states that any question as to the validity, meaning or effect of any “retained EU law” is to be decided:
“(a) in accordance with any retained case law and any retained general principles of EU law, and
(b) having regard … to the limits, immediately before IP completion day, of EU competences.
Section 6(7) defines “retained EU law” as anything which continues to be, or forms part of, domestic law by virtue of sections 2, 3 or 4. Regulation 261/04 is part of domestic law by virtue of section 3 and is therefore “retained EU law” for the purposes of section 6(3).
Section 6(7) also defines “retained case law” as including retained EU case law which is “any principles laid down by, and any decision of, the European Court, as they have effect in EU Law immediately before IP completion day”.
Section 6(3) provides that lower courts are bound to decide any question as to the meaning, validity or effect in accordance with the decision of the CJEU made prior to IP completion day. However, section 6(4)(ba) and (5A) empower a relevant Minister to make regulations which provide that a “relevant court” should not be bound by retained EU case law. This power was exercised and by virtue of Regulation 3(b) of the European Union (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020 the Court of Appeal is a “relevant court” for the purposes of section 6.
Under Regulation 4(2) a “relevant court is bound by retained EU case law so far as there is post-transition case law which modifies or applies that retained EU case law and which is binding on the relevant court”. Regulation 5 provides that “[i]n deciding whether to depart from any retained EU case law by virtue of section 6(4)(ba) of the 2018 Act and these Regulations, a relevant court must apply the same test as the Supreme Court would apply in deciding whether to depart from the case law of the Supreme Court.”
8.5 Domestic legislation in relation to passenger compensation
Direct EU legislation, such as Regulation 261/04, can be amended by domestic law. In the present case the Air Passenger Rights and Air Travel Organisers’ Licencing (Amendment) (EU Exit) Regulations 2019 (“the Air Passenger Regulations 2019”) came into force on 31st December 2020. They were made by the Secretary of State in the exercise of the regulation making power under section 8(1) of, and paragraph 21 of Schedule 7 to, the EU(W)A 2018, and section 71 of the Civil Aviation Act 1982.
Regulation 8 amended Regulation 261/04. The cumulative effect is that the present governing law is Regulation 261/04 as amended.
“8.—(1) Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91 is amended as follows.
(2) In Article 1 (subject) omit paragraphs 2 and 3.
(3) In Article 2 (definitions)—
(a) for point (c), substitute—
“(c) ‘Community carrier’ means an air carrier with a valid operating licence granted by a Member State in accordance with Chapter II of Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community as it has effect in EU law;”;
(b) in point (d), for “Article 2, point 2, of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours” substitute “regulation 2(1) of the Package Travel and Linked Travel Arrangements Regulations 2018”;
(c) in point (e), for “Article 2, point 1, of Directive 90/314/EEC” substitute “regulation 2(5) of the Package Travel and Linked Travel Arrangements Regulations 2018”;
(d) after point (l) insert—
“(m) ‘UK air carrier’ means an air carrier with a valid operating licence granted by the Civil Aviation Authority in accordance with Chapter II of Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the United Kingdom.”.
(4) In Article 3 (scope)—
(a) in paragraph 1, in point (a), for “the territory of a Member State to which the Treaty applies” substitute “the United Kingdom”;
(b) for point (b) substitute—
“(b) to passengers departing from an airport located in a country other than the United Kingdom to an airport situated in—
(i) the United Kingdom if the operating air carrier of the flight concerned is a Community carrier or a UK air carrier; or
(ii) the territory of a Member State to which the Treaty applies if the operating air carrier of the flight concerned is a UK air carrier, unless the passengers received benefits or compensation and were given assistance in that other country.”;
(c) in paragraph 6, for “Directive 90/314/EEC” substitute “the Package Travel and Linked Travel Arrangements Regulations 2018”.
(5) In Article 6 (delay), in paragraph 1, in point (b), omit “intra-Community flights of more than 1500 kilometres and of all other”.
(6) In Article 7 (right to compensation)—
(a) for paragraph 1 substitute—
“1. Where reference is made to this Article, passengers shall receive compensation amounting to—
(a) £220 for all flights of 1500 kilometres or less;
(b) £350 for all flights between 1500 and 3500 kilometres;
(c) £520 for all flights not falling under (a) or (b).
In determining the distance, the basis shall be the last destination at which the denial of boarding or cancellation will delay the passenger’s arrival after the scheduled time.”;
(b) in paragraph 2, in point (b), omit “intra-Community flights of more than 1500 kilometres and for all other”.
(7) In Article 8 (right to reimbursement or re-routing), in paragraph 2, for “Directive 90/314/EEC” substitute “the Package Travel and Linked Travel Arrangements Regulations 2018”.
(8) In Article 10 (upgrading and downgrading)—
(a) in paragraph 2, in point (b), omit the words from “intra-Community” to “other”;
(b) in paragraph 2, in point (c), omit the words from “, including” to the end.
(9) In Article 16 (infringements)—
(a)f or paragraphs 1 and 2 substitute—
“1. A body designated under the Civil Aviation (Denied Boarding, Compensation and Assistance) Regulations 2005(3) for the purposes of this paragraph is responsible for the enforcement of this Regulation. Where appropriate, this body shall take the measures necessary to ensure that the rights of passengers are respected.
Without prejudice to Article 12, each passenger may complain to any body designated for the purposes of paragraph 1 or to a body designated for the purposes of this paragraph, about an alleged infringement of this Regulation.”;
(b) omit paragraph 3.
(10) Omit Article 17 (report).
(11) After Article 19 (entry into force) omit the paragraph beginning with the words “This Regulation”.
8.6 Trade and Cooperation Agreement
Finally, the TCA contains an article relevant to consumer protection in relation to compensation in the case of “denied boarding, cancellation or delays”. It provides:
“Article AIRTRN.22: Consumer protection
The Parties share the objective of achieving a high level of consumer protection and shall cooperate to that effect.
The Parties shall ensure that effective and non-discriminatory measures are taken to protect the interests of consumers in air transport. Such measures shall include the appropriate access to information, assistance including for persons with disabilities and reduced mobility, reimbursement and, if applicable, compensation in case of denied boarding, cancellation or delays, and efficient complaint handling procedures.
The Parties shall consult each other on any matter related to consumer protection, including their planned measures in that regard.”
It is evident that both the UK and the EU considered that there was a need to enshrine the principle of consumer protection in international law relations between them. Whether this is because they considered that the existing legislative regime was insufficient or to guard against it becoming so in the future is unclear. Either way, the TCA has something of relevance to say about the subject matter of the present dispute. The issue therefore is whether Article AIRTRN.22 affects the task of this court in construing and applying Regulation 261/04.
16(1) provides that nothing in the TCA is to be construed as conferring or imposing rights or obligations “on persons other than those created between the Parties under public international law”. Further, the TCA precludes direct invocation of its terms in domestic law. Nothing in the TCA permits it “to be directly invoked in the domestic legal systems of the Parties”. In other words the TCA does not have direct effect:
“Article COMPROV.16: Private rights
Without prejudice to Article MOBI.SSC.67 [Protection of individual rights] and with the exception, with regard to the Union, of Part Three [Law enforcement and judicial cooperation ], nothing in this Agreement or any supplementing agreement shall be construed as conferring rights or imposing obligations on persons other than those created between the Parties under public international law, nor as permitting this Agreement or any supplementing agreement to be directly invoked in the domestic legal systems of the Parties.
The effect of Article AIRTRN.22 cannot therefore be directly invoked and its legal effect in this litigation thus depends upon how it is implemented into domestic law. The Long Title of the EU(FR)A 2020 includes the following: “An Act to make provision to implement and make other provision in connection with, the Trade and Cooperation Agreement …” The Act thus seeks to implement the TCA. It contains different parts relating to a wide variety of subject matters covered by the TCA. By way of illustration section 8 on passenger and vehicle registration empowers the Secretary of State to disclose vehicle registration data in accordance with specified provisions of the TCA; it incorporated the TCA by cross reference.
However, there is nothing in the TCA which specifically implements Article AIRTRN.22. This does not however mean that it is not implemented. Section 29 EU(FR)A 2020 provides a sweeping up mechanism. This is entitled “General implementation of agreements”. It provides:
“29 General implementation of agreements
(1) Existing domestic law has effect on and after the relevant day with such modifications as are required for the purposes of implementing in that law the Trade and Cooperation Agreement or the Security of Classified Information Agreement so far as the agreement concerned is not otherwise so implemented and so far as such implementation is necessary for the purposes of complying with the international obligations of the United Kingdom under the agreement.
(2) Subsection (1) –
(a) is subject to any equivalent or other provision—
(i) which (whether before, on or after the relevant day) is made by or under this Act or any other enactment or otherwise forms part of domestic law, and
(ii) which is for the purposes of (or has the effect of) implementing to any extent the Trade and Cooperation Agreement, the Security of Classified Information Agreement or any other future relationship agreement, and
(b) does not limit the scope of any power which is capable of being exercised to make any such provision.
(3) The references in subsection (1) to the Trade and Cooperation Agreement or the Security of Classified Information Agreement are references to the agreement concerned as it has effect on the relevant day.
(4) In this section—
“domestic law” means the law of England and Wales, Scotland or Northern Ireland;
“existing domestic law” means—
(a) an existing enactment, or
(b) any other domestic law as it has effect on the relevant day;
“existing enactment” means an enactment passed or made before the relevant day;
“modifications” does not include any modifications of the kind which would result in a public bill in Parliament containing them being treated as a hybrid bill;
“relevant day”, in relation to the Trade and Cooperation Agreement or the Security of Classified Information Agreement or any aspect of either agreement, means—
(a) so far as the agreement or aspect concerned is provisionally applied before it comes into force, the time and day from which the provisional application applies, and
(b) so far as the agreement or aspect concerned is not provisionally applied before it comes into force, the time and day when it comes into force;
and references to the purposes of (or having the effect of) implementing an agreement include references to the purposes of (or having the effect of) making provision consequential on any such implementation.”
The section 29 mechanism provides that domestic law (as defined) “has effect … with such modifications as are required for the purposes of implementing in that law the Trade and Cooperation Agreement”. The phrase “has effect” is important. Parliament has mandated a test based upon the result or effect. The phrase “has” makes clear that this process of modification is automatic i.e. it occurs without the need for further intervention by Parliament. The concept of modification is interpreted broadly in section 37(1) to “include” (and therefore is not limited to) amendment, repeal or revocation. Section 29 is capable of achieving any one or more of these effects. This does not lay down a principle of purposive interpretation (such as is found in section 3 Human Rights Act) but amounts to a generic mechanism to achieve full implementation. It transposes the TCA into domestic law, implicitly changing domestic law in the process. Applying section 29 to domestic law on a particular issue now means what the TCA says it means, regardless of the language used.
“Domestic law” is defined broadly by section 29(4)(2) to include “an existing enactment” but also “any other domestic law”. “Enactment” is also defined broadly in section 37(1) to include all forms of primary and subordinate measure, instruments, orders, regulations, rules, schemes, warrants, by-laws or other instrument made under an Act of Parliament, and Orders in Council made in the exercise of the Royal Prerogative. The definition would include all of the legislative measures arising in this case.
The process of automatic modification in section 29 is subject to two statutory clarifications. First, it applies only so far as necessary i.e. it does not modify a domestic law that, otherwise, is already consistent with the TCA. Secondly, it covers modifications “necessary for the purposes of complying with the international obligations of the United Kingdom under the agreement”. This ensures that the construction of domestic law which best secures compliance by the United Kingdom with its international law obligations is to be applied. This is needed because under the TCA the parties bind themselves to a variety of international law obligations beyond the TCA itself.
The courts and tribunals will in due course confront many situations where they must interpret and apply the TCA in order to find out what the effect of domestic law is. Parliament has instructed the courts and tribunals as to the principles of interpretation to be applied to the TCA. The Act cross-refers to the TCA which itself incorporates the Vienna Convention on the Law of Treaties. Section 30 EU(FR)A 2020 provides:
“30 Interpretation of agreements
A court or tribunal must have regard to Article COMPROV.13 of the Trade and Cooperation Agreement (public international law) when interpreting that agreement or any supplementing agreement.”
“Article COMPROV.13: Public international law
The provisions of this Agreement and any supplementing agreement shall be interpreted in good faith in accordance with their ordinary meaning in their context and in light of the object and purpose of the agreement in accordance with customary rules of interpretation of public international law, including those codified in the Vienna Convention on the Law of Treaties, done at Vienna on 23 May 1969.
For greater certainty, neither this Agreement nor any supplementing agreement establishes an obligation to interpret their provisions in accordance with the domestic law of either Party.
For greater certainty, an interpretation of this Agreement or any supplementing agreement given by the courts of either Party shall not be binding on the courts of the other Party.”
Applying section 29 there are three steps to take. The first is to identify the relevant domestic law. This is Regulation 261/04 as amended. The second step is to determine whether the domestic law is the same as the corresponding provisions of the TCA. If it is then under section 29(1) there is no need to apply the automatic read-across. If there is inconsistency, daylight or a lacuna then the inconsistent or incomplete provision is amended or replaced and the gap is plugged. As to this the TCA imposes a duty on the parties, in pursuit of a principle of consumer protection, to “ensure” that “effective” measures are taken to protect consumers in the field of transport including in relation to compensation for denied boarding and with ensuring “efficient handling complaint handling procedures”. In my view Regulation 261/04 as amended does this provided that it is construed purposively to achieve that requisite degree of consumer protection. The judgment of Lord Justice Coulson achieves this. The claims permitted under this measure are modest; if satisfaction of such claims entails litigation the costs could subsume the compensation within moments of a lawyer being instructed. This case has arisen as a test case of the scope of the right to compensation. Article AIRTRN.22: provides that there should be “efficient complaint handling procedures. Litigation is to be avoided but if it arises then it should be adjudicated upon, with the principle of consumer protection well in mind, on as summary a basis as possible. I endorse the conclusions of Lord Justice Coulson at paragraphs  –  of his judgment who emphasises that cases concerning compensation should be resolved with minimum cost and on the papers if at all possible.
8.7 Some basic principles – summary
It is helpful to summarise some basic conclusions. In this case, the task of the court has been relatively straightforward since as of the date of this judgment the new legal regime has been in place for only a few months and nothing of relevance in the case law of the CJEU has changed. As time moves on, and the case law of the CJEU evolves, then the differences between the current state of EU law and that which the Court is to take account of might become more accentuated. At that stage the analysis might become more complex. The basic principles of relevance in this appeal can be summarised as follows:
Regulation 261/04 is direct EU legislation.
It takes effect in domestic law as amended by the Air Passenger Regulations 2019.
It should be given a purposive construction which takes into account its recital and other principles referred to in the body of the regulation and in the recitals.
To the extent necessary this process of interpretation would include any provision of international law that has been incorporated into the Regulation by reference.
The meaning and effect of the measure should be determined by reference to case law of the CJEU made prior to 11 pm 31st December 2020.
General principles of EU Law from case law and as derived from the Charter of Fundamental Rights and the TFEU, are relevant to interpretation.
In construing and applying such a Regulation the Court can depart from any retained CJEU case law or any retained general principles. The Court is not bound by such principles and may depart from them if it considers it right to do so.
The provisions of the TCA and the EU(FR)A 2020 may be relevant to the effect of domestic law insofar as the subject matter of the domestic law in issue overlaps with the subject matter of the TCA and/or EU(FR)A 2020 and in so far as domestic law does not already cover the subject matter of the TCA.
If domestic law does not already reflect the substance of the TCA then domestic law takes effect in the terms of the TCA. In this case domestic law already implements the relevant provisions of the TCA and there is no need for any further transposition in order to achieve the requisite effect.