Aviation Law
March 15th, 2024
In the recent decision of the European Court of Justice (ECJ) – C 11/23 – dated 29 February 2024 the court had to decide if an airline can prevent passengers from assigning claims to third parties by including a respective clause in the General Terms and Conditions of Carriage. It was not a surprise when the ECJ held that such a clause which prohibits the assignment of the passenger’s claims against the operating air carrier constitutes an excluded restriction of rights within the meaning of Article 15 of Reg. (EC) 261/2004. The court emphasized the passenger’s freedom “to choose the most effective way of pursuing his claim, in particular by allowing him to decide whether to contact the operating air carrier directly, to bring an action before the competent courts or, where provided for by the relevant national law, to assign his claim to a third party, in order to avoid difficulties and costs which might prevent him from taking personal action against the air carrier for a limited amount in dispute” (ref no.44).
As it is a common business model of the claim management companies to work with assignments when filing claims against airlines on behalf of the passenger, the practical results in court show that there are several legal pitfalls regarding the validity of assignments – both from the practical and the legal point of view.
In the first part of this article, I want to shed some light on the German legal perspective when passengers’ claims – after having been assigned to claim management companies – are filed in court.
Part 1: Assignment of claims under German law
1. Claim management handling model in aviation passengers’ rights
It is no secret that claim management companies play a vital role in managing and processing compensation and refund claims on behalf of air passengers who have experienced disruptions, delays, or cancellations during their flight. It has become a big industry. They streamline the claim handling process within automated systems and are striving to improve their operational efficiency. By employing technology and effective procedures, claim management companies can process claims very quickly and accurately, reducing workload and costs. However, there are certain features in this process that are exposed to errors.
2. Assigning a claim under German Law
In order to be entitled to assert passenger claims, claim management companies work with assignments. In German law – as most likely in most other jurisdictions as well – the concept of assigning claims involves transferring a legal right from one party (the assignor) to another (the assignee). This can occur through a contract or other legal means, allowing the assignee to enforce the rights associated with the claim. The assignment must adhere to legal requirements in order to be valid.
In most cases the passenger signs a form – usually online – and thereby transfers the claim to the claim management company. But most passengers usually have no idea or understanding of the legal concept of assignment under German law. Therefore, in this context, the question often arises in legal disputes as to whether passengers have made an informed decision when assigning their claims to a claim management company and are aware that they are no longer entitled to the claim once it has been assigned. Sometimes they assign their potential claim to different claim management companies at the same time. Furthermore, many passengers are completely unaware that they have contacted a claim management company; very often they believe that they have contacted the airline directly. The business model and the websites of the claim management companies are designed in such a way that they might lead the passengers to the impression that they have contacted the airline directly. Many passengers are not even aware that a direct contact with the airline is financially more efficient than to contact the claim management companies who keep a commission for their work when an airline pays out compensation or covers any costs for hotels, transportation or meals. Claim management companies profit from passengers‘ unawareness and take advantage of standardized procedures. These are aspects to be taken into consideration when challenging assignments.
3. Handling over a written deed
Pursuant to Section 410 (1) of the German Civil Code (BGB), debtors are entitled to refuse payment to an alleged assignee until they receive a suitable deed of assignment. Due to the mass business of claim management companies and the need to prevent double claiming against the airline (which repeatedly occurs in this context), the rules of Section 410 (1) are only observed by the assignee when submitting the original assignment deed in writing. Claim management companies, however, regularly submit declarations of assignment in a digital format. Some courts do not regard this as sufficient to prove a valid assignment. Sometimes judges grant the claim but only against the handover of an assignment deed. This means that plaintiff has to present the original deed before defendant is obliged to pay the claim. This can give plaintiff a hard time if there exists no original deed.
4. Common irregularities in assignment forms
Often it is not clear if the passenger did personally sign the assignment declaration form. Sometimes the signatures are not clearly written, or they do not allow a clear allocation to the individual name of the passenger. In other cases, signatures look alike even though they are presented for different passengers. This is particularly problematic in the case of claims for compensation under Reg. (EC) 261/2004, because originally only the individual passenger is entitled to compensation claims, regardless of who booked the flight. This means that only the passenger himself can assign the claim to another person.
Common mistakes when assigning a passenger’s right claim under German law include, but are not limited to, a failure to formalize the assignment in writing as well as incomplete or inaccurate documentation. Under German law, assignments do not generally require a form; they can also be made informally, e.g. verbally. However, informal assignments are often difficult to prove. If an assignment is challenged in a lawsuit, the party invoking the assignment carries the burden of proof and therefore has to prove the validity of assignment. Therefore, in most cases some sort of documentation is presented even though there is no form requirement under German law.
Given the nature of the business model of claim management companies, who mainly conduct their business online, difficulties of proof regularly arise. They normally have no personal contact with their client, i.e. the passenger. For example, declarations of assignment are not properly filed or contain inaccurate information about the passenger, an address is not given or signatures do not match the passenger’s name. These are just some irregularities that often occur.
If a claim management company cannot prove a disputed assignment with corresponding written documents, such as ID-documents or passports, the hearing of the passengers as witnesses is often requested. German courts will consider such requests for evidence, even if the passengers are not residents in Germany but abroad. German judges can resort to the option of hearing the witnesses in writing or having a hearing conducted before the court at the witness’s place of residence by means of a request for legal assistance. In these cases, the claim management companies‘ chances of success very much depend on the willingness of the witnesses to testify.
5. Double Claiming
Another important aspect regarding assignments is the so-called double claiming: it often happens that passengers contact several claim management companies and assign their claims several times. Once a claim has been assigned, the assigning person is no longer owner of this claim and therefore the assigning person cannot effectively assign the claim a second time. Unfortunately, it is not uncommon for airlines having to pay out a claim several times due to passengers assigning their claims to different claim management companies. Here a diligent documentation of the receipt of different assignments forms and their exact dates should be recorded by the airlines. Further precautions in the systems should be taken to warn the agents handling the claims about any irregularities regarding the assignment issue. A stringent verification process should be implemented.
Therefore, assignments are a topic that plays an essential part already at customer care level when the claims are received from the claim management companies as well as at court level when their validity can be challenged. Here, a legal support is highly recommended.
Sources
European Court of Justice, 29.02.2024, file C 11/23
