Navigating the Legal Labyrinth: Defending Passenger Claims Under Reg. (EC) 261/2004 by Challenging Assignments (Part II)

Part 1: Assignment of claims under foreign law

In many passenger claims, the plaintiff’s right to act is a point of contention. The assignment and its effectiveness become additionally difficult if the passengers live abroad at the time of the assignment or have their usual place of residence there. The focus here is, among other things, Art. 14 Rom-I-Reg.

1. Challenges of assignment at the factual level

In fact, a point of contention will regularly be which languages the assignor speaks and whether, when the contract was concluded, he or she was able to understand the signed declaration of assignment or the agreed terms and conditions of the claim management company (cmc) or the airline in the respective language. In addition, in order to avoid the application of foreign law, plaintiffs could also deny that the passenger does not usually reside abroad but is mainly staying in Germany. In addition, if the plaintiff claims a choice of law in favor of German law, it is often problematic to determine whether this was effectively included in the assignment agreement and whether such choice is effective in the specific case, whether it is transparent and not abusive of law.

2. Challenge of assignment on a legal level

The Rom-I-Reg. regulates the applicable law in cross-border cases as well as the effectiveness of choice of law clauses in contracts with a cross – border connection. According to Art. 14 Rom-I-Reg., for foreign assignors the legal assessment of the assignment may depend on the relevant assignment law in the assignor’s home country.

In practice, both the (actual) facts of the assignment – as briefly outlined above – and the (legal) effectiveness of the assignment are often problematic, which will be discussed briefly below:

Art. 14 para. 1 of Rom-I-Reg. regulates the so-called transfer statute, i.e. the relationship between assignor (e.g. passenger) and assignee (e.g. passenger portal). Paragraph 1 specifically regulates that the relationship between assignor and assignee is subject to the law that applies to the contract between assignor and assignee according to the Rom-I-Reg. So, if a consumer is involved (which is usually the case in passenger claims), the law of the state in which the consumer has his or her habitual residence is applicable and the entrepreneur carries out his activities in this state practiced or at least directed (Art. 6 para. 1 lit. a) and b) Rom-I-Reg. with regard to the formal effectiveness of the assignment, Art. 11 para. 4 of Rom-I-Reg. also seems to suggest that the respective home law of the assignor is decisive. Something different could apply if German law has been agreed due to a choice of law clause, Art. 6 para. 2 Rom-I-Reg. in conjunction with Art. 3 Rom-I-Reg. However, the Rom-I-Reg. suggests that even if a choice of law in favor of a specific legal system has been agreed, it must still be checked whether mandatory assignment regulations in the assignor’s home law conflict with the agreed law, cf. Art. 6 para. 2 Sentence 2 Rom-I-Reg. In this respect, the effectiveness of any choice of law clause in the general terms and conditions of the passenger portals could regularly be ignored.

It follows that in the case of a foreign assignor, the respective courts would have to check whether the law of the home country considers the assignment to be effective (particularly due to formal requirements or consent requirements for the assignment by the debtor). The airlines will always deny this by just challenging of this, as it is often a foreign and foreign legal system.

The burden of proof is disputed in this context and has not been finally clarified. However, it seems appropriate to place the burden of proof on the plaintiffs, in accordance with the general rules of evidence, to show that the assignment made between the parties is effective under the respective domestic law of the assignor. In this context, it also seems appropriate to allow the airline to simply contest the effectiveness, at least if the plaintiffs have not made any substantive statement on the foreign law of assignment. If the plaintiff does not give any statements on this matter, obtaining an expert opinion is unlikely to be appropriate, as this would be considered as investigative evidence. The court could also not commission the expert to ask a specific question about the effectiveness or any protective provisions of the assignment, as the court could not provide the expert with any specific provisions. However, entrusting the expert with the all-encompassing task of examining the entire foreign assignment law with regard to the admissibility or conflict of provisions relating to the assignment would probably go too far.

To the extent that it has been clarified that a foreign legal system should be used based on the Rom-I-Reg., it will generally result in the courts having to obtain an expensive expert opinion on foreign assignment law. This usually results in several thousand Euro costs and is therefore often disproportionate to the low amounts in dispute of passenger lawsuits in the range (for individual lawsuits) of EUR 250.00, EUR 400.00 or EUR 600.00. The aspect of who bears the burden of proof (and thus the financing risk of an expert report) will usually be disputed: although the plaintiff must in principle present and prove their legal legitimacy, this could be different if the defendant complained the airline invokes assignment regulations unknown to it. In these types of cases, this procedural effect (and the unclears of the respective foreign legal systems for both parties) often leads to the corresponding proceedings being ended by a court settlement before an expert report is obtained.

3. ECJ ruling of February 29, 2024 (C-11/23)

In the judgment already mentioned, the ECJ recently decided that compensation claims arising from the Air Passenger Rights Regulation do not in principle represent contractual claims, but rather arise directly from the Air Passenger Regulation (see para. 36 of the judgment).

From this one could conclude (at least with regard to the compensation claims according to Art. 7 of the Air Passenger Regulation) that the assignor home law is not relevant for the purposes of Art. 14 para. 2 in conjunction with Article 5 para. 2 of Rom-I-Reg. Assignability of the claim, i.e. if the assigned claim is not derived from the contract of transport and therefore no contractual obligation within the meaning of Rome I Regulation is relevant.

However, if the ECJ states that the compensation should take place because the operating airline “breached its contractual obligations”, one could nevertheless assume that there is a contractual or at least contract- like claim. A part of the German literature has always understood the claim according to Art. 7 as a flat-rate claim for damages, so in the opinion of some observers it would seem preferable to see the claim for compensation according to Art. 7 of the Air Passenger Regulation as a sui generis claim.

In any case, the Rom-I-Reg. should generally be applicable regarding the underlying assignment as a contractual obligation.

However, the question of the applicability of the Rom-I-Reg. or the Rom-II-Reg. can partially be left open, as with Art. 15 lit. e Rom-II-Reg. and Art. 4 Rom-II-Reg., the law at the place where the damaging act occurs must always be considered. In case of cancellations, this may be the originally planned point of departure, so if this is abroad, foreign law could still be applied. In the case of delayed flights, it would probably have to rely on the original destination, which will also often be abroad.

It turns out that even if the Rom-II-Reg. is supposedly applied (regardless of the place of residence and any choice of law clauses), foreign assignment law will also often be applied.

4. Conclusion

The cmc are therefore well advised to pay attention, particularly when purchasing passenger claims, to the country in which the passengers are domiciled at the time of the assignment and where they then file the lawsuit, otherwise the plaintiffs will expose themselves to considerable procedural risk. This could result in an international request for legal assistance, meaning that German courts would have to examine the passengers as witnesses with regard to the assignment and heard by their home court, which is time-consuming and also increase the court costs.

Passenger claims with foreign assignors therefore represent a complex challenge for court practice due to the diversity of legal systems and language barriers.