International Air Transport Association & Anor, R (on the application of) v Department for Transport

MR JUSTICE NEWMAN: I have before me an application for a reference pursuant to Article 234 EC. The application arises in connection with two sets of judicial review proceedings, respectively, proceedings brought by the International Air Transport Association as claimant against the Department for Transport and between European Low Fares Airline Association against the Department for Transport. Permission to apply for judicial review has been granted in both actions and they are proceeding in this court, the Administrative Court, in/as one set of proceedings.

Each raise substantially the same issues in connection with the validity of an EC Regulation, namely EC Regulation 261 of 2004, which regulation is due to come into force on 17th February 2005. At this preliminary hearing, which was ordered by Richards J, the court has been concerned to give attention to the terms of the proposed reference and to decide whether or not a reference should be made. It has been concerned also to consider an application by two corporate entities identified in the papers in the action as ERA and ADL, who have sought permission in accordance with CPR 54.17 to file evidence in the proceedings. In support of that application, two statements have been lodged: the witness statements of Andrew Clarke, Director of Air Transport Policy for European Regions Airline Association and Dr Detlef Winter, Secretary General of the German Air Carrier Association, known as ADL.

The court has determined to make a reference in terms which it is unnecessary to refer to further in this short judgment, because they will be embodied in a form of reference which has been drawn up.

This judgment is concerned to deal with an application which was not agreed between the parties, which relates to one aspect of the reference. That is whether or not the court should request the President of the Court of Justice, in accordance with the Court of Justice Rules of Procedure, to consider under Article 55 whether or not there are special circumstances which would justify the case being given priority over others, and also for consideration to be given by the President, in response to a request by this court pursuant to Article 104A, whether the matters raised by the case justify the President concluding that the questions should be considered as raising matters of exceptional urgency.

Determination under each of those rules of procedure is a matter for the President, but it is appropriate that this court should outline why it has concluded that there are circumstances in this case capable of amounting to exceptional urgency, alternatively rendering it fit for expedition pursuant to Article 55(2). The matters which have persuaded the court of the capability of these questions falling within the ambit of consideration for the president under are as follows.

The court has seen and considered a body of evidence, including the evidence from ERA and ADL, which evidence points to the existence of a significant risk that airlines will suffer serious damage following the coming into force of the Regulation. The court takes notice of the fact that the European Court of Justice adopts a restrictive approach to damages for invalid legislation (see case C-352/98P Bergaderm v the Commission [2000] ECR 1-5291). The court has formed the view that the calculations set out in the evidence, principally based on the low profit margins for the airlines operating and represented by the European Low Fares Airline Association, disclose a significant and real risk that in the event that airline operators become liable to the provisions of the Regulation, they could be exposed to liabilities which will, not only wipe out any profit in connection with the flight in question giving rise to the claim, but will, according to the circumstances which differ in some respects as between the ERA and the ELFAA members, give a potential for either all flights operated by that operator being deprived of profitability in order to meet the claim, or a significant number of other flights, other than the flight in question, also being deprived of profitability.

The desirability of the continued viability of the airlines, which serve a significant market of consumers and fulfil a significant public interest in the European Community, in my judgment, is a factor upon which weight can properly be placed.

Next, I have had the advantage of seeing a draft of the statutory instrument which will give domestic effect to the EC Regulation and it demonstrates that failure to comply with the Council Regulation will give rise to criminal penalties. This court attaches some weight to the principle that if there is a real issue as to the validity of a provision providing for a criminal penalty, there is a strong case for determination of the issue of validity to be made prior to and not in the course of any criminal proceedings.

The court has heard submissions directed towards the strength of a challenge advanced upon an alleged failure to comply with Article 251. It is not for this court to express a view other than that which it regards as relevant to its own position. Tested by this court's approach to the merits of the argument and unaffected by the court's inability to deal with the issue because it involves the validity of an EC regulation, this court has formed the view that the strength of the arguments are such as would justify expedition in this court being given to the hearing of the matter in advance of the regulation coming into effect.

The court has been informed of the periods which commonly arise in the ECJ where acceleration does not occur and, mindful of that, in addition to the point already made as to the risk to the operators' viability, the court has also taken account of the need, in the absence of acceleration, which will arise for substantial internal management rearrangements and provisions to be made by airlines so as to place themselves in a position where, in the face of the risk of such claims, they can properly organise their affairs.

I turn now to the matter which is not for the European Court to consider, namely the position in the action which should be taken so far as the witness statements of Messrs Clarke and Winter are concerned. There has been no opposition to the evidence being evidence for consideration in the action, nor has there been any objection to it being evidence considered by the court in connection with the application for the request to be made for expedition.

In my judgment, the evidence is relevant to the issue of proportionality and also the question of proportionality which has been put to the court. It is evidence which is not simply repetitious of that which has already been put in by Mr Kurth, it is evidence which has assisted the court in considering the issue of accelerated expedition.

The only matter which arises is whether the court should give permission, which it does, on terms such as that the providers bear their own costs in any event or whether, either by the evidence being treated as adopted by IATA it becomes part of IATA's case, or whether the court orders, so far as costs are concerned, that the costs of those involved should be dependant upon the event -- namely the action or the outcome of the action -- and not be borne by them or whether they should bear their own costs.

I am very conscious of the position which Mr Lewis has taken for the Department that it should not, as a general rule, as the Government Department involved in judicial review proceedings, find itself in a position in which it becomes exposed to having to bear the costs of persons not parties to the proceedings, who have not intervened formally by becoming interested parties but who have played a part in the action to secure some benefit for themselves but, not being parties to the action, are not at risk of costs unless some special application is made. In my judgment, the position, in normal circumstances, should be that the costs in connection with the progress of the case should all be within the normal rules that costs go with the successful party, and that the resolution of issues of costs should, as far as possible, be resolved within that framework of the issues as between the parties.

Having reflected on the matter, I have concluded that where, as here, two commercial enterprises (using that expression in the broadest sense) having elected to incur costs in order to play a part in, and indeed a very limited part in, the proceedings, then the first position subject to any other factor pointing against it should be that they do so at their own risk, or at their own cost, because they are obtaining the advantage of influence within the action for a legitimate commercial advantage which they themselves wish to see as an outcome of the action. In this instance, Mr Brealey QC informs the court that IATA are content to adopt the evidence and make it part of their case.

I can see the forensic advantage of that offer made by IATA, but it seems to me that it is too late for me to see that as a legitimate approach to the matter today. Had IATA wished to take that course, they could have taken that course and there would have been no problem. The matter would have fallen within the conventional structure or framework to which I have indicated. I must deal with it on the basis upon which it had been made to this court. That being the case, and having considered the position of the Department for Transport, I am satisfied that there is nothing which points to any advantage in costs awarded to parties who have incurred them voluntarily with a view to participating, which demonstrates that the Department of Transport should be placed on risk for those costs.

For all those reasons I conclude those parties should bear their own costs.