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Lexology GTDT Air Transport Austria

Lexology GTDT: Air Transport in Austria

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Our Aviation Team was chosen to author the chapter on Air Transport in Austria in Lexology´s Getting the Deal Through (GTDT).

The GTDT´s aim is to give readers quick access to country specific insights to a variety of topics. Thus, it is crucial for contributors to have a wide range of expertise while also being able to deliver relevant information in a compact, but still comprehensive way.

Luckily, our aviation team was perfectly prepared for this challenge. With our partner, Martina Flitsch, leading the way with her over 25 years of experience in the aviation field assisted by our two associates, Dominik Weiß and Aleksander Makal, who were, despite their young age, already able to gather several years of experience in advising many players on a variety of aviation related topics.

We invite you to check out the GTDT on Air Transport in Austria by clicking here (pdf) and to reach out to us for further information.

Reproduced with permission from Law Business Research Ltd. This article was first published in Lexology GTDT – Air Transport 2023. For further information, please visit: https://www.lexology.com/gtdt

Aviation Fuel Tax in Austria

Aviation Fuel Tax in Austria

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The Aviation Team of Weisenheimer Legal has recently secured a business jet operator’s right to tax-free use of aviation fuel in Austria.

According to Article 14 Energy Products Directive (2003/96/EC), energy products supplied for use as fuel for the purpose of commercial air navigation (“other than in private pleasure-flying”) are exempt from EU Energy Tax. In order to benefit from this tax exemption, an operator must obtain a refueling certificate. To obtain such a refueling certificate, an “exclusively commercial use of the aircraft by the operator” must be shown and supported by appropriate evidence.

For several years, it was unclear in Austria what constitutes an “exclusively commercial use of the aircraft” and what evidence the authorities may reasonably demand from the operator to prove it.

With the majority of business aviation flights booked with operators not by passengers but rather via charter brokers, the Austrian authorities insisting on the disclosure of “end-customer invoices” (i.e. invoices issued by brokers to passengers), many operators could not discharge the burden of proof and were thus denied refueling certificates necessary for tax-free use of aviation fuel in Austria. Furthermore, Austrian Customs (Zollamt Österreich) insisted that the sale of flights via charter brokers meant that it were the brokers and not the operator who exercised the effective control and enjoyed the use of the aircraft for the duration of the flight booked.

Following the intervention by Weisenheimer Legal and the support of Austrian Business Aviation Association (ABAA), the Federal Finance Court decided that the mere fact that flights are sold via charter brokers does not effect a transfer of control and use of the aircraft to third parties (brokers). Therefore, it was decided that invoices issued to brokers by an operator with a valid Air Operator Certificate (AOC) were sufficient evidence of “exclusively commercial use of the aircraft by the operator”.

The decision is available here (in German).

This decision is the next positive development in a chain of court decisions issued after the Austrian Supreme Administrative Court decided in September 2022 that flights operated by business jet operators for the aircraft owners satisfied the requirement of commercial operation and thus qualified for tax-free use of Aviation fuel as long as they were operated “for a fee”, which could also take the form of a (monthly) management fee (case number Ra 2019/16/0104).

The Hague Court of Arbitration for Aviation

The Hague Court of Arbitration for Aviation

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In many cases, commercial disputes among members of the aviation sector are still resolved by litigation rather than arbitration, even though arbitration may offer several advantages for the parties involved in the dispute. The recently established Hague Court of Arbitration for Aviation (Hague CAA) could contribute to change this by offering specialized arbitration in aviation related matters.

Especially in the context of international commercial disputes within the aviation sector, arbitration offers several advantages compared to litigation. For instance, the possibility to appoint an arbitrator with special knowledge of the aviation sector, aviation law and the technology used instead of having the dispute decided by a judge with no link to the aviation sector, who is often heavily depending on the opinion of expert witnesses. Another practical advantage is that due to the widely ratified New York Convention, the international enforcement of arbitration awards is often much easier than enforcing rulings of national courts.

Further, by choosing arbitration in a country, in which none of the involved parties is based, a possible “homefield advantage” of one party is eliminated. The new Hague CAA is not affiliated with particular parts of the aviation industry and administered by the widely respected Netherlands Arbitration Institute (NAI), which further ensures the court´s neutrality.

Similar to other industry specific courts like the Court of Arbitration for Art (CAfA), the Chambre Arbitrage Maritime de Paris (CAMP) or the Court of Arbitration for Sport (CAS), the Hague CAA´s main selling point is its specialization. By choosing the Hague CAA, parties have access to the court´s pool of aviation law and technology specialists, who can act as arbitrators, mediators, or experts in the proceedings.

As a consequence of its aviation specialization, the Hague CAA´s procedural rules were designed to meet the particular needs of the aviation sector, especially for speed and flexibility. For instance, the parties have the possibility to appoint an emergency arbitrator to decide urgent measures within a maximum of 15 days after his or her appointment. The Hague CAA is also offering more flexibility regarding the location of hearings and the possibility of their virtual attendance compared to litigation in most countries. Additionally, the procedural rules set forth expedited proceedings for amounts in dispute of less than € 10 million or when the parties consent thereto.

Another important way of dispute resolution and valid alternative to litigation is mediation. By choosing this way and finding an amicable solution, parties are often able to avoid high procedural costs and to continue their business relationship relatively unharmed. Mediation is also offered by the Hague CAA.

Overall, many parties are well advised to seriously consider resolving their disputes by mediation or arbitration rather than litigation. For members of the aviation sector, the newly established Hague Court of Arbitration for Aviation is a promising new venue for this purpose. Don´t hesitate to contact our Aviation Team to learn more about different ways of dispute resolution.

Lexology GTDT Air Transport Austria

Lexology GTDT: Air Transport in Austria

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We are happy to share that our Aviation Team was chosen to author the chapter on Air Transport in Austria in the latest edition of Lexology´s Getting the Deal Through (GTDT).

The GTDT´s aim is to give readers quick access to country specific insights to a variety of topics. Thus, it is crucial for contributors to have a wide range of expertise while also being able to deliver relevant information in a compact, but still comprehensive way.

Luckily, our aviation team was perfectly prepared for this challenge. With our partner, Martina Flitsch, leading the way with her over 25 years of experience in the aviation field assisted by our two associates, Dominik Weiß and Aleksander Makal, who were, despite their young age, already able to gather several years of experience in advising many players on a variety of aviation related topics.

We invite you to check out the GTDT on Air Transport in Austria by clicking here (pdf) and to reach out to us for further information.

Reproduced with permission from Law Business Research Ltd. This article was first published in Lexology GTDT – Air Transport 2023. For further information, please visit: https://www.lexology.com/gtdt

New place of jurisdiction for passenger claims in Austria

New place of jurisdiction for passenger claims in Austria

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As of May 1st, 2022, Austrian law provides for a new place of jurisdiction for passenger claims in Austria based on Regulation 261/2004.

According to the new § 101a of the Austrian Act on Jurisdiction (Jurisdiktionsnorm), a passenger may choose to initiate proceedings before the court in whose jurisdiction the respective flight´s place of arrival or place of departure is located.

This new provision is applicable in cases in which Brussels I Regulation (recast) does not apply (i.e., when the air carrier is located outside the EU) and aims to provide for an equal treatment of such air carriers and those located in a member state of the EU. Until now, passengers were in many cases not able to initiate proceedings against an air carrier located outside the EU, unless the Austrian Supreme Court decided that initiating proceedings where the air carrier is located would be an unreasonable burden for the respective passenger.

Don´t hesitate to contact our Aviation Team to learn more about the places of jurisdiction for passenger claims in Austria.

Changes of scheduled departure times as cancellations

Changes of scheduled departure times as cancellations

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On 21 December 2021 the European Court of Justice (ECJ) rendered two decisions regarding the question if and under which circumstances changes of scheduled departure times qualify as cancellations within the meaning of Article 5 of Regulation 261/2004.

In case C-395/20, a flight from Düsseldorf to Antalya that was initially scheduled to depart at 13:20 was postponed to depart at 16:10. The ECJ decided that because the departure time was postponed by less than three hours, the flight must not be regarded as being cancelled.

In case C-263/20, a flight from Palma de Mallorca to Vienna that was initially scheduled to depart at 14:40 was brought forward to depart at 08:25. The ECJ decided that because the departure time was brought forward by more than one hour, the flight must be regarded as being cancelled (leading to the consequences stipulated in Articles 7, 8 and 9 of Regulation 261/2004).

On a side note: in this case the ECJ also stated that it is not sufficient for an airline to merely inform the intermediary through which a flight was booked about the changes of the scheduled departure time two weeks in advance to comply with Article 5(1) (c) (i) of Regulation 261/2004 and to avoid being obliged to pay a compensation – even if the passenger’s contact details were not disclosed to the airline.

Don’t hesitate to contact our Aviation Team to learn more about what changes of scheduled departure times constitute cancellations under Regulation 261/2004 and passenger claims in Austria in general.

Compensation payments must be deducted

Compensation payments must be deducted

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In one of its rare rulings regarding the Regulation 261/2004, the Austrian Supreme Court decided in the case 4 Ob 177/21i that compensation payments an airline paid to a passenger in accordance with Article 7 of the regulation must be deducted from further claims for immaterial and material damages asserted by the passenger.

While the regulation sets forth certain passenger rights (Art 7: compensation, Art 8: reimbursement or re-routing, Art 9: care), other claims a passenger may assert (e.g. damages for a hotel booking or a rental car that he could not use) must be based on national law.

In the case at hand, the passenger claimed that the compensation payment aims only to reimburse him for the inconveniences linked to a denied boarding/cancellation/long delay and, therefore, must only be deducted from immaterial damages. However, the Austrian Supreme Court clarified that in such cases the compensation payment must also be deducted from material damages like expenses for a hotel booking or a rental car.

Don´t hesitate to contact our Aviation Team to learn more about when compensation payments must be deducted under Austrian law and about passenger claims in Austria in general.

Payments to the credit card accound are not sufficient

Payments to the credit card account are not sufficient

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The regional court Korneuburg decided in the cases 22 R 171/21h, 22 R 196/21k and 22 R 210/21v that while Article 7 (3) of Regulation 261/2004 does not generally prevent payments to the credit card account used by a passenger, it must be assessed in accordance with applicable national law whether such payments relieve an airline from its obligation to pay.

If Austrian law applies, payments to the credit card account a passenger used to pay for his/her tickets are not sufficient for an airline to fulfill its obligations (i.e., mainly in connection with a ticket refund or a compensation payment). The regional court argued that only payments made to an account the passenger disclosed vis a vis the airline for refund purposes are regarded sufficient to relieve the airline from its obligation to pay.

These rulings especially have an impact on cases in which it is uncertain whether a passenger already received a payment or when exactly he/she received the payment. To comply with these rulings, it would be advisable to either have passengers specify the account they demand a payment to be made to during the refund application process or to contact the specific passenger before issuing a payment.

Don´t hesitate to contact our Aviation Team to learn more about passenger claims in Austria.

No-Show Clauses in Austria

Is there a future for No-Show Clauses in Austria?

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Over the last years, consumer protection agencies throughout the European Union have made continued efforts to prevent the use of so called No-Show Clauses, which are commonly used by airlines in their general conditions of carriage. In Austria, this led to several court proceedings in which rulings effectively restricting the use of No-Show Clauses were issued. This, in turn, prompted many airlines to adapt their clauses in order to comply with the court practice. This article seeks to give a brief overview of the topic and the future of No-Show Clauses in Austria against the backdrop of the most recent ruling of the Austrian Supreme Court in case 4 Ob 63/21z.

What is a No-Show Clause?

Airlines use complex pricing systems to allocate specific ticket fares to individual passengers. The ticket fare a passenger is charged depends, inter alia, on the specific itinerary he or she chooses. This is because, on the one hand, passengers are willing to pay higher fares for direct flights; on the other hand, fares are generally dependent on the respective place of departure. As a result, the ticket fare for a flight booked e.g. from Warsaw to New York with a stopover in Vienna will probably be offered for a lower fare than a direct flight from Vienna to New York. Another example would be roundtrips (e.g. with the flight legs Vienna – New York – Vienna), which are often offered for a lower price than one-way tickets.

However, airlines experienced some passengers using the pricing system to their advantage by e.g. booking a flight from Warsaw to New York with a stopover in Vienna instead of a (more expensive) direct flight from Vienna to New York despite their residence in Vienna and their intention to only be transported from Vienna to New York. Other passengers book a roundtrip and intentionally “miss” the second flight leg. Some travel agencies even specialize in getting the cheapest ticket fares possible for their customers by circumventing the pricing system in this way.

As a reaction, airlines implemented so called No-Show Clauses in their general conditions of carriage stipulating that passengers will be denied boarding or have to pay an adapted fare when they do not use all flight legs (i.e., in our examples: when the passenger does not board the flight from Warsaw to Vienna or misses his or her second flight leg from New York to Vienna).

How are No-Show Clauses challenged by consumer protection agencies?

Since No-Show Clauses are usually implemented in an airline´s general conditions of carriage, several organizations have the right to challenge them according to Austrian consumer protection provisions. Especially the “Verein für Konsumenteninformation, VKI” and the “Bundesarbeitskammer” are quite active in this regard.

These two organizations are regularly screening general terms and conditions used by several companies including general conditions of carriage used by airlines operating flights to or from Austria for clauses which they deem to be unlawful, especially by arguing that such clauses are surprising and disadvantageous for consumers or grossly disadvantageous. If a clause is deemed to be unlawful, the airline usually receives a letter from the consumer protection body or its lawyer demanding that the airline in question immediately refrains from using the “unlawful” clause, together with a cease and desist declaration secured by a contractual penalty.

One aspect that is often criticized by our clients is that normally the consumer protection agencies are neither willing to discuss the lawfulness of the respective clause nor to work together to find a solution that takes into account the positions of both the consumer and the airline. They rather only give airlines the options to either sign the cease and desist declaration within (usually) 14 days or be confronted with court proceedings.

How are No-Show Clauses viewed by Austrian courts?

Austrian courts regard No-Show Clauses to be void especially when they are deemed to be either surprising and disadvantageous for the consumer or grossly disadvantageous. While the “surprising” character of a No-Show Clause may be avoided by implementing certain measures in the booking process to ensure that passengers are duly informed, it is rather challenging for airlines to formulate No-Show Clauses that are not regarded as grossly disadvantageous but are still effective.

The Austrian Supreme Court first had to deal with No-Show Clauses in 2012 (4 Ob 164/12i, a case in which our partner, Martina Flitsch, was directly involved). While the Supreme Court explicitly acknowledged the airline´s legitimate interest to implement and protect its pricing system, it regarded the No-Show Clause the airline used to be too extensive and, therefore, grossly disadvantageous. This view was adopted and further developed in several other Supreme Court rulings with the latest one being 4 Ob 63/21z from 2021.

As a reaction, several airlines operating flights to and from Austria adapted their conditions of carriage in order to comply with the criteria set forth by Austrian court practice. Therefore, nowadays the consequence of not using all flight legs is usually a recalculation of the ticket fare or a lump sum that must be paid. Additionally, many No-Show Clauses now explicitly state that they do not apply in cases of force majeure, illness or, in general, when the reasons for the passenger not using all flight legs are not attributable to him or her.

What does the future hold for No-Show Clauses in Austria?

The latest decision of the Austrian Supreme Court (4 Ob 63/21z) dealt with a No-Show Clause that has obviously been designed to comply with the Austrian court practice. However, despite careful drafting, the clause was finally regarded as grossly disadvantageous to the consumer and, therefore, void. The Supreme Court emphasized the necessity to differentiate between passengers that are deliberately circumventing the pricing system and passengers that are not using all flight legs for any other reason.

In practice, it is foreseeable that it will be particularly challenging for airlines to successfully determine on a case by case basis if a passenger is circumventing the pricing system, especially when this decision must be made very quickly before boarding is denied. Especially with regard to the Regulation (EU) 261/2004 and the organizations specialized in representing passengers in cases of denied boarding, the risk of lawsuits and court proceedings, in which airlines have to prove that the denied boarding has been justified, is rather high.

Despite the many challenges airlines face when it comes to No-Show Clauses in Austria, it is, in our opinion, rather unlikely that airlines will refrain from using them. As explained, No-Show Clauses are an essential tool to ensure the functioning of an airline´s pricing system, which is a vital part of an airline´s business model.

Therefore, airlines must remain vigilant and keep an eye on ongoing developments such as new court decisions in order to avoid being confronted by consumer protection agencies or finding themselves in court proceedings which, while causing substantial workload and legal fees, have limited chances of success. In such cases, it is certainly not a mistake  to engage a reliable legal advisor who is experienced in dealing with consumer protection agencies and handling passenger claims.