Supreme Court of Canada Ruling: Air Passenger Protection Regulations do not offend the exclusivity principle of the Montreal Convention (mostly)

On October 4, 2024, the Supreme Court of Canada ruled in International Air Transport Association v. Canada (Transportation Agency), 2024 SCC 30 that the Air Passenger Protection Regulations (“APPRs”), which came into effect in 2019, do not offend the exclusivity principle of the Montreal Convention as the APPRs are a consumer protection scheme, rather than an “action for damages”.

The APPRs came into effect in 2019. The APPRs require air carriers transporting passengers to and from Canada to meet prescribed standards of treatment and to pay passengers minimum levels of compensation for flight delays and cancellations, denied boarding, tarmac delays, seating of children under the age of 14, the transportation of musical instruments, and lost or damaged baggage under certain circumstances. 

The International Air Transport Association (“IATA”), along with several airlines, challenged these regulations on the basis that the APPRs conflict with the Carriage by Air Act, RSC 1985, c. C-26, which gives effect to the Convention for the Unification of Certain Rules for International Carriage by Air (“Montreal Convention”) which sets conditions and limits on airline liability to passengers travelling internationally. The effect of Article 29 of the Montreal Convention is that any “action for damages” within its scope is exclusively subject to the Montreal Convention and no other damages are recoverable, even if there are causes of action that would otherwise be available to claimants. 

Minimum Compensation set in the APPRs do not run afoul of the Montreal Convention

The Supreme Court affirmed the Federal Court of Appeal’s ruling that the APPRs do not give rise to liability and as such do not conflict with the Montreal Convention.  

Standardized compensation payable under the APPRs is not calculated based on individualized losses or harm and is therefore distinct from an “action for damages” within the ambit of Article 29 of the Montreal Convention. The APPRs operate as a consumer protection scheme, allowing the Canadian Transportation Agency to set minimum standards for how passengers are treated, regardless of any harm suffered.

In contrast, the Montreal Convention sets limits for damages for specific injuries (e.g., death, bodily injury, baggage loss). The Court ruled that the APPRs compensation system does not fall within the scope of these damages. The two forms of passenger compensation given by the APPRs and the Montreal Convention are capable of standing alongside each other.

Baggage Claims

One exception is for claims for the damage to or loss of baggage.  The Montreal Convention stipulates that the carrier is liable for damage sustained in the case of destroyed, lost or damaged baggage, and the damage occasioned by delay to passengers or baggage. Liability is generally capped at 1,288 SDR on proof of loss under the Montreal Convention. 

The APPRs authorized the CTA to prescribe minimum compensation for lost or damaged baggage. For example, Section 23(1) and (2) sets the carrier’s liability for lost, delayed or damaged baggage at an amount equal to or greater than the sum of the fees paid for that baggage and the compensation payable under the Montreal Convention. In other words, compensation under the APPRs will often exceed the cap of the Montreal Convention. 

The Federal Court of Appeal held that the reimbursement of fees does not conflict with the Montreal Convention. However, because Section 86.11(1)(c) of the Canada Transportation Act only authorized the Canadian Transportation Agency to prescribe minimum compensation for “lost or damaged baggage”, and not temporarily lost or delayed baggage, it was held that Section 23(2) of the APPRs ultra vires. This aspect of the ruling was not appealed to the SCC.

Practical Implications for Airlines

Air carriers must continue to compensate passengers travelling to and from Canada in the circumstances and minimum amounts prescribed by the APPRs. However, air carriers are not required to compensate passengers for “temporary loss of baggage” under section 23(2).

The Canadian Transportation Agency (“CTA”) is currently experiencing significant delays in processing air travel complaints and claims for compensation under the APPRs, despite implementing its new streamlined process for adjudicating complaints.  As a result, we anticipate an uptick in claims for compensation under the APPRs appearing in court proceedings.  Therefore, air carriers that have a valid basis in law for not compensating passengers under the APPRs may still face legal proceedings brought against them by passengers. A plaintiff may also claim minimum compensation under the APPRs as an additional cause of action alongside an action for damages pursuant to the Montreal Convention.