Ryanair has been slowly getting to grips with improving industrial relations after a major climbdown past year that saw the airline pledge to recognise unions for the first time.
The UK Civil Aviation Authority (CAA) has now revealed it is taking "enforcement action" action against Ryanair.
Passengers had previously been advised to lodge compensation claims with Aviation ADR, the CAA approved arbitration provider.
Passengers have made claims for compensation to the airline, but these have been rejected by Ryanair on the grounds that the disruption arose from "exceptional circumstances" and therefore exempt.
Rory Boland, Which? Travel editor, said: 'Customers would have been outraged that Ryanair attempted to shirk its responsibilities by refusing to pay out compensation for cancelling services during the summer - which left hard-working families stranded with holiday plans stalled.
The Civil Aviation Authority (CAA) has launched an enforcement action against Ryanair after the low-priced airline refused to pay compensation to passengers for flight disruptions caused by recent strikes.
Ryanair has now told the CAA that it has terminated its agreement with ADR.
The Civil Aviation Authority maintain the strikes were not "extraordinary circumstances" and were not exempt, meaning consumers should be compensated.
The airline maintains financial compensation is not payable under European Commission Regulation 261/2004 for flight disruption resulting from industrial action by the airline's staff. The airline has refused to pay out under existing compensation rules, claiming the strikes should be considered "extraordinary circumstances". "We expect the UK CAA and courts will follow this precedent".
Ryanair warned over profits in October after it was stung by strike action, combined with higher oil prices.
One passenger tweeted: "Ryanair how can you advertise as priority boarding when over half the plane have so-called "priority"?"