Okay, it's not my field, but what makes you interpret it differently?

Article 5 reads:In case of cancellation of a flight, the passengers concerned shall:
(a)be offered assistance by the operating air carrier in accordance with Article 8; and
(b)be offered assistance by the operating air carrier in accordance with Article 9(1)(a) and 9(2), as well as, in event of re-routing when the reasonably expected time of departure of the new flight is at least the day after the departure as it was planned for the cancelled flight, the assistance specified in Article 9(1)(b) and 9(1)(c); and
(c)have the right to compensation by the operating air carrier in accordance with Article 7, unless:
(i)they are informed of the cancellation at least two weeks before the scheduled time of departure; or
(ii)they are informed of the cancellation between two weeks and seven days before the scheduled time of departure and are offered re-routing, allowing them to depart no more than two hours before the scheduled time of departure and to reach their final destination less than four hours after the scheduled time of arrival; or
(iii)they are informed of the cancellation less than seven days before the scheduled time of departure and are offered re-routing, allowing them to depart no more than one hour before the scheduled time of departure and to reach their final destination less than two hours after the scheduled time of arrival.

Thus there is a requirement in this instance to (a) offer assistance per Article 8 and (c) pay compensation per Article 7.

Article 8 is a requirement for reimbursement or re-routing under comparable conditions.

Article 7, in relation to the amount the amount of compensation payable, provides at para (2), that:



When passengers are offered re-routing to their final destination on an alternative flight pursuant to Article 8, the arrival time of which does not exceed the scheduled arrival time of the flight originally booked

(a)by two hours, in respect of all flights of 1500 kilometres or less; or

(b)by three hours, in respect of all flights between 1500 and 3500 kilometres; or

(c)by four hours, in respect of all flights not falling under (a) or (b), the operating air carrier may reduce the compensation provided for in paragraph 1 by 50 %.

It seems to me in this case that compensation is payable, and reimbursement or re-routing is due. Because re-routing resulted in arrival no later than 4 hours after scheduled arrival time, that is reduced by 50%.

I may well be missing something, and open to hearing it if so, but it looks initially quite straightforward.