The immediate impact of the pandemic might be on the wane, but the legal battlefield continues. In HDI Global and MS Amlin Insurance (Joined Cases C-771/22 and C-45/23), the CJEU analysed the implications of insolvency on consumers’ right to a refund after validly cancelling a package trip under the Package Travel Directive (Directive (EU) 2015/2302).
In both cases, the consumers booked package trips with their travel organisers and paid in full. Due to the spread of Covid-19, the consumers cancelled their bookings on the grounds of ‘unavoidable and extraordinary circumstances’ as per Art. 12(2) of the Directive, entitling them to a full refund. However, the organisers became insolvent before issuing the refunds. Though Article 17(1) of the Directive does mandate the provision of security for insolvency protection, its wording seems to require a causal link between the non-performance and the organiser’s insolvency for the consumer to benefit. Questions thus arise as to whether its coverage should extend to those consumers who cancelled their trips before the insolvency occurred. Art. 17(1) reads:
Member States shall ensure that organisers established in their territory provide security for the refund of all payments made by or on behalf of travellers insofar as the relevant services are not performed as a consequence of the organiser’s insolvency. […] (emphasis added)
The CJEU first reiterated the methods of interpreting EU law: ‘account must be taken not only of its wording, but also of its context, the objectives pursued by the rules of which it is part and, where appropriate, its origins.’ Moreover, ‘where the meaning of a provision of EU law is absolutely plain from its very wording, the Court cannot depart from that meaning’. (para 56) The CJEU then continued its reasoning in accordance with this formula.
Starting with the wording. The term ‘relevant services’ can only cover ‘travel services’, or it can indicate a broader scope, covering other services such as refunds (paras 58-59). Due to this ambiguity, the wording of Art. 17(1) does not provide an absolutely plain meaning (para 60). The CJEU thus further engaged with the provision’s context, objectives and origins.
- Contextual interpretation: The CJEU interpreted Art. 17(1) of the Directive within its broader context, considering other paragraphs of the same provision, related provisions and the recitals of the Directive. In particular, Art. 17(2) of the Directive requires the security to be effective and to cover reasonably foreseeable costs (para 64). In light of recitals 39 and 40, the CJEU states that any refund of payment is a foreseeable amount of payment which may be affected by the travel organiser’s insolvency (para 68). Otherwise, the effectiveness of consumers’ right to termination under Article 12(2) would be compromised, and consumers would be dissuaded from exercising their rights (paras 69-70). Lastly, Art. 5 of the Directive requires the travel organiser to inform the consumer that ‘if the organiser … becomes insolvent, payments will be refunded’. This information would be misleading if Art. 17(1) excludes consumers’ refund claims arising before insolvency (para 73).
- Teleological interpretation: One of the main objectives of the Directive is to ensure a high level of consumer protection in EU package travel policy (para 74). In this light, given that Directive 90/314, the predecessor of the current Package Travel Directive, did not exclude travellers’ refund claims from insolvency protection, a restrictive interpretation of Art. 17(1) would constitute a reduction in the level of consumer protection (para 79).
- Historical interpretation: The CJEU consulted the legislative history of Art. 17(1) but did not find it helpful (para 80).
Finally, the CJEU also highlighted that secondary EU law must be interpreted consistently with primary EU law as a whole, including the principle of equal treatment (para 82). This principle requires that comparable situations must not be treated differently unless objectively justified (para 83). The situations involved are (1) travellers whose package travel cannot be performed due to insolvency and (2) travellers whose refund claims following termination cannot be fulfilled. These situations are comparable because in both cases travellers are exposed to the financial risks entailed by the organiser’s insolvency (para 87), and there appears to be no justification for treating them differently (para 89).
In conclusion, the CJEU ruled that the security under Art. 17(1) applies to a traveller who has terminated the contract before insolvency but has not received the refund. Consumers can rest assured – while your trips might not go as planned, your refunds are secure. This decision will surely be welcomed by consumer rights advocates. Insurers are not too exposed either, as the ‘reasonable foreseeability’ criterion still serves to protect their interests.
