Insolvency protection for cancelled trips amidst Covid-19: CJEU in HDI GLobal and MS Amlin Isurance (C-771/22 and C-45/23)

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.

Revision of EU travel rules

By Alex Azabache on Unsplash

Last week, on November 29th, the European Commission announced the forthcoming (long-awaited) revision of EU travel rules (Improved rights and better information for travellers). This concerns a few legislative measures: 

1. Revision of Regulation 261/2004 on Passenger Rights through a newly proposed Regulation as regards enforcement of passenger rights in the Union

• new rules for passengers who booked flights via an intermediary
• an intermediary being defined as any ticket vendor, organiser or retailer other than a carrier
• new Article 8a adds a reimbursement right 
• passengers will need to be clearly informed by the intermediary and air carrier about the reimbursement process
• free of charge
• if reimbursement occurs through intermediaries: Air carriers shall reimburse intermediaries within 7 days, with intermediaries reimbursing passengers within further 7 days
• if passengers do not receive reimbursement within 14 days of choosing for this remedy, the air carrier contacts passengers to receive payment details and reimburses them within further 7 days
• new Article 14a adds rules on the transfer of passenger information, its safeguarding and when to delete it
• this will facilitate intermediaries sharing passenger information with air carriers, so that air carriers can be in contact with passengers about their flights
• strengthening enforcement mechanisms (similar mechanisms have been proposed to be added also to Regulation 1107/2006, Regulation 1177/2010, Regulation 181/2011, and Regulation 2021/782)
• new Article 15a requires air carriers to establish 'service quality standards' (Annex II contains a minimum list thereof) and implement 'a quality management system'
• new Article 16a specifies that the Commission will adopt a common form for reimbursement and compensation requests under Articles 7 and 8 Regulation 261/2004
• passengers will retain the right to submit their refund requests by other means
• passengers shall be free to provide information in any of the EU languages
• new Article 16b specifies that national enforcement bodies should adopt a risk-based approach to monitoring compliance with passenger rights
• this should allow detection and correction of 'recurrent non-compliance'
• new Article 16bb determines that carriers shall share information with national enforcement bodies within 1 month from the request (max 3 months in complex cases)
• new Article 16bc requires informing consumers about ADR

2. Revision of Regulation 1107/2006 on Rights of Disabled Persons and Persons with Reduced Mobility when Travelling by Air through a newly proposed Regulation as regards enforcement of passenger rights in the Union

• special right to assistance for persons with reduced mobility 
• including right for free of charge travel for a companion (if necessary to comply with safety procedures) - in Article 4(2)

3. New proposal for a Regulation on passenger rights in the context of multimodal journey

• multimodal journey is defined as a 'journey of a passenger between a point of departure and a final destination covering at least two transport services and at least two modes of transport' (Art 3(1))
• whilst the new provisions will apply to various types of multimodal journeys (single contract, combined contract, separate tickets) the unifying link between them (and limitation to scope) is that all transport contracts need to be offered by a carrier or intermediary
• whether payment takes place together for all services or separate is irrelevant though
• still, this means that the Regulation will not apply when it is the traveller who seeks out various connection between travel modes on their own
• Art. 4 - establishes the right to non-discriminatory contract conditions and tariffs
• discrimination is not allowed on the basis of passenger's nationality or the place of establishment of the carrier or intermediary
• Art. 5 - better information for passengers combining different travel modes (air, rail, road) in one trip
• e.g. on minimum connecting times between different transport modes, time schedules and conditions for the fastest trip, highlighting the lowest fares, disruptions and delays, complaint procedures
• intermediary transfers passenger data to all carriers involved to facilitate direct communication between them
• caveat: SMEs are exempted from having to provide real-time information
• right to assistance in case of missed connections
• Art. 7 - right to reimbursement and re-routing
• re-routing with the same (or another commissioned) carrier should not bring with it additional costs to passengers
• reasonable efforts should be made to ensure short delays in total travel time and to avoid additional connections
• reimbursement should be paid within 14 days (and may include vouchers, provided passengers agree to this)
• Art. 8 - reimbursement through intermediaries
• provided carriers agree, travellers could request reimbursement from intermediaries
• carriers then reimburse intermediaries within 7 days, and intermediaries have further 7 days to reimburse passengers
• if passengers do not receive reimbursement within 14 days of choosing for this remedy, the carrier contacts passengers to receive payment details and reimburses them within 14 days
• Art. 9 - right to assistance
• free of charge
• means and refreshments - reasonable to waiting time
• accommodation (and transport to it) - up to 3 nights
• Art. 10 - liability for combined multimodal tickets (with a single point of payment for all services) in case of missed connections
• carrier/intermediary liable to reimburse total amount paid for combined multimodal ticket + compensation (75% of the total ticket price) 
• unless clear information that the combined multimodal ticket consists of separate transport contracts
• Art. 11 - common form for reimbursement and compensation requests
• Chapter IV - contains rights for passengers with reduced mobility
• Chapter V - contains provisions on assuring quality of services
• Chapter VI - information and enforcement provisions

3. Revision of Package Travel Directive (2015/2302)

• Package organisers granted a right to a refund from service providers in case of cancellation or non-provision of a service within 7 days (Art. 22)
• to facilitate reimbursement of travellers within 14 days
• Downpayments for packages limited (new Article 5a)
• to max 25% of the package price, unless higher downpayment is justified by package organisers having to pay upfront for service provision
• total payment should not be requested until 28 days before the start of the package
• this is to protect consumers against risk of bankruptcy of organisers
• Revised Art. 12 clarifies termination rights in case of extraordinary circumstances (such as Covid-19)
• e.g. the need to consider official warnings against travel, but also serious restrictions that would have applied to travellers' travel at destination or upon return from travel at home country - when looking for justified termination
• New Art. 12a clarified vouchers policies 
• travellers transparently informed on the right to insist on a refund and voucher characteristics (validity period)
• voucher's amount should at least equal the amount of the refund right
• vouchers shall be valid min 12 months from the day travellers' accept them (with an option to extend by 12 months - once)
• refunded automatically (within 14 days) if not used before the end of the validity period
• vouchers shall be transferable to another traveller without any additional cost
• vouchers and refund rights covered by insolvency protection

Additional proposals have been adopted that aim to facilitate better provision of information to travellers on available travel modes, incl. combining different types of travel (revision of Delegated Regulation 2017/1926 on the provision of EU-wide multimodial travel information services). This new service intends to provide real-time information and updates, also on delays and cancellations, as well as specific information, e.g. on possibilities of taking bikes on a train (see more here).

Thomas Cook's liquidation puts package travel rules to a test

Earlier today Thomas Cook, one of the world's oldest package tour organizers, entered compulsory liquidation, affecting about 600,000 travellers. The company explained its financial problems by a variety of factors: from political unrest in important holiday destinations to prolonged Brexit negotiations. Since the decision comes before the UK's exit from the EU, the follow-up process, including important consumer protections, is subject to Directive 2015/2302 on package travel.

A short history of package travel law

Source: Pixabay

Harmonised rules on package travel belong to the earliest EU instruments of consumer law. The relevant discussions date back to the 1981 Council resolution on a second programme for a consumer protection and information policy, and were based on pre-existing laws on package travel in Member States like the UK. Directive 90/314/EEC on package travel was first to harmonise this framework at the European level. It introduced a set of minimum protections for the travellers who bought 'packages', defined as a pre-arranged combination of not fewer than two tourist services (in particular transport and accommodation), sold or offered for sale at an inclusive price, when the service covered a period of more than twenty-four hours or included overnight accommodation. The directive laid down rules on pre-contractual information, the content of contracts, consumer's right to transfer the package, changes to contract terms, liability for non-performance as well as security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency.

This framework was recently updated in the wave of a broader reform of the European consumer law. As of 1 July 2018, Member States are obliged to apply national measures implementing a new act - Directive 2015/2302 on package travel and linked travel arrangements. Unlike its predecessor, the updated framework provides for a full level of harmonisation. It addresses a similar set of matters as Directive 90/314/EEC, but in a much more comprehensive way. 

Insolvency protection

As regards insolvency protection, Article 17(1) of Directive 2015/2302 requires Member States to 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. If the carriage of passengers is included in the package travel contract, organisers shall also provide security for the travellers' repatriation. Pursuant to next paragraphs, an organiser's insolvency protection shall benefit travellers regardless of their place of residence, the place of departure or where the package is sold and irrespective of the Member State where the entity in charge of the insolvency protection is located (para. 3). When the performance of the package is affected by the organiser's insolvency, the security shall be available free of charge to ensure repatriations and, if necessary, the financing of accommodation prior to the repatriation (para. 4). For travel services that have not been performed, refunds shall be provided without undue delay after the traveller's request (para. 5).

This provides an interesting background for the today's coverage of Thomas Cook's liquidation. The UK government and the Civil Aviation Authority are reported to have launched "the largest repatriation in peacetime history" codenamed Operation Matterhorn. Hotels accommodating Thomas Cook customers have been informed that the cost of accommodation will be covered by the government, through the Air Travel Trust (ATT) Fund/ Air Travel Organiser’s Licence (ATOL) cover. Assistance will reportedly be provided to all customers, regardless of their nationality. It can be assumed that customers whose return flights were scheduled to countries other than the UK will also be able to reach their destinations, although current statements focus understandably on UK travellers. A dedicated website is further being launched "to let customers know how to get their money back", which suggests that refunds for services not performed will also be available.

Customers of Thomas Cook are therefore likely to obtain the protection provided under Directive 2015/2302. The ATT/ATOL cover appears to be directly linked to this framework. It requires ATOL holders to pay a fee of £2.50 for each traveller, which is held in a fund managed by the ATT. This fund is used to support consumers currently abroad and provide financial reimbursement for the cost of replacing parts of the package. While all of this points to the well-functioning package travel scheme, parts of today's reporting are painting a slightly different picture. 

For example, the UK government announced that it is "stepping in" to assist all impacted passengers, including those who are not ATOL protected. Considering that Thomas Cook is an ATOL holder, a question can be asked: which group of travellers is in fact covered by this statement and how significant this group is?

Of interest are also the widely reported last-minute rescue talks carried out between the company and the UK government. Prime Minister Boris Johnson revealed that the government had rejected a request from Thomas Cook for a bailout, while questioning whether directors of the company were "properly incentivised" to avoid bankruptcy. This seems to disregard the existence of insolvency protections discussed above, to which companies of this kind are also contributing. As long as the United Kingdom remains in the EU, it is also required to ensure an effective functioning of this scheme.

Concluding thought

Today's news about Thomas Cook's liquidation is remarkable for a number of reasons. It concerns one of the oldest organisers of package tours, established in the UK, which itself is on its track to leave the European Union. It raises the question about the functioning of existing insolvency protections and especially how they will apply to travellers from outside the UK. One can also wonder if their situation would be different, had the liquidation happened post-Brexit.

Thomas Cook's story also sheds light on the broader transformation of the travel sector. What the company has not mentioned as a likely factor for its financial troubles is the growing role of direct booking channels and new types of intermediaries, like online platforms. While effects of this transformation on the long-established companies like Thomas Cook may be regretted, its story should primarily be a wake-up call for the law- and policymakers. The potential connection between increased regulatory burdens and the inability to compete with other travel companies is perhaps one of the questions to be asked. More importantly, however, the collapse shows that package travel is no longer the principal way how people travel and this is not really reflected in the legal framework. The 2015 reform of package travel law has partially extended its scope to the so-called "linked travel arrangements", thus capturing at least part of the transformation. For now, however, the discussion does not ensure that interests of those who prefer to assemble their trip on their own are adequately safeguarded.

* The author carries out a research project on consumer protection in the collaborative economy, financed by the National Science Centre in Poland on the basis of decision no. DEC-2015/19/N/HS5/01557.

When the going gets tough - the need for insolvency protection of travel organisers

As today's UK news bring about information about two major holiday providers (Super Break and Late Rooms) going into administration (Super Break and Late Rooms holiday firms go into administration), the scope of consumer protection measures is again at the forefront of many travellers' minds. Already the previous Package Travel Directive (Directive 90/314/EEC) required the Member States to ensure that package travel providers had sufficient insolvency protection, but these rules have been further specified and strengthened in the new Directive 2015/2302 on package travel and linked travel arrangements. The UK has implemented the new Directive in the Package Travel and Linked Travel Arrangements Regulations 2018.

At the moment, the European Commission is reviewing whether the Member States have completely and properly implemented provisions of Directive 2015/2302 into their national laws. What happens to travellers who have booked their holidays with Super Break and Late Rooms will be a good example, on which to check how effective the UK protection against the insolvency of the package travel organiser is. However, even if the insolvency protection has been properly arranged many customers of Super Break and Late Rooms are likely to end up dissatisfied. Why? 

Well, first: they may not have concluded a package travel or a linked travel arrangement contract, which means that they would not benefit from insolvency protection.

Travellers who have been inconvenienced and do not have a separate travel insurance (as then it is best to contact the insurance company), should then first check whether their holidays are a package holiday or a linked travel arrangement, as in both cases insolvency protection had to be assured. Generally, this means that the traveller booked at least two different types of travel services (accommodation, travel, vehicle rental, etc.) for the purpose of the same holiday with either the same trader or through a linked booking process. If only accommodation was booked, without travel or vehicle rental, then the question whether a booking of another travel service makes it a package holiday depends on the value and importance of the provision of this additional travel service in the overall context of the package travel contract. 

Second, even if they fall within the scope of protection, their holiday has likely been ruined.

In case of package travel holidays or linked travel arrangements, travellers may at least expect the full refund of the payments they have made for the purchase of the package (but not additional payments that e.g. have been made after the package has already been concluded - e.g. to purchase additional attractions at their destination) and repatriation, in case they were already on holidays. Unfortunately, it is unlikely that they will be able though to enjoy their holidays as the insolvency insurance does not have to ensure the possibility of travellers continuing with their travel plans.

Who covers for insolvent package tour organisers? States, not air carriers - CJEU in HQ and Others (C-163/18)

Today the CJEU issued a judgment in the case HQ and Others (C-163/18), which we previously discussed as the Aegean Airlines case (Avoiding double claims at all cost...). The CJEU followed the argumentation presented by AG Saugmandsgaard Øe and decided that as long as passengers have a right to claim a reimbursement of their air tickets' costs from a package tour organiser pursuant to the national rules implementing Package Travel Directive, they are prohibited from claiming such costs from an air carrier, as well. Irrespective of whether they are actually able to obtain actual compensation. 

This is a very literal interpretation of Article 8(2) Regulation 261/2004 (para. 31), which aims to prevent double compensation claims from being raised by passengers (para. 34). However, this interpretation does not help consumers in a situation like in the given case, where the package tour organiser is insolvent and the consumer is left without a recourse. The CJEU indicates that where the package tour organiser did not ensure sufficient insolvency protection pursuant to Article 7 Package Travel Directive, this provision has been improperly implemented and applied in a given Member State (paras. 41-42) and the passenger may claim his damages from the Member State under State liability rules (para. 43). The burden is placed, therefore, on passengers to continue with their search for justice.

Solvency II on hold

Another new legislative proposal that has been pushed on the European Parliament's agenda is the suggested amendment to Solvency II Directive 2009/138/EC from 2009 (through Omnibus II Directive). On the European Commission's website we may still read that the proposed changes are likely to apply as of 1 January 2014. However, the vote in the European Parliament has been delayed by five months until 11 March 2014 and since by then the new European elections would be approaching, the election preparations may further delay the implementation of these rules ("Solvency II kicked into long grass"). The proposed changes were supposed to update the existing rules for the insurance companies regarding their supervision, financial reporting, finance techniques and risk management, among others making sure that consumers are protected due to insurers keeping enough money in reserve, proportionally to the risks they were underwriting. Since insurance companies do not hide their unhappiness with this proposal, on top of the news from the tobacco world, it is not hard to imagine that some heavy lobbying took place also in respect of this proposal to delay its adoption

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Informal Council

Last Friday the EU Ministers held an informal council during which they assigned priority to further works on the Data Protection Reform as well as to the new cross-border Insolvency law. Another subject that was tackled was harmonisation of efforts to fight hate crime and intolerance in Europe. (see more Data Protection reform and cross-border Insolvency law prioritised by EU Ministers)