From dream vacation to legal dispute: CJEU in Tuleka (C-469/24)

Tirana Post 

Some consumers have truly bad luck, but their misfortune raises interesting legal questions. In Tuleka (C-469/24), the applicants booked a 1-week, all-inclusive package holiday in a 5-star hotel in Albania. What was meant to be a dream vacation quickly turned into an ordeal due to: 1) Demolition of hotel swimming pools, commissioned by Albanian authorities and carried out in the presence of media and police; 2) Consequential destruction of the seafront promenade and waterfront infrastructure, blocking access to the sea; 3) Long queues and limited meals at the hotel restaurant; 4) Construction work to add a fifth floor, with building materials transported by guest elevators. Unsurprisingly, the travellers filed a claim for damages upon their return. They sought compensation for material damages equal to the full price of the package (due to non-performance) and non-material damages (exceeding the amount of material losses). 

Article 13 of the Package Travel Directive 2015/2302 makes organisers responsible for the performance of the package, with an option for the Member States to extend that responsibility to retailers, as well. This is irrespective of which travel service provider is to perform the service. Organisers must offer alternative arrangements and otherwise remedy lack of conformity, unless doing so is impossible or entails disproportionate costs. In that case, Article 14 entitles travellers to a price reduction and appropriate compensation, unless the lack of conformity is "attributable to a third party unconnected with the provision of the travel services included in the package travel contract and is unforeseeable and unavoidable". The hotel indeed argued that the swimming pool's demolition was attributable to a third party (Albanian authorities) and constituted an extraordinary circumstance.

Burden of proof: Attribution does not require fault

Polish law implementing the PTD placed a burden of proof on organisers that the lack of conformity was due to the fault of a third party to escape liability. This higher threshold limited organisers' ability to exonerate themselves. The CJEU held this approach incompatible with Article 14(3)(b) PTD. The phrase "attributable to" must be interpreted autonomously, given its lack of definition in the PTD (para 31). Its ordinary meaning refers to an outcome resulting from a person's conduct - without implying intentional or negligent failure (para 32). Consequently, attribution does not require fault. This interpretation gives organisers more scope to avoid liability (para 33). This interpretation is further aligned with the Directive's structure and context (para 36). As the PTD provides maximum harmonisation, the Member States cannot impose stricter standards (para 38).

Full refund for serious non-conformity 

The second question inquired whether travellers could claim a full price reduction, that is the total cost of the package, even if some services were performed, but the lack of conformity was serious. Article 14(1) PTD grants an "appropriate" price reduction, assessed objectively across the entire period of non-conformity (para 45). The assessment must consider not only organisers' obligations "explicitly stipulated in that contract, but also those linked to it as a result of the purpose of that contract" (para 46). The longer and more serious the non-performance or improper performance, the greater the price reduction (para 47). Considering the objective of the high level of consumer protection behind the adoption of the PTD, the CJEU determines that where the lack of conformity is so severe that the package travel no longer serves its purpose, that is it is objectively no longer of interest to the traveller, travellers are entitled to a full refund (para 49).

Price reduction and compensation: Restorative, not punitive

The PTD allows claims for non-material damages, which are always more difficult to quantify. A question arose whether in estimating travellers' damages any punitive damages should be considered (para 56). The CJEU emphasises the language of Article 14 PTD and clarifies that it aims to restore contractual balance (para 57), and does not mention or permit punitive damages (para 58). Punitive damages are therefore excluded (para 60).

Extraordinary circumstances: Was demolition unforeseeable?

Finally, the Court considered whether the demolition order issued by national authorities qualified as an unavoidable and extraordinary circumstance. Article 3(12) PTD defines such circumstances as events beyond the control of the organiser that could not have been avoided with reasonable measures (para 62). Recital 31 PTD contains a non-exhaustive list (para 63) and prior case law likens this concept to force majeure (para 64), demanding these events were unforeseeable (para 65). An order to demolish the swimming pool was unlikely unforeseeable, as such decisions are typically debated and publicised (para 67). The national court must determine whether either the organiser or hotel manager was notified of the administrative procedure or the content of the decision before it was implemented (para 70). 

Interpretation favours air passengers - CJEU in Cymdek (C-20/24)

In Cymdek case (C-20/24) Polish court asked the CJEU to further interpret provisions of Regulation 261/2004 on air passenger rights regarding proof of travel (reservation) and the concept of traveling 'free of charge'. The case was decided on March 6 and the CJEU interpreted relevant provisions of the Regulation in a passenger-friendly manner. 

Facts and legal questions

In this case, a company CCC financed package tours for a group of passengers. CCC booked this package tour with a tour operator BBB. It included a flight between Spain and Poland, which was delayed by over 22 hours (operating carrier: AAA). Two questions raised in the dispute followed from passengers not being involved with making the reservation nor paying for it. Article 3 of the Regulation 261/2004 defines the scope of its application and requires that passengers 'have a confirmed reservation on the flight concerned'. This requires passengers to have a ticket or 'other proof' that the air carrier or tour operator accepted and registered the reservation, pursuant to Article 2(g). Further, Article 3(3) excludes from the scope of application such passengers who travel free of charge or at a reduced fare. As proof of their reservation passengers were presenting their boarding passes and the first question answered by the CJEU asked whether this was sufficient as 'other proof'. Second question addressed the issue of passengers traveling 'free of charge' if they did not pay for their flight, but the tour operator and the air carrier were remunerated nonetheless.

Boarding pass as proof of a reservation

The CJEU considers a boarding pass as proof of a reservation, as it includes ticket or reservation number and confers on passengers 'entitlement to transport', authorising them to take the flight (paras 23-24). It also relies on the fact that as the operating air carrier admitted these passengers on board via check-in and allowed them to take the flight, they had to have had a confirmed reservation for that flight (para 29). The boarding pass can then prove the existence of a reservation, even if it does not contain all information normally expected from it, e.g. arrival time (para 25). 

Free of charge air travel only if made free by the operating air carrier

The most common interpretation of the exclusion from Article 3(3) Regulation 261/2004 involved air carriers offering free (or at a reduced fare not available to the public) flights to passengers, outside the frequent flyer programme benefits (paras 40-41). The CJEU confirms in this judgment that it is only the operating air carrier's decision to facilitate free (or at a reduced fare) travel to passengers that would prevent passengers from claiming protection from Regulation 261/2004 (para 44). The fact that the tour operator in this case remunerated the operating air carrier according to market conditions further signifies that the flight was not 'free of charge' (para 48). It is also irrelevant whether passengers paid themselves to the tour operator, or whether, as in this case, the package tour was paid by a third party (para 49). The burden of proof that a passenger travelled free of charge rests on the air carrier, as they will need to prove their case is excluded from the applicability of Regulation 261/2004 (para 51).

The importance of this judgment is twofold. First, it clarifies the language of the previous case Azurair and Others (C-146/20, C-188/20, C-196/20 and C-270/20), which implied that a proof of a reservation is only perceived as such if it contains a lot of flight-related information. This specific interpretation would have made it relatively easy for the airlines to avoid providing passengers with a 'confirmed reservation' by not providing some of this information in written form to passengers, or providing it in various documents. It is also good to have a confirmation of the notion 'free of charge' and its narrow applicability. We may have expected that it was irrelevant whether passengers paid for their flight themselves, as they also did not require a contractual relationship with the operating air carrier. However, it is good to read that passengers will not lose their protection if they travel on a discounted rate basis due to arrangements e.g. between their employers and tour operators, provided it is not the operating air carrier that offers this (not publicly available) deal.

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).

Ex officio and package holidays - CJEU in RTG v Tuk Tuk travel SL (C-83/22)

 Dear readers,

do you remember when the Package Travel Directive (2015/2302) and package travel rules all of a sudden seemed very current, back at the heights of the pandemic, after having been mocked for years as the 2015 rules for 1980s holiday-making? Well, in a reminder that we all sit in our little bubbles :), it turns out consumers may not have noticed all the fuss in the legal community after all - but ex officio is there to make courts watch. 

Here's the story: yesterday the CJEU published its decision in RTG v TUK travel SL, which concerned a refund claim by a consumer who had planned and cancelled a trip to a faraway location in 2020. When trying to get his money back, the consumer was informed by the travel organiser that they would only be able to recover a very tiny sum. Subsequently, he sued for recovery claiming the contract was terminated due to force majeure, demanding ca 75% of the original sum - in acknowledgement of what the consumer thought were reasonable expenses incurred by the organiser. 

The national court seised with the case had its quandaries with the claim: on the one hand, the judge knew that the Package Travel Directive's article 12(2) entitled the consumer to a full reimbursement in cases like the one at hand; on the other hand, rules of Spanish civil procedure did not allow the court to modify the consumer's claim. The Court asked the parties to clarify - had the trader in fact informed the consumer, at the moment of concluding the contract, that he had a right to termination without consequences if the trip had to be cancelled? Apparently they had not. 

I will not discuss here the first question asked by the court, which rested on a misunderstanding of the text of the directive. The second question, however, in essence asked - to what extent are courts required to apply the Package Travel Directive ex officio? 

The CJEU gave a reasonably helpful answer to this question. In essence, national courts in similar situations will have to ex officio examine whether the rules in the Directive have been complied with, on the basis of the information available within the procedure. If the Court ascertains a violation - like, in this case, of article 12(2) - it will allow the consumer to amend their claim. Courts are not required or allowed, however, to go on and apply the remedy ex officio "rewriting" the consumer's claim without further ado. 

This is a somewhat systematically ambitious judgement to the extent that the CJEU (para 54-57) ventures into expressly translating previous case-law into a series of requirements without which ex officio cannot take place:

• the court must have a judgment pending about the specific contract at hand brought by one of the parties
• the involved provision (right to terminate) must be relevant to the object of the dispute as identified by the parties
• the court must have all the necessary elements available and
• the consumer must not have expressly objected to the application of the provision at hand. 

The first three requirements appear taken almost verbatim from the CJEU's previous decision in Lintner (C-511/17 - see our comment here), concerning unfair terms; the last one also seems to reflect case-law in the same area, and namely Dziubak (C-260/18 - see our comment here). 

Different to many ex officio cases, this case did not concern an absentee consumer - only one who had gone to court without a lawyer and maybe therefore (and because of the trader's failure to comply with consumer protection law) had not formulated their best possible claim. Also contrary to Duarte Hueros (C-32/12 - see our comment here), this consumer had in fact formulated a successful claim - but one that was not as advantageous as the one that he was allowed under consumer law. In this respect the decision is both far-reaching - it's not obvious that the consumer would have not received effective protection without ex officio, so the "public order" reason for control seems to feature prominently - and rather modest in not prescribing an outcome (which seems to make it less of a public order reasoning). In any case, this being Friday afternoon, I will say that it's not particularly easy to feel in this case for the trader who had actively tried to mislead the consumer as to his rights. Not nice of you, Tuk Tuk travel!

National law temporarily exempting travel organisers from full refund in cash ruled not compatible with EU law (Case C-407/21)

As expected, some of the disputes regarding the termination of travel related contracts due to the Covid-19 outbreak have arrived at the attention of the CJEU. On June 8, the Court issued two judgments establishing that national laws which temporarily exempted travel organisers from the obligation of full refund are not compatible with EU law. Here, we look at Case C-407/21.

Facts of the case 

In March 2020, at the beginning of the Covid-19 outbreak, the French Government adopted an order aimed at safeguarding the cash flow and solvency of the service providers impacted by the pandemic. The order established that ‘where a travel and holiday sales contract is ‘rescinded’ between 1 March and 15 September 2020, the organiser or retailer may offer, instead of a full refund of any payments made under the ‘rescinded contract’, a credit note [voucher] which the customer may use under certain conditions’ (para 12). The offer would be valid for 18 months and, after that period, if not accepted, the trader would have been required to provide a full refund. The provision derogated from Article 12(2) and (3) of Directive 2015/2302 on package travel and linked travel arrangements. The latter provisions, combined, establish that if the organiser or the traveller terminates the contract due to ‘unavoidable and extraordinary circumstances (…) affecting the performance of the package or which significantly affect the carriage of passengers to the destination’ the traveller is entitled to a full refund. 

Two consumer organisations (Union fédérale des consommateurs – Que choisir (UFC) and Consommation, logement et cadre de vie (CLCV)) brought an application before the referring court (Conseil d’État) against the French Minister for Economic Affairs, Finance and Recovery, requesting the annulment of the order. UFC and CLCV claimed that the order was in violation of Article 12, pursuant to which the consumer is entitled to a full refund within 14 days from the termination of the contract. The referring court noted that immediate full refunds to all consumers may have jeopardised the very existence of the operators and thus the chance for those consumers to obtain it; it stayed the proceedings and referred to the CJEU.

Can the trader provide a voucher instead of a cash refund?

 

The CJEU observes that although the Directive does not define the concept of ‘refund’, the everyday meaning of the term refers to the ‘to the fact of returning to a person a sum of money which that person has paid out or advanced to another person’ (para 25). Further, Article 12(2) and (3) refers to a payment made. According to the Court, it thus follows that the concept does refer to the return of cash. Further, the fact that the reimbursement must be made within 14 days from the termination makes it clear that the refund should consist of cash: that short period in fact guarantees that the traveller will again ‘be able to dispose freely of the sum spent on the package’ (para 30). Receiving a sum of money, writes the Court, better protects consumers than receiving a voucher, and thus ensures a higher level of consumer protection, which is the objective of the Directive (para 33). The Directive must thus be interpreted as providing that the organiser of a travel package is required to provide a full refund in the form of a sum of money. However, this does not preclude the traveller from voluntarily accepting a voucher if the option of the cash refund remains available. 

What if there is a global pandemic? 

The Conseil d’État asks the CJEU whether the Directive must be interpreted as requiring traders to provide a full cash refund within 14 days even when, because of a global pandemic, this would risk jeopardising the existence of the whole travel organisers’ sector. Preliminarily, though, the CJEU must establish whether Article 12(2) and (3)(b) on unavoidable and extraordinary circumstances applies to the French order regarding the Covid-19 outbreak. In essence, it must establish whether the pandemic can be qualified as an unavoidable and extraordinary circumstance. The Court answers the question in the positive and argues that, for sure, it must be considered that a health crisis on a global scale makes ‘it impossible to travel safely to the destination as agreed in the package travel contract’ (Recital 31, Directive). Further, the Covid-19 outbreak certainly is to be regarded as beyond the control of the traveller (Article 3(12), defining what an unavoidable and extraordinary circumstance is). Article 12 thus applies to the contracts terminated due to the global pandemic. 

 

The force majeure hypothesis and consumer protection 

The French government also argues that the Covid-19 pandemic constitutes a case of force majeure thus allowing a derogation from Article 12. However, as observed by the Advocate General, from the travaux préparatoires of the Directive it emerges that the concept of unavoidable and extraordinary circumstance was meant to replace and exhaustively implement that of force majeure (paras 55-56). That being the case, no derogation is allowed since Article 12(2) and (3) does not provide for it. Such a derogation would lower the level of consumer protection for the travellers whose contract is terminated due to the pandemic and whose circumstances are protected under Article 12 (para 61). National legislation of the sort of the French order’s is thus in violation of the Directive (para 62). 

As suggested by the Slovak Government, a force majeure claim may be used also to argue that a Member State has not complied with EU law when ‘the non-conformity of national legislation with the provisions of a directive is justified on the grounds of force majeure so as to ensure that that legislation may continue to apply during the necessary period’ (para 68). This argument cannot be applied to the French order: the latter’s application, by suspending the reimbursement obligation ‘is not confined solely to cases in which such constraints, in particular financial constraints, have actually occurred, but extends to all contracts terminated during the reference period, without taking into account the specific and individual financial situation of the travel organisers concerned’ (para 70). 

The State aid solution 

The Court further observes that the French Government, contrary to other Member States, decided not to recur to any State aid measure allowed under Article 107 (2)(b) TFEU. The use of State aid would have helped overcome the liquidity problem which the Government considered as justifying a derogation from EU law. In light of all of the above, thus, the Directive must be read as precluding Member States from temporarily releasing traders from the full refund obligation in order to overcome the solvency issue emerged due to the global pandemic. 

Principle of sincere cooperation 

Finally, the Conseil d’État asks whether a national court before which an action for the annulment of national legislation contrary EU law has been brought can adjust the temporal effects of its decision, to avoid the damages arising from the annulment. There have been cases in which this has been allowed, in the presence of ‘overriding considerations relating to the protection of the environment or to the need to eliminate a genuine and serious threat of disruption to the electricity supply’ (para 82). The CJEU though decisively excludes that a threat to the economic interests of the travel operators is comparable to a threat to the environment and electricity supply. The French Government itself had in fact noted that the damages would be ‘limited’ (para 84). In light of the principle of sincere cooperation, EU law must thus be interpreted as not allowing the national court to adjust the temporal effects of its decision on the annulment of legislation contrary to Article 12(2) to (4) of the Directive. 

The ruling emphasises the imperative nature of the provisions of the Directive and thus reinforces the pivotal role of consumers within the internal market. By receiving a full cash refund within 14 days from the termination, consumers can freely dispose of that sum and invest it in other purchasing activities not prevented from the pandemic (e.g., Amazon deliveries). Further, once again, it emerges clearly that consumer interests enjoy a prominent position in the Union and their prevalence over traders’ financial interests remains undisputed also in exceptional times such as those of the Covid-19 pandemic. This is true, in particular, when alternative measures such as State aid would have allowed the French Government to prevent the solvency issues potentially encountered by travel operators.

Price reduction for travel services not performed due to pandemic - CJEU in FTI Touristik (C-396/21)

On January 12, the CJEU issued a judgment in FTI Touristik (C-396/21) as to the application of the Package Travel Directive  (Directive (EU) 2015/2302) in the times of a global pandemic. Specifically, the question raised by the national court was whether national restrictions adopted to fight the spread of Covid-19 could be perceived as leading to non-conformity of a package, if such restrictions were imposed globally. 

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The travellers booked a 2-week package holiday from Germany to Greece for March 2020 and, unfortunately, were unexpectedly subject to the first wave of pandemic restrictions being put in place (e.g. beaches were closed, curfew was adopted, access to swimming pools/sunbeds was prohibited, entertainment was discontinued). Their 'holiday' ended early, after 7 days. Could they claim price reduction for the package they purchased considering that it was performed in a very limited scope?

Art. 14(1) PTD entitles travellers to price reduction in any circumstances when there was a lack of conformity, unless it was attributable to them. As the CJEU observes, there is one condition to obtain this remedy (lack of conformity) (para 21), with AG Medina pointing out also that there is only one exception to this - attribution to a traveller (para 16 Opinion of AG Medina, para 23 judgment). As the lack of conformity is defined as a 'failure to perform or improper performance of the travel services' (Art. 3 point 13 PTD), this concept is not linked to fault or any specific circumstances that led to non-conformity. The objective nature of this finding does not allow for considering the cause/origin of the lack of conformity (para 22). Consequently, even if non-conformity results from extraordinary circumstances, these would not impacts its finding (para 24). 

Further, as the CJEU rightly observes, the structure of Art. 14 PTD clearly divides remedies that travellers could always claim (provided they did not contribute to it) - that would be price reduction, and these they could claim only if the organiser or parties involved in the provision of travel services were responsible for the non-conformity - that would be compensation (para 24). There would be no need to separate these remedies in the structure of the Directive, if either could be excluded from consumer rights by the occurrence of extraordinary circumstances (para 24). This dissociation of the two remedies occurred during the legislative process, which serves to prove the intention of the legislator to equip consumers in the right to price reduction in the majority of non-conformity cases (para 30). 

Consequently, irrespective of whether Covid-19 restrictions are recognised as force majeure  or a 'general life risk' (para 33), consumers have a right to claim price reduction for the lack of conformity of their package. Their claim will, however, be restricted to non-performance or improper performance of these services that were included in the contract (para 37), incl. services that were not explicitly mentioned in the contract but could be linked to it based on the purpose of the travel (para 38). In this case, courts will need to consider e.g. whether access to the public beach would be linked to the purpose of the travel, even if it was not guaranteed in the contract. Also, the assessment of the 'appropriateness' of the price reduction itself needs to objectively consider the travel services' value (para 39).

It is important to note, as well, that the CJEU specifically addresses whether PTD applies in a situation of a pandemic, stressing that 'the application of Directive 2015/2302 is not limited to instances of travel disruption of a certain scale or at a local level.' (para 29).

This judgment will allow at least some travellers whose travel was affected by the pandemic to claim remedies easier. However, the preliminary reference was limited to circumstances where the travel started before pandemic restrictions were put in place. It will likely not apply to these cases, when the contract was concluded and travel began after restrictions were already imposed (para 33 Opinion of AG Medina).

Public consultation time: Package Travel Directive

The European Commission just announced opening of a new public consultation, this time regarding the effectiveness of the new protection framework for package travel contracts and linked travel arrangements, incl. protection against insolvency of travel organisers. If you have thoughts, experience, comments on this, as well as ideas for the improvement of the framework - you could report these until 10 May 2022 on this website. A separate review/consultation is announced to follow shortly, on the topic of protection of passengers in stand-alone transport arrangements. 

Reflecting on EU (package) travel law in 2021: travel platforms in a regulatory blind spot?

The EU legislature has been pushing for the harmonisation of consumer protection in the travel sector for several decades now. The entire process has progressed in a piecemeal fashion, with a focus on selected transport services as well as package tours. Typically, after putting in place a set of common norms in one area, the EU would shift its attention to another, trying to build upon prior experience while also addressing new issues. Over time, discrepancies between harmonised norms across the different areas would become apparent and discussions would centre on the needed revisions. The Court has also remained quite busy responding to the questions posed by referring courts, especially in the field of air transport. References made in relation to other transport modes and package travel have been more limited, but not without importance, as the recent judgment in Kuoni Travel shows (see: Somber CJEU case on package travel...).

By contrast, travel services not covered by the main strand of regulatory debate (i.e. not qualifying as transport by air, rail, bus or coach, or as a package tour) have long escaped EU attention, partly for competence reasons. This has slightly changed when online travel platforms, such as Booking.com, Airbnb and Uber, entered the scene. First, the new Package Travel Directive of 2015 promised to take account of the ongoing developments in online travel markets. Second, in 2016 the European Commission adopted its agenda on collaborative economy, highlighting, among others, the associated challenges for consumer protection. Five years later, however, the EU law continues to have little to offer to consumers who plan their trips via online travel platforms. The 2015 Package Travel Directive (PTD) and its concept of linked travel arrangements (LTAs)* appears to complicate the regulatory landscape without bringing significant value to consumers, and travel platforms are only marginally affected (and some of them not at all - like Uber) by the recent work streams on consumer protection and online platforms. Finally, the impact of COVID-19 pandemic on EU travel law is yet to be seen, but a renewed focus on the well-established fields of EU travel law seems likely. 

Report on the Package Travel Directive

To get an idea of the current EU position on travel law it is worth taking a look at the Commission's report on the application of Package Travel Directive published earlier this year. The report is already several months old but remains worthy of attention, as it reflects the Commission's appraisal of the existing acquis and reveals the directions of future regulation.

 

Different services and consumer protection norms

The report begins with some illustrative stats. It notes that "in 2017, packages represented around 9% of all tourism trips of EU27 residents and had a share of around 21% of the total tourism expenditure." More recent numbers are not provided and even those given are not put into perspective, e.g. taking into account the corresponding shares of various stand-alone services and related trends.

To its credit, the report does recognize that the concept of a 'linked travel arrangement' and its distinction from a 'package' are somewhat problematic. In particular, with regard to 'click-through bookings' it seems very difficult to establish whether a package, an LTA or none of them was concluded. As the Commission admits:

"A travel service provider who, after completion of a booking, transfers the traveller’s name, payment details and e-mail address to another trader with whom a second service is booked within 24 hours of the confirmation of the first booking, is the organiser of a package and hence liable for the performance of both services. If one of those data elements is not transferred, the first trader facilitates a LTA and is only liable for the performance of its own service, provided the second booking happens within 24 hours. If it happens later, the PTD is not applicable at all" (p. 6). [Of course, there is also no LTA where the contract conclusion was facilitated for just one travel service, e.g. transport or accommodation. - AJ]

The report further points out that concerns have been raised as to what kind of obligations should be placed on the traders facilitating LTAs. These, for the time being, concern primarily insolvency protection and pre-contractual information. As regards the latter, several industry stakeholders argued that the information LTA facilitators are required to provide "could be considered confusing and deterrent, as travellers are primarily informed that they do not benefit from rights applying to packages" (p. 7). The Commission responded that it "was precisely the aim of this information requirement to draw the attention of consumers to the different level of protection offered by packages as opposed to LTAs and thus give them an informed choice between the two models." It is likely that a similar logic applied to the information duty which was recently added in Article 6a of the Consumer Rights Directive (CRD), concerning a different standard of protection in business-to-consumer (B2C) and peer-to-peer (P2P) contracts concluded via online marketplaces.  

Prima facie, the above regulatory approach seems reasonable, leaving consumers a variety of options at hand while providing them with information about relevant differences. However, on a closer look information duties in neither PTD (on LTAs), nor CRD (on the supplier's status) truly bring added value to consumers in online travel markets. In the Package Travel Directive, a choice is offered between broadly similar products (in both cases a combination of at least two travel services) with a key difference pertaining to the level of protection. That's fair enough, but in reality consumers may prefer to choose particular travel services at different points in time or from different providers, which is precisely what online platforms make possible. For this (arguably growing) group of consumers the choice between a higher and a lower level of protection is not available. Moreover, the recently amended Consumer Rights Directive could suggest that the level of consumer protection offered by EU law is higher in case of B2C contracts for stand-alone travel services as compared to P2P transactions. On a closer look, however, also this is does not really hold true. When we delve deeper into stand-alone travel services offered by businesses and by peer providers via online platforms (thus, e.g. excluding air or rail transport, for which P2P markets do not exist), we find that the protection offered to the consumers of those services by the EU acquis is almost non-existent, regardless of the supplier's status. Elsewhere in the report the Commission recognizes that a question remains open whether harmonised norms for linked travel arrangements should not be broadened, e.g. so as to also cover liability for the performance of relevant services and not only insolvency and information. Traders facilitating the conclusion of contracts for stand-alone travel services as well as individual providers of such services, however, are left out of the picture. As for the latter, one could think that the EU may not want to enter into the business or regulating small providers. These, nonetheless, can already be covered by the provisions of package travel law, as the commented report explicitly acknowledges (p. 5). Overall, the discussion about the scope of EU travel law and the corresponding role of package travel framework has not moved any further through the cited report.

Thomas Cook bankruptcy and COVID-19 pandemic

While reflection on the scope of the PTD, and EU travel law more generally, contained in the report falls short of expectations, the opposite is true for the extensive sections devoted to the impacts of Thomas Cook bankruptcy and the COVID-19 pandemic on the package travel sector. The analysis of both events is solid and contains valuable insights. For example, the Commission admits that the burden of Thomas Cook bankruptcy has been shared by the various travel guarantee funds and insurance companies, since the company continued to have insolvency protection in different Member States and did not rely on the PTD's mutual recognition mechanism. Nonetheless, the bankruptcy has not been without impact on the market for insolvency protection for package travel organisers and reportedly prompted a number of banks and insurance companies to pull out of the market. With this in mind, the report points to the need of new solutions to effectively protect travellers against the risk of insolvency, such as a "pan-EU guarantee fund as a kind of re-insurance for the first line guarantors" (p. 11). Moreover, following the disruptions caused by the COVID-19 pandemic, some stakeholders had argued that the protection of consumer refund claims should be extended beyond insolvency, and also cover termination due to unavoidable and extraordinary circumstances (p. 20-21). The Commission seems open to the idea and it seems, in general, that protection of the travellers in case of supplier's insolvency (in package travel and beyond) as well as, possibly, in case of major liquidity problems will be one of the upcoming goals for regulation. Indeed, it may be the lack of corresponding mechanisms that had led many travel service providers to withhold refund payments or to push consumers to accept vouchers instead of monetary refunds during the peak of COVID-19 crisis. The result of this was a serious mess, which consumer organisations are still working to clear up (see e.g. a recent press release by BEUC: Major airlines told to comply with passenger rights...).

Finally, the report can also be credited for drawing attention to characteristics of the value chains in the "travel ecosystem". For example, when discussing the possibility of limiting pre-payments and requiring travellers to pay only when they receive the service, possible negative impacts on suppliers' liquidity and ability to operate at scale are discussed. Moreover, a question has been raised whether suppliers of travel services (e.g. air transport) that are ultimately not provided to a given consumer following the latter's termination of a package travel contract should have a refund obligation towards the package organiser who reimbursed the traveller. Such an obligation is currently not in place, which - the report suggest - could lead to an unfair sharing of the burden among economic operators. Travel could therefore become another area in which B2B unfairness becomes a regulatory topic - after agriculture, food supply and online intermediation.

Concluding thought

 

The EU travel law is in need of rethinking. The current regulatory landscape looks like an increasingly complex patchwork, with some issues being addressed meticulously and other being resolved only at the surface. Admittedly, the analysis of well-established business models, such as package travel, is rich and detailed, yet the share of package tours in the overall travel sector pie is shrinking. While one can hardly imagine a field more fit for harmonisation, the EU approach to (online) travel markets remains fragmented. Clearly, the COVID-19 pandemic has surfaced challenges which we had previously not reckoned with and which now will need to be addressed. The Commission intends to do that as part of its upcoming analysis of EU package travel and transport law planned for 2022. It would be a waste of potential if stand-alone travel services and online travel platforms were to be kept, yet again, out of Commission's view.

 

* For a definition, see Article 3(5) PTD. Essentially an LTA means at least two different types of travel services purchased for the purpose of the same trip or holiday, not constituting a package, resulting in the conclusion of separate contracts with the individual travel service providers and facilitated by one trader in a specific way.

 

** 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.

Somber CJEU case on package travel - Kuoni Travel (C-578/19)

(trigger warning sexual violence)

 

Yesterday, the CJEU issued a judgment in the Kuoni Travel case (C-578/19), in which the Supreme Court of the UK asked for guidance on the interpretation of certain provisions of the old Package Travel Directive (Directive 90/314). It might be (one of) the last UK consumer law case decided at the CJEU. The travellers in this case bought a package travel to Sri Lanka from Kuoni Travel. The package included return flights, and 15 nights all-inclusive accommodation in 2010. Unfortunately, the traveller was assaulted and raped by an electrician and hotel employee, wearing a staff uniform and on duty at the time. The question that arose was whether Kuoni was liable for damages to the traveller, that is whether these arose as a result of the improper performance of the package travel contract by the supplier of a service and if yes, whether exception from Article 5(2) PTD could apply - that the travel organiser is not responsible because even with all due care they could not foresee or forestall the event that had occurred.

Pursuant to the contract, Kuoni limited its responsibility as follows:

‘due to fault on [that company’s] part, or that of [its] agents or suppliers, any part of [the] holiday arrangements booked before … departure from the UK is not as described in the brochure, or not of a reasonable standard, or if [the other contracting party] or any member of [his or her] party is killed or injured as a result of an activity forming part of those holiday arrangements’ and, secondly, that Kuoni does not ‘accept responsibility if and to the extent that any failure of [the] holiday arrangements, or death or injury is not caused by any fault [on the part of the company], or [that of its] agents or suppliers; is caused by [the other contracting party] … or is due to unforeseen circumstances which, even with all due care, [the company] or [its] agents or suppliers could not have anticipated or avoided’. 

High Court of Justice and Court of Appeal both dismissed consumers' claim on the basis that Kuoni accepted responsibility for its agents and employees in the performance of 'holiday arrangements', which should not encompass actions by a member of the hotel's maintenance staf. This would according to the court also fall within the scope of the PTD, as it did not aim to regulate the conduct by employees or agents of the travel organiser, where that conduct was not part 'of the role in which he was employed'. The Supreme Court, however, highlighted the fact that the hotel staff's member was guiding the traveller to the reception which could be perceived as a service falling within the scope of the 'holiday arrangements' (para 21, 51), and therefore an assault that occurred could be seen as an improper performance of the contract.

The CJEU first reminds the fact that Article 5(3) PTD prohibits travel organisers and/or retailers who are responsible towards consumers for the performance of the package travel contract to exclude their liability by means of a contractual clause (para 34). Article 5(2) PTD provides an exhaustive set of such exclusions. The liability extends to the proper performance of obligations under the contract by suppliers of services, who are however not defined in the directive (para 35). 

Suppliers of services

The linguistic and purposeful interpretation of this notion leads to the determination that a supplier of services is a natural or legal person who provides services for remuneration (paras 38-40). An employee of a supplier (here maintenance staff member in a hotel) could not however be a supplier of a service, both due to not having concluded a contract with the travel organiser and having an employment contract (rather than of provision of services, per definition) (paras 41-42). However, as suppliers of services may use their employees to perform the obligations from the package travel contract, and the travel organiser has the ultimate responsibility for the proper performance thereof, their liability should cover acts committed by employees of the supplier of services (paras 45-48).

Exemption from Article 5(2) PTD 

The CJEU interprets the exemption as applying to 

'events which cannot be foreseen, irrespective of whether they are usual, or from events which cannot be forestalled, irrespective of whether they are foreseeable or usual' (para 59)

This exemption is a separate ground to force majeure, as well (para 58). What is similar, however, is that the event that occurred must have been outside the sphere of control of the travel organiser or the service supplier (para 60) as Article 5(2) PTD generally requires the absence of fault. Clearly, this does not apply here as acts of an employee of a supplier of service fall within that sphere of control (para 61).

 

Whilst the judgment should lead to damages being awarded to travellers, it is really necessary to note the time frames here. The event occurred in 2010. The case went through all instances in the UK courts, whilst the reference to the CJEU could have been made sooner. The CJEU also took its sweet time in replying, as the case was brought in in July 2019.

Regarding the judgment itself, it may have harsh consequences for travel organisers, as it does not leave much space for limiting their liability. Similarly to the interpretation of 'extraordinary circumstances' under the Regulation 261/2004 on air passenger rights, what is crucial is what could be seen as remaining within the sphere of control of travel organisers and the inclination will be to see that sphere as quite broad.

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.

Avoiding double claims at all cost - AG Saugmandsgaard Øe in Aegean Airlines (C-163/18)

On Thursday AG Saugmandsgaard Øe gave his opinion in the case Aegean Airlines (C-163/18), which examines the relationship between the provisions of Regulation No 261/2004 and Package Travel Directive (old one 90/314/EEC). Both these acts grant certain rights to passengers of cancelled flights, when these cancelled flights form a part of a package travel contract. 

Article 8(2) Regulation 261/2004 states that also passengers whose flights form part of a package travel may claim reimbursement of the full cost of the ticket on the basis of that Regulation, unless their right to reimbursement arises under the PTD. The national court asked for the interpretation of this provision, inquiring whether it limits the rights of passengers to make a claim against the operating air carrier for the reimbursement of the ticket pursuant to the Regulation, when the national law implementing the PTD gave them the right to claim the whole cost of the package travel, including the price of the ticket, from the package travel organiser (para 31). The answer to this question is especially important when the organiser is in liquidation, i.e. is not able to meet the financial obligations of the reimbursement and has not guaranteed such reimbursements, e.g. by not taking out an insurance (para 32). 

The Commission was of the opinion in this case that as long as the passenger does not get compensated in practice by the organiser, the operating air carrier should be held liable for the reimbursement of the ticket (para 33). The airline (obviously) together with the Czech and German governments disagreed (para 34). AG Saugmandsgaard Øe supports the second opinion, following the literal interpretation of the provision of Article 8(2) Regulation 261/2004 (para 36-39). Since Article 8(2) only refers to the right to reimbursement arising pursuant the PTD, it does not require that the passenger can actually acquire the reimbursement in practice. As previously the Court had not always interpreted Regulation 261/2004 on the basis of the wording of its provisions (cases of Sturgeon or Nelson), we will need to see whether the opinion of AG Saugmandsgaard Øe will be followed. Just in case, the AG supports his reasoning also by referring to: the legislative history of Regulation 261/2004, which shows that there were doubts about extending the scope of protection of the Regulation to package travellers (para. 43-45); and to the system of the Regulation, which set up the exception of Article 8(2) narrowly, only applying it to the right to reimbursement of the ticket (para 50), and which seemed to give priority to the protection of the PTD, also through Article 3(6) Regulation 261/2004 (para 52); as well as to the system of the PTD, which aimed to guarantee the reimbursement by organisers by obliging them to set up insolvency protection (para 55). 

The above reasoning of AG Saugmandsgaard Øe could be supported, however, his following statement that this conclusion is not hindering the achievement of the objectives of Regulation 261/2004 is less convincing. He draws attention to the fact that beyond ensuring strong protection of passenger rights the Regulation aimed to restore the balance between passengers and air carriers (para

59). Passengers would be protected too much, according to him, if they could claim reimbursement  both on the basis of Regulation 261/2004 and the PTD (para 64). Well, yes, of course passengers should not be allowed to claim the price of the ticket back twice (para 65), however, it seems in practice this opinion will not allow them to claim it even once. This clearly would not support the main objective of the Regulation. A better solution would then be to interpret Article 8(2) Regulation 261/2004 as only allowing claims on the basis of the Regulation, if for the passenger it is impossible, not only legally but also practically, to make a claim pursuant to the PTD. After all, the air carrier could also be protected by having redress on the package travel organiser. And the package travel organiser should be able to indicate the ticket price as a component of the package price (contrary to the argument made in para 66).