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.

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.

Costs of repatriation flights during Covid-19 not covered by Regulation 261/2004 - CJEU in Austrian Airlines (C-49/22)

On Thursday, June 8th, the CJEU issued a judgment in the Austrian Airlines case (C-49/22). The national court asked for help with interpreting Articles 5 and 8 of Regulation 261/2004 on air passenger rights regarding assistance that operating airlines need to offer passengers of cancelled flights, as well as passengers' rights to reimbursement and re-routing. 

Facts

Image by Stephen Cruickshank from Pixabay     

Passengers in this case were stuck on a beautiful island of Mauritius, when Covid-19 led to cancellation of their return flight. The airline did not inform them directly thereof, despite having their contact details. When they heard about the cancellation from their travel agent (a day later), they managed to arrange for a return flight home via the Austrian consulate. Ironically, the repatriated flight was with Austrian Airlines as well, and took place at the time their original return flight was scheduled. As the passengers were asked to contribute to the cost of the repatriation flight, they are trying to claim this amount back from Austrian Airlines. The claim is that the airline failed to organise re-routing of passengers, which they had to arrange and pay for themselves. 

Repatriation flight not a re-routed flight

The CJEU first considered whether the repatriation flight could be considered a re-routed flight, for which organisation and cost Austrian Airlines would need to take responsibility. The short answer is: Repatriation flight does not qualify as a re-routed flight. Despite Regulation 261/2004 not defining a re-routed flight (para 25), and everyday language suggesting that this notion would be broadly interpreted (para 26), the CJEU highlights the need for the 'commercial nature' of a re-routed flight (para 29). This need stems both from the legal basis for the adoption of Regulation 261/2004 and some of its provisions referring to concluded contracts and fee-paying passengers (Art. 2(b) and 3(3)). Sensibly, the CJEU stresses that as the repatriation flight is not commercial in nature, it may differ from commercial flights in terms of available services and conditions on board, and would not be in the discretion of the operating air carriers to offer to passengers (paras 31-32).

No EU entitlement to reimburse costs of a repatriated flight

May a passenger claim repatriation costs back from the operating airline of a cancelled flight? Unsurprisingly, this would not fall within the scope of the reimbursement provided for in Article 8 Regulation 261/2004, which specifies the passengers' right to claim back costs of the ticket for the parts of the journey not made (paras 40-41). Although, Art. 12 Regulation 261/2004 allows passengers to claim 'further compensation', assessed on an individual basis, from the airlines but only provided that national or international law gives them such a claim (para 36). The CJEU stresses, however, that Article 8 by listing various rights of passengers (reimbursement or re-routing) implies that the air carrier has an information duty about these rights, which only when fulfilled would lead to passengers being able to effectively exercise their rights (paras 43-44). If the air carrier fails in this information duty, which forms part of its obligation to offer assistance to passengers, the passenger is entitled to 'reparation in kind' (para 48). This will be limited to what 'proves necessary, appropriate and reasonable to remedy the shortcomings of the operating air carrier' (para 49).

It is then unlikely that passengers could use Regulation 261/2004 for claiming costs of their repatriation back from the airlines whose flights were cancelled due to Covid-19. Even if the airlines breached their obligations under EU law (to inform about flight cancellation, about passenger rights in the even of cancellation, offer assistance, reimburse part of the travel costs), the compensation claimed would aim to compensate for damages arising from this breach rather than be related to costs of the repatriated flight.

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. 

https://www.freeimages.com/photo/
playa-de-los-enamorados-1525895

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).

Right of withdrawal, leisure activities and intermediaries - CJEU in Eventim (C-96/21)

Earlier this year in C-96/21 CTS Eventim the CJEU delivered another interesting judgment on the interpretation of Directive 2011/83/EU on Consumer Rights (CRD). As with most cases on CRD, this case tackles the matter of the right of withdrawal by providing an interpretation of Article 16(l) that exempts  'services related to leisure activities if the contract provides for a specific date or period of performance' from the right of withdrawal. 

Facts

The consumer ordered tickets through an online booking platform operated by CTS Eventim, an intermediary selling concert tickets organized by third parties. The concert that was due to take place in Germany was cancelled because of German administrative restrictions amid the COVID-19 pandemic, with a possibility to be held at a later date. In accordance with German legislation, CTS Eventim, acting on behalf of the concert organizer, sent the consumer a voucher in the value of the ticket price. The consumer however asked CTS Eventim for reimbursement of the ticket price and costs incurred and thus, according to the referring court, implicitly asked to withdraw from the contract.

Question

The question referred to the CJEU was: Would a situation where the trader (an intermediary acting in its name and on behalf of the organizer of the leisure activity) does not directly provide the consumer with a service related to leisure activity but sells the consumer a right of access to such service fall under the exception of Article 16(l)?

Ruling

The CJEU noted that the contract for the transfer of a right falls within the concept of a ‘service contract’ under Article 2(6) CRD, and insofar as Article 16(l) covers all services provided in the leisure sector, due to the word ‘related’, the provision is not limited solely to services directly relating to the pursuit of leisure activity (para 38). The transfer of a right of access to a leisure activity constitutes, in itself, a service related to a leisure activity (para 39). In this regard, it is irrelevant that a service is provided by the intermediary and not by the organizer of a leisure activity itself (para 43). 

However, CJEU looked at the objective of Article 16(l), and referring to Recital 49 noted that the objective is to protect traders against the risk associated with the setting aside of some capacity which, if a right of withdrawal were exercised, the trader may find difficult to fill, inter alia, in the case of cultural or sporting events (para 44); and referred to its previous case-law where it was established that the aim of Article 16(l) is to protect the interest of the providers of certain services against disproportionately suffering from consequences of the right of withdrawal (para. 45). The CJEU concluded that as long as the risk falls on the organizer of the activity, the transfer of a right of access to that activity by an intermediary will constitute a service related to that activity. It is irrelevant whether, on the date on which the consumer invokes the right of withdrawal, it is possible for the trader to fill in the empty capacity, in particular by means of the resale of the ticket. ‘The application of Article 16(l) of Directive 2011/83 cannot depend on such an assessment of the circumstances of each case' (para 48).

The CJEU also considered the second part of the exemption and concluded that a contract for the transfer of a right of access to a leisure activity must be regarded as providing for a specific date or period of performance since that activity is scheduled to take place on a specific date or within a specific period (para 53).

The CJEU concluded that the exception from the right of withdrawal may be relied on against the consumer, if, first, the termination of the obligation to perform that contract vis-à-vis the consumer by means of withdrawal would place the risk linked to the setting aside of the capacity thus released on the organizer of the activity concerned and, second, the leisure activity to which that right gives access is scheduled to take place on a specific date or within a specific period.

Further thoughts

This case provides an important interpretation of the CRD in distance contracts concluded via intermediaries, given that the CRD is silent on regulating contracts concluded via intermediaries.

The CJEU provides a good explanation of the rationale for the exception. It is expected of traders, not of intermediaries, to fill in capacities that are created by the right of withdrawal, e.g. resell the ticket that is for a specific date to avoid loss. 

The CJEU also provides substantiated reasoning why the exception should apply in the same way when contracts are concluded directly with service providers and indirectly, with intermediaries. The rule does not change whether or not the ticket is sold by an intermediary or the direct service provider, as long as the risk is born by the direct service provider, in this case, the organiser of the concert. 

However, the present case does not give full guidance on how Article 16(l) CRD should apply in other, similar settings. The present case defines intermediaries as those acting in their own name but on behalf of their principal. Given the emphasis of the risk being on the organiser of the event, the same solution would probably apply with intermediaries acting in the name and on behalf of their principal. However, the situation is less clear when the risk is not on the direct service provider, the organiser of the event, but on the online seller who sells tickets via its website. This would occur in a situation when the tickets are bought for resell. Although in this case online sellers would probably not be classified as intermediaries in law, from a consumer's point of view, there may be confusion and the two kinds of sellers might be considered to both be intermediaries. For instance, consumers would consider Skyscanner an intermediary whereas it is a travel agent. We could argue that the regime should again be the same because the rationale for the exemption seems to be the inability of traders to fill in the capacities that are created by the right of withdrawal. For example, just like organisers, intermediaries might struggle to resell tickets for a particular date and as a result, suffer loss. Overall though, this interpretation cannot easily be deducted from the reasoning in the present case.

Since this case and the earlier Tiketa C-536/20 case, the case law seems to move in a direction of considering including intermediaries within the scope of CRD; in the next case on this topic, the CJEU should take the opportunity to express views on the classification of various (intermediary) sellers and the legal regime(s) applicable to them.

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.

Update: Air passenger rights

In the busy past academic year we might have missed to report important consumer news. We will try to update the blog with the relevant references in the coming weeks, starting with this short update on air passenger rights.

Order in KLM Royal Dutch Airlines (C-367/20)

On 12 November 2020 the CJEU issued an order in this case asking for the clarification of some provisions of Regulation No 261/2004. The facts of the case concerned passenger travelling from outside of the EU to the EU via connecting flights (NYC-Amsterdam-Hamburg). The first connecting flight was operated by a non-Community air carrier under a code-share agreement, whilst the second one was operated by KLM (Community air carrier). The first flight was delayed to the extent that the final destination was reached with a delay of more than 3 hours. 

The main point of this order was that in case of connecting flights covered by a single reservation, if at least one of the connecting flights was operated by a Community air carrier, the connecting flights as a whole should be perceived as operated by a Community air carrier - and they fall, therefore, within the scope of the Regulation, pursuant to its Art. 3(1)(b) (para 23). As such, the long delay in reaching the final destination, which occurred as a result of events taking place during the first flight, could entitle the passenger to claim compensation under provisions of the Regulation. This claim could be made against the operator of the second flight, the Community air carrier involved in the performance of the connecting flights, despite them not being the cause of the delay.

Update on the revision of Regulation No 261/2004

This Regulation has been in the process of being revised since 2013, but the Council was at a stalemate in its discussion on it, partially due to the dispute between Spain and the UK as to the position of the airport in Gibraltar. Before the Covid-19 pandemic hit, the works in the Council moved forward - between November 2019 and March 2020. Then other issues took priority, but the revision of this measure is listed by the Commission on its priority list of its work programme for 2021 (See more on the EP website dedicated to this issue).

Vaccination Passports

Travelling during Covid-19 pandemic has been problematic and is meant to be facilitated nowadays by the use of vaccination passports. Notwithstanding various problems associated with the use of these passports (related to privacy, equal treatment, etc - see e.g. a paper by Ana Beduschi 'Covid-19 health status certificates: Key considerations for data privacy and human rights'), the technical process of not only putting them in place but also national passports being recognised in other countries (the ultimate goal for the travel industry) still is somewhat wonky. Just today The Independent reported on the British NHS Covid vaccine passports not being recognised in all of the Member States at the moment - e.g. Hungary, Italy and Latvia are mentioned as problematic. This apparently follows on the EU not having yet linked the UK's certification scheme to the EU one (although this has now been done for Swiss and Turkish schemes). See further: UK's NHS Covid Passport Still Not Recognised in Parts of Europe.

Covid-19's impact on consumer behaviour patterns

Last week the Commission published the new Key Consumer 2020 data following from the

Consumer Scoreboard 2020, which documents the changes in consumer behaviour during the pandemic, as it was conducted at the end of 2020. Interestingly, one of the emphasised by the report conclusions revolves around 'greener' consumption choices that have been made (see the press release here). This follows from the findings that 

• 56% of consumers said that 'environmental concerns influenced their purchasing decisions', 
• 67% - 'bought products that were better for the environment, even if such products were more expensive', and
• 81% - 'shopped closer to home and supported local businesses 

Other interesting findings indicate the increase in the amount of consumers shopping online, unsurprisingly, as well as more concerns about the ability to timely pay bills. The latter may have contributed to the noted consumers' reluctance to make a major purchase. Covid-19 delayed also consumers in making travel plans.

What does not seem to have been influenced by the pandemic is the high level of trust consumers have in retailers. The extra time spent at homes during the pandemic also did not seem to have encouraged consumers to read upon their consumer rights - as only 27% showed the knowledge thereof. Consumers remain also reluctant to take actions when there are issues with their transactions.

The New Consumer Protection Agenda 2020-25

Last month, on November 13 2020 the EU Commission adopted its new Consumer Protection Agenda 2020-25 that will provide the strategic framework of consumer protection policy  for the next five years. The Agenda identified 5 key priority areas:

1) Green transition: empower consumers to behave 'green' to purchase sustainable and circular products.

2) Digital transformation: increase online consumer protection; this aim will entail the revision of several well established directives: General Product Safety Directive, Consumer Credit Directive and Distance Marketing of Financial Services Directive.

3) Effective enforcement and redress: places emphasis on the CPC Regulation. 

4) Consumer vulnerability: means addressing the needs of different groups, including debt advice and safety of products designed for children.

5) Consumer protection in the global context: aims to promote overall high level of protection, including the safety of products sold online. 

The strategy seems to have addressed the most pressing consumer protection issues of our everyday lives. Not surprisingly it is significantly influenced by the COVID pandemic and the ways in which it reshaped our lives.

CMA pushes for refunds of cancelled holiday bookings

We have previously reported on the EU Commission's recommendation regarding cancelled flights (asking airlines to make vouchers an attractive alternative to consumers instead of a refund - see here) due to COVID-19, as well as the situation on cancelled events in Germany (entitling consumers to vouchers not refunds - see here). In the meantime, in the UK the Competition and Markets Authority (CMA) encouraged consumers to report (through an online form) if they had been affected by unfair cancellation terms as a result of COVID-19. So far this has resulted specifically in a closer investigation of the COVID-19 Taskforce (set up on March 20) as to holiday accommodation providers and their cancellation policies. Already one big provider - Vacation Rentals (responsible for Hoseasons and Cottages.com) - announced the reversal of their cancellation policy, which means consumers could expect a full refund (see here). The full refunds are due to consumers as it was unlawful to travel to the rented accommodation at the time and/or for the accommodation to be made available.

If you want to report on how the national enforcement authorities help with unfair cancellation policies in your country, please leave a comment!

Coronavirus and digital finance: public consultations and other initiatives

The current coronavirus pandemic made our financial lives exclusively digital. This raised new challenges but also opened new opportunities for the financial sector. It is of no surprise therefore that within the EU Commission's overall focal point on fighting the coronavirus health emergency and its social and economic consequences, digital finance gained a pivotal role. There are currently a couple of initiatives that we wished to share with you.

Public consultations 

A couple of days ago the Commission opened two important public consultations.

The first focuses more generally on setting out the new Digital Finance Strategy/FinTech Action Plan later in 2020 that would identify policy areas and policy measures for the next 5 years (on the current FinTech Action Plan we reported here). The consultation is organized around three priority areas:

1. ensuring that the EU financial services regulatory framework is fit for the digital age;
2. enabling consumers and firms to reap the opportunities offered by the EU-wide Single Market for digital financial services;
3. promoting a data-driven financial sector for the benefit of EU consumers and firms.

At the same time, the EU Commission opened a separate consultation on retail payments as a key step towards the adoption of a retail Payments Strategy for Europe.

Both consultations can be contributed to by the 26th of June 2020.

Online roundtables

Within its initiative of Digital Finance Outreach 2020 DG FISMA moved its planned roundtable events online. They are organized around current topical issues and are run weekly until the end of May. The events aim to raise awareness of the work of DG FISMA and to connect relevant stakeholders. They are free to attend and encourage contribution, so if you have anything to add, feel free to raise your hand.

Pan-European Hackaton

Finally, in collaboration with Member States the Commission opened a very interesting call for participation in a pan-European Hackaton, within the #EUvsVirus challenge, to develop innovative solutions for the new challenges raised by the current coronavirus crisis. One of the domains of the hackaton is digital finance with a range of challenges. One important challenge for us is how to develop innovative solutions to support the the most vulnerable, the digitally excluded such as the elderly, who currently struggle to access financial services and products. There is also a challenge to solve other problems in the current climate such as to development of coronavirus related health insurance (see the list of challenges here). The hackaton will be held 24-26 April. Registration is still open (access link here), so if you have ideas for workable solutions, please register. The full agenda is also available here and much of the event is livestreamed on Facebook. 

Free online seminars on consumer law

In response to the current outbreak of COVID-19 The Academy of European Law (ERA) is one of the companies that provides some of their services now for free (for an abusive approach of companies we reported here). They made available some of their past seminars for free on specific areas of law, including consumer law. We highly recommend these seminars as being delivered on topical matters by high level experts.

Coronavirus and unfairness: scams and unfair practices

Dear readers,

The news is full of warnings of scams and other unfair practices that consumers are exposed to these days. Using the words of The Guardian, what is for some the 'greatest heath and economic emergency for a century', for others, is a chance to 'scam a fortune from a captive market under effective house arrest.'

The spread of COVID-19 and subsequent government interventions has led to unprecedented situations, completely rearranging our lives, from working from home to social distancing. Fear for the health of our loved ones and our own and social solidarity with those in need of e.g. food is all part of our daily lives now. This is a new situation for everyone, and as such we are all vulnerable and easy prey for those that wish to take advantage of us, as consumers, to obtain financial gain.

This advantage taking can take harsh forms of fraud, that seem very common in these difficult times. BBC News ran a special feature on scams recently, giving the example of a young woman who was misled by a scammer posing as a rental agent into transferring part of her rent in advance to the scammers account, believing that she was helping other vulnerable tenants who could not afford to pay rent (see more examples here). A couple of days ago Finextra reported on a new pop up malware activated by a cyber-attacker to open a webpage titled 'Coronavirus Finder'  which clams there are people nearby infected with the virus. In order to find the infected individuals the victim is asked to pay only 0.75 euros on a payment page set up by the hacker. The attempted payment of this money would then transfer the bank details of the consumer to the fraudster. Fraudsters even pose as the EU Commission sending fake debt collect letters for unpaid taxes. There are also teams of people showing up at consumers' homes dressed in protective gear, to supposedly check whether the consumer's environment is not contaminated with the virus. When some of them are talking to consumers, others are robbing the house. New COVID-19 themed scams appear virtually every day, and they cost, for instance, UK customers 800 000 pound sterling in the past month.

Apart from clear cases of fraud, there are other, perhaps less financially harmful but still unfair practices. While many traders have shown their goodwill by providing free (digital) services and digital content, such as fitness training and free entertainment for kids, and free delivery of goods, there are also those that have taken unfair advantage of the current situation, by raising the price of goods in high demand such as toilet paper and by selling fake goods such as face masks and sanitizers that allegedly cure the illness.

The current situation placed the key actors in consumer protection enforcement on high alert across Europe. Authorities are already taking steps to prevent the illegal content to reach consumers, for instance, the Italian Consumer Protection Authority blocked the website of a trader who claimed that he sells the only drug that cures the illness.  On March 20 the national consumer protection authorities within the CPC network issued their Common Position on COVID-19, and subsequently the EU Commissioner for Justice and Consumers wrote to online platforms and marketplaces to combat these practices.

The new situation will be yet another grand challenge for EU consumer law. It is our job as academics and policy makers to question whether the current legal framework and enforcement tools are fit for purpose. In particular, enforcement of consumer rights at the EU level and the functionality of the CPC network and the role of the EU Commission might be questioned once again (see for instance our reports here  and here). It is also less clear what will the EU Commission and national authorities do about stopping specific scams such as the illegal transfer of money and the theft of personal data. These may even be outside the competence of national consumer protection authorities and will require further cooperation and coordination with the relevant authorities. Finally, we should consider whether the concept of consumer vulnerability needs to be further worked on in the new circumstances, and generally whether these new circumstances require new or redefined measures of protection.

If you are interested in these issues, please listen to the recording of the public webinar of our colleague Dr Christine Riefa (with contributions of Professor Christian Twigg-Flesner) on Consumer Rights, Scams and Coronavirus (accessible here). You can also share your views and information on COVID-19 related scams or unfair practices in comments.

And finally, please stay safe and stay alert at all times 🌈