Co-authored by Phyllis Acheampong, Trainee Solicitor
On 14 August 2017, the Department for Business, Energy and Industrial Strategy ("BEIS") published its Consultation on the implementation of the new Package Travel Directive ("New PTD"). The deadline for responding is 25 September 2017.
BEIS is working with the Department for Transport ("DfT") to implement the new PTD, with the DfT focussing on the specific changes which need to be made to the ATOL scheme in order to ensure that it is fully in compliance with the New PTD. The DfT consulted on this issue at the end of 2016. Fieldfisher's summary of the outcome of this earlier consultation can be found here.
The second step in implementing the New PTD is this latest Consultation, which discusses the overarching proposals for implementing the New PTD and the changes which need to be made to the existing Package Travel Regulations 1992 ("PTR"). That is the focus of this briefing.
Little flexibility for Member States
The New PTD is a maximum harmonisation directive and so the UK will have little flexibility in how it must implement the majority of the provisions. BEIS confirms that the provisions of the New PTD will largely be copied and pasted into UK law. As a result, the UK regulations which implement the New PTD will not provide a great deal of clarity on exactly how the grey areas in the New PTD will work in practice. However, BEIS confirms that the industry should expect to receive official guidance in the run up to the New PTD coming into force (1 July 2018).
There are some provisions where there is some flexibility for the UK in implementation. BEIS is keen to receive views from the industry on these points and so travel companies should give serious consideration to these areas in their responses because they could have a strong bearing on how these provisions are implemented (if at all). There is also an opportunity, by responding to the Consultation, to shape the form of the guidance which will be published alongside the regulations.
Areas of flexibility for implementation
The areas in which the UK has some flexibility in implementation are as follows:
Insolvency regime for non-flight packages
BEIS is proposing to maintain the current insolvency protection arrangements for non-flight packages. Travel companies will therefore have the option of arranging a bond, insurance or a trust account to protect the customer's money. BEIS believes that these options are effective and remain viable under the New PTD. However, it is seeking views on the following issues:
(a) its intention to broaden the scope of the non-flight insolvency regime to cover the new definition of a package under the New PTD;
(b) its intention not to introduce an equivalent to the ATOL Certificate for non-flight packages;
(c) the viability of the current regime for non-flight packages (i.e. bonds, trust accounts and insurance) and whether there are any contrary views on this; and
(d) whether there is an issue with the independence of the trustees of trust accounts, and whether there should be a legal requirement for them to be independent.
Insolvency regime for non-flight Linked Travel Arrangements ("LTAs")
Under the New PTD, facilitators of LTAs will be required to provide insolvency protection for the money which they take, to protect against the risk of the relevant travel service not being provided because of the facilitator's insolvency.
BEIS proposes to allow LTA facilitators to use the same three insolvency protection options as non-flight packages (bonds, insurance and trust accounts). However, it is seeking views from businesses on whether covering non-flight LTAs under the same regime as non-flight packages will work or whether there may be any issues with this approach.
Central contact points
Member States are required to designate central contact points to facilitate the sharing of information about the insolvency protection arrangements of organisers/facilitators operating in different Member States. This information will include information about the national insolvency protection mechanisms, as well as responding to concerns of other Member States in relation to the insolvency protections for specific organisers/facilitators selling into their jurisdiction.
BEIS is considering:
(a) which bodies will be the most appropriate to take on this role on behalf of the UK;
(b) whether or not to designate more than one central contact point (i.e. one for non-flight packages and LTAs and one (i.e. the CAA) for flight-inclusive packages and LTAs); and
(c) whether or not to create a register which lists all UK established organisers' insolvency arrangements. BEIS believes this will help the central contact points to comply with their obligations to share information with other Member States.
BEIS is seeking views from the industry on these points.
Minimum harmonisation provisions
BEIS is also seeking views from the industry on the following points:
(a) Significant changes to the package contract - when termination should take effect
The New PTD requires the organiser of packages to inform the traveller of any changes to the package before departure. If the changes are significant, the organiser must give the traveller the option to terminate the contract without paying a termination fee. The question arises as to what should happen if the traveller does not respond to this communication.
BEIS proposes that the contract should remain in place unless the traveller specifically opts for termination and that the contract should not automatically be terminated.
(b) Traveller not able to terminate off-premises package contract within 14 days without giving a reason
Member States have the option of giving travellers a 14-day "cooling off" period for "off-premises" contracts (e.g. doorstep selling), whereby they can cancel without giving a reason and without having to pay a termination fee.
BEIS thinks this would be burdensome on businesses for a number of reasons including the difficulty in reallocating often tailor made packages following termination. Also the 14 day statutory cooling off period for off-premises sales does not currently apply to package holidays and so it does not see the reason why this should be changed.
(c) Retailers responsible for performance of package as well as organiser?
The organiser of a package is made responsible for the "proper performance of the package", as they are today. This means that they are liable to the customer when things go wrong. Member States have the option to impose this liability also on the retailer of the package, as well as the obligations concerning changes and cancellation of the package. BEIS does not think that this should be done as it would confuse who bears this responsibility.
(d) Third country traders – enforcement of the provision of insolvency protections
The insolvency protection rules for travel companies selling into the EU from outside the EU (so-called "third country traders") will be the same as they are today. They will be required to comply with the insolvency protection requirements of the Member State into which they are selling.
BEIS is aware that it has been difficult to hold these companies to account in the past. However, BEIS refers to the new rules in the New PTD which will impose package responsibilities on EU retailers which sell the packages of non-compliant third country traders. BEIS thinks that this will help to address although not completely resolve the problem. BEIS welcomes suggestions on possible mechanisms that the UK could operate that would ensure compliance by third country traders.
Timings for implementation
The UK is required to transpose the requirements of the New PTD into national law by 1 January 2018. It must then bring this new law into force by 1 July 2018. BEIS proposes to wait until 1 July 2018 before bringing the new law into force, and also to ensure that it only applies to packages and LTAs sold after this date, not to holidays taken after 1 July 2018 (but purchased before). BEIS seeks views on this issue.
Mutual recognition – place of establishment rather than place of sale
Although it is not an area where there is flexibility, it is worth touching upon this issue. It was one of the most controversial changes brought about by the New PTD. In essence, travel companies established in one Member State may use the insolvency protection arrangements they have in place in that Member States to cover all their EU-wide sales. This is different to the current regime, which requires separate insolvency protection arrangements to be made in each Member State into which the travel company is selling.
Concerns have been raised about this issue because it could mean that UK travellers are vulnerable to insufficient insolvency regimes from other Member States. However BEIS has concluded that the introduction of the new insolvency requirements under the New PTD, which are prescriptive about what the insolvency protection measures in each Member State must cover, will raise standards across Member States. BEIS seeks further views on the associated risks with the mutual recognition principle.
Responding to BEIS
If you think any of these measures may affect you or your business, you can provide responses to BEIS using one of the following methods online here; or via email to: firstname.lastname@example.org; or by post to Consumer & Competition Policy, Department for Business, Energy & Industrial Strategy, 1 Victoria Street, London, SW1H 0ET.
Our team can assist you in framing your responses, so please do get in touch if we can help you in this regard.
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