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Publication

BEIS report on the Package Travel Consultation

16/04/2018

Locations

United Kingdom

On 14 August 2017, the Department for Business, Energy and Industrial Strategy ("BEIS") published its consultation on implementing the new Package Travel Directive ("New PTD").

Introduction

On 14 August 2017, the Department for Business, Energy and Industrial Strategy ("BEIS") published its consultation on implementing the new Package Travel Directive ("New PTD").  This has been running in parallel to consultations published by the Department for Transport and the Civil Aviation Authority (“CAA”) on how the ATOL scheme should be reformed to implement the New PTD.  Summaries of these various consultations can be found here.

BEIS has now published its response to the consultation (see here), which sets out how it intends to address the various issues raised.  This note summarises the key outcomes from this process.

Guidance will be published

BEIS has confirmed that it will cut and paste the New PTD into a new set of Package Travel Regulations (“Regulations”).  In spite of calls for BEIS to introduce clarity in the drafting, particularly concerning the definitions of a “package” and a “linked travel arrangement”, it has decided against it for fear of “creating unintended consequences or further points of ambiguity”.

However, in order to address the difficulty in interpreting certain parts of the New PTD, BEIS has promised to publish comprehensive guidance alongside the new Regulations.  It says that the guidance “will address specific holiday products and business models and, clarify whether they fall in scope.”  It also says that once the new Regulations come into force in July 2018, it will work closely with the industry to assist as far as possible with the implementation of the Regulations and any compliance issues.

The promise of guidance is good news for the industry given the various grey areas which exist in the New PTD.  The industry would be well advised to engage with BEIS in this process and to highlight where there is a need for clear guidance, and what that guidance should be.

Information requirements

BEIS received a number of responses concerning the pre-booking information requirements set out in the New PTD.  In particular, respondents expressed concern at the very long list of information which has to be given to consumers before booking.  For instance, it is absurd to suggest that this should be read out to customers making telephone bookings.  It is also futile – even lawyers will not bother to listen after the first 5 minutes of the agent’s monologue!

There are also issues concerning the standard information forms which have to be given for linked travel arrangements.  In some instances, the wording on the form may be misleading, particularly in scenarios where the travel company does not actually provide any insolvency protection at all because it does not handle the customer’s money i.e. because it is paid direct to the relevant travel service provider.

These are two good examples of the practical difficulties caused by ill-conceived and badly drafted sections of the New PTD.  It is encouraging to note that BEIS has confirmed that it is committed to working with the industry to find practical solutions where possible, as indeed it should.  It would not make sense to introduce requirements which lead to no consumer benefit, and in fact lead to consumers being misled.

Significant changes to the Package: unresponsive consumer

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.  However, the question arises as to what should happen if the traveller does not respond to this communication from the organiser?

BEIS does not believe that the booking should automatically be cancelled.  However, it recognises that there should not be an impasse and so it proposes that the organiser should send a second notice, and only if there is no response to this notice should the package be terminated.

Insolvency protection

BEIS has confirmed that it will maintain the current three options for insolvency protection of non-flight packages (bonding, trust accounts and insurance), and expand this so that it also covers non-flight linked travel arrangements.  However, there will be some modifications. 

BEIS will require organisers who use trust accounts to obtain additional insurance if there is a risk of repatriation.  This is to cover the additional cost for arranging repatriation, which may be more than the amount paid by the consumer for the package.  BEIS will similarly make it clear that the bonding option must also cover the risk of repatriation.

BEIS will also prohibit those using trust accounts from making partial refunds (i.e. for one part of the package). 

Finally, and what reflects how ATOL trust accounts currently work, the new Regulations will allow those using trust accounts to release a proportion of the customer monies (e.g. to pay suppliers) provided that they obtain a commensurate degree of insurance protection instead (such as supplier failure cover).

Other issues

BEIS has also confirmed in its response that:

• It will not impose a responsibility on the retailer for the proper performance of the package, as it could have done if it so wished.

• It will implement the “mutual recognition” principle, so that travel companies may sell throughout the EU using the insolvency protection scheme of the place of their establishment.  There have been some serious concerns expressed to BEIS about the effectiveness of insolvency protection schemes in other Member States, but BEIS believes that these concerns will be addressed by the new rules set out in the New PTD about what the insolvency protection must cover.

• The CAA will be the central contact point to act as a dedicated channel to share information with other Member States about the insolvency protection arrangements put in place by organisers.  The CAA will refer any non-flight queries to BEIS.

• The new Regulations will apply to sales made from 1 July 2018.

Next steps

BEIS will publish draft Regulations shortly and begin the formal process of transposing the New PTD into UK law.  This is not likely to be of much interest to those looking for more clarity on the grey areas in the New PTD given that BEIS intends to copy and paste the New PTD into the Regulations.  What is likely to be of more interest is the guidance promised by BEIS.  It is this document which is likely to tackle the difficult issues of interpretation and it is where the real battle will take place concerning how the New PTD will be applied in practice.

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