direction Revised regulations will broaden the scope of travel products covered under the new Package Travel Directive, says michael Coley TAP TO NAVIGATE PAGES 1 Credits Michael Coley is a barrister at the 36 Group. 2 3 4 5 To share this page, in the toolbar click on Images: Lyu Hu / Shutterstock 6 You might also like Package Travel Directive European Commission T he way we take our holidays has changed a great deal in recent years. Whereas in the 1980s and 1990s people often favoured package holidays, the trend nowadays is to choose bespoke products, travel independently or customise existing off-the-shelf offers. In light of this, the new Package Travel Directive (EU Directive 2015/2302) (The 2015 Directive) was agreed in November 2015 to reflect these changes, and is due to come into force on 1 January 2018. Despite Britain voting to leave the EU with the timetable for its secession still unclear the 2015 Directive will still need to be implemented before socalled Brexit takes effect. The aim of the 2015 Directive is to update the regulatory position to cater better for the way in which package travel sales have evolved since the 1990 Directive was implemented. We look at some of the keychanges. packages In the 26 years since the original Package Travel Directive was signed, the way in which travel and related services has changed is significant. The 2015 Directive seeks to account for this by broadening the scope of products covered. Recital 2 of the 2015 Directive recognises that, in addition to the traditional pre-arranged package, consumers now increasingly have the option to customise elements of their packages into a bespoke product. In the past, it was unclear whether products of this type were covered by the 1990 Directive; the 2015 Directive now brings them firmly within the extent of the legislation. The definition of a package under the 2015 Directive has become somewhat longer in an attempt to cover the various means by which travel services may now be bought and sold. The definition (at Article 3 (2)) addresses packages where separate contracts are concluded with different travel service providers, and arrangements under which the choice of travel services is made after the contract is concluded. The 2015 Directive also recognises linked travel arrangements, in which a single trader facilitates the making of separate contracts for travel services with different providers. These are distinct from packages, but often compete closely with them. As such, information and insolvency protection requirements apply under the directive. Linked travel arrangements are covered by Chapter VI of the directive. organisers The principle that the organiser is responsible for compliance with the package contract is reinforced in the 2015 Directive. Organiser is now more broadly defined: a person will be an organiser if he is a trader who combines and sells or offers for sale packages, either directly or through another trader or together with another trader. The words other than occasionally, which appear in the definition under the 1990 Directive, are absent from the new definition. It is anticipated that the revised definition will bring more people and entities within its scope. For example, those selling flight-plus products, which were previously not considered package holidays, are now likely to be considered organisers and fall within the 2015 Directive and any regulations made under it. Caps on prices Price increases that take place after the conclusion of the package contract will now be capped at eight per cent of the total value of the package. If the increase exceeds this limit, the consumer will be entitled to terminate the contract without paying a termination fee. performance Responsibility for conformity with the contract lies with the organiser. Article 13 (3) says that if any of the travel services are performed otherwise than in accordance with the contract, the organiser shall remedy that non-conformity unless to do so is impossible or entails disproportionate costs, taking account of the extent of the nonconformity and the value of the travel services in question. If a lack of conformity is not remedied, Article 14 says that the consumer shall be entitled to a price reduction for the period of nonconformity. In addition, the consumer shall be entitled to compensation for any loss sustained as a result of the non-conformity unless it is: attributable to the traveller; to a third party unconnected with the provision of the travel services included in the package travel contract and is unforeseeable or unavoidable; or because of unavoidable and extraordinary circumstances. Article 13 (5) details that if a significant proportion of the travel services cannot be provided in accordance with the contract, the organiser must offer alternative arrangements of equal or higher quality at no extra cost. If the alternative offered is of lower quality, anappropriate price cut must be made. The consumer is only able to reject the alternative offered if it is not comparable to what was originally contracted for or the price reduction is inadequate. Article 13 (6) says that where a lack of conformity substantially affects the performance of the package and the organiser has failed to remedy it within a reasonable period set by the traveller, the customer can terminate the package travel contract without paying a termination fee and, where appropriate, request a price reduction and/ or compensation for damages. In cases involving carriage of passengers, where alternative arrangements are impossible or have been validly rejected, or the consumer has terminated the contract, the organiser will be obliged to provide repatriation at no extra cost. Article 13 also makes provision for circumstances in which the travellers return is impossible to ensure in accordance with the package by reason of unavoidable and extraordinary circumstances. By virtue of Article 13 (7), in such circumstances, the organiser is responsible for the cost of accommodation, if possible to the equivalent standard of that included in the package, for a maximum of three nights per traveller. However, if the organiser is informed at least 48 hours in advance that the traveller has reduced mobility (or is accompanying such a person), is pregnant, is an unaccompanied minor, or requires specific medical assistance, the three-night limit on accommodation does not apply. mutual recognition of insolvency protection An important feature of the 1990 Directive and the 1992 Regulations was insolvency protection. It remains prominent in the 2015 Directive, but has now been overhauled to allow for mutual recognition of insolvency protection regimes between member states. Since the implementation of the 1990 Directive, insolvency protection has been something of a vexed question for package holiday providers and regulators. The 1990 Directive required only that member states have an insolvency protection scheme. As a result, implementation across Europe was inconsistent, with different countries having their own insolvency protection schemes, and providers having to comply individually with the insolvency protection scheme in force in each country in which products were sold. The UK made moves towards mutual recognition in the 1992 Regulations: Regulation 16 (2) released operators from compliance with the UK insolvency protection scheme as long as they complied with the scheme in operation in the member state in which they were established. Famously, this led to some organisers relocating within the EU and concerns being raised by the Civil Aviation Authority (CAA) about so-called regulation shopping. Under the 2015 Directive, regulation shopping is perfectly legitimate. Article 17 says that member states will now be required to recognise each others insolvency protection schemes, and will be prohibited from imposing additional requirements on foreign organisers. They will be required only to comply with the insolvency protection scheme in the member state in which they areestablished and, in doing so, will be deemed to be compliant acrossthe EU. The effect that mutual recognition will have on regulatory behaviour is still unclear and has been the topic of much debate. Fears have been raised that member states will engage in a deregulation arms-race to attract business, to the detriment of consumers. However, others argue that the opposite will be the case: the publicity that attaches itself to stranded holidaymakers and the burden on the member state in question to assist in rectifying matters will operate as a brake on any tendency towards under-regulation. On the contrary, the element of competition will act as an incentive for member states to offer a regulatory regime that is competitive for business, gives the best protection for consumers, and is efficient for both. For organisers, the benefits of mutual recognition are clear: the administration required in complying with multiple insolvency protection schemes will be greatly reduced, as will the attendant costs to those businesses. The EU estimates that compliance spending will be reduced from around 11 to 8 per package sold. Overall, many of the rights and protections afforded to consumers under the 1990 Directive remain unchanged by the 2015 version. Certain aspects, such as the cap on price increases and the provisions concerning accommodation in the event of unavoidable and extraordinary circumstances are new. However, the real changes are those that seek to update the Directive to reflect the modern way of doing and regulating business in the travel industry. Re-defining the terms packages and organisers increases the scope of those concepts and should bring greater certainty forconsumers about whether they are protected, while mutual recognition of insolvency protection was an inevitable response to theregulatory landscape. While it remains to be seen how the 2015 Directive is to be implemented, the recognition of the need for clarity and efficiency in the regulatory regime so far looks to be a step in the right direction for both traders and consumers.