Opinion: Package Travel Directive 2015 In this feature l need to amend l enforcement concerns l insolvency protection Direction of travel A recent article on the new 2015 Package Travel Directive caught readers’ attention. This month travel expert Bruce Treloar presents his point of view Package Travel Directive 2015 nAew direction Revised regulations will broaden the scope of travel products covered under the new Package Travel Directive, says Michael Coley In this feature l key changes l travel industry l insolvency protection The 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 so- called 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 key changes. 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 TAP TO NAVIGATE PAGES 123456 To share this page, click on  in the toolbar Credits Michael Coley is a barrister at the 36 Group. Images: Lyu Hu / Shutterstock You might also like Package Travel Directive – European Commission Unless there is a process of educating business, enforcers and consumers, I believe there will be confusion, not certainty Trading Standards has enforced the 1990 Package Travel Directive for the past 26 years and realises that the internet and budget airlines have changed the face of holidays. I agree with Michael Coley’s view in October’s TS Today that there is definitely a need for amending the 1990 Directive, but unless there is a process of educating business, enforcers and consumers, I believe there will be confusion, not certainty. This year’s Holiday Habits Report survey (commissioned by ABTA) found that the most popular reason for choosing a package holiday is ‘having everything taken care of ’, while last year’s top reason, ‘best value option for price’, has slipped to second place. This has added to enforcement concerns and fuelled calls for a funded publicity campaign to educate people about the scope of the new directive, and to prevent confusion among businesses and consumers about rights and protection. Enforcement and definition changes Improvements had to be made in the Package Travel Directive (EU Directive 2015/2302) (the 2015 Directive) in respect of enforcement and definition, because so many consumers now book online. Trading standards is hoping the implementation measures will include allowing proactive rather than reactive enforcement, which will enable trading standards officers to investigate without waiting until an organiser folds, leaving consumers exposed. The new definition of package holiday will include online, click- through arrangements – but only if the consumer’s name, email and payment details are provided. The new Linked Travel Arrangements (LTA) – in which a single trader facilitates the making of separate contracts with different providers – gives some financial protection in relation to the insolvency of the facilitator of the arrangements, although this is often time-limited. Customers may not realise the difference in definition and the protection offered between a package holiday and an LTA. The LTA protection does not generally extend to the booked components such as hotels and flights, unless the tour facilitator is the party providing the component – for example, the airline offering the flight. Mutual recognition: an oversight? As the previous article made clear, it was inevitable that ‘mutual recognition of insolvency protection regimes between states’ would be added into the 2015 Directive. Currently, the Package Travel, Package Holidays and Package Tours Regulations 1992 apply to those holidays sold or offered for sale in the UK (Regulation 3). However, the 2015 Directive talks of ‘place of establishment’ – defined by the Services Directive (Directive 2006/123/EC) as being where the travel organiser’s centre of infrastructure for providing the services is based – as guiding country law compliance. So, tour organisers whose place of establishment is outside the UK in another member state, and who target UK consumers can – under the terms of the new directive – comply with the insolvency provisions in their own state, which may not be comparable to the Air Travel Organiser’s Licence (ATOL) or Package Travel Regulations (PTRs) protection. By way of example, earlier this year trading standards was powerless to act when a company – LowCostHolidays – moved its place of establishment from Crawley to Palma. It continued to target online sales at UK consumers, but did not highlight that consumers were no longer covered by UK insolvency protection. This only came to light when the company collapsed, leaving outstanding bookings of an estimated £50m. It appears that LowCostHolidays had 140,000 customers when it ceased trading – 77,000 of these are British, but the British administrators of LowCostTravel Group’s UK arm stated that consumers would receive less than £10 each in compensation. LowCostHolidays was in breach of the current PTRs but, because it complied with Spanish rules for insolvency protection, neither the Civil Aviation Authority – which enforces ATOL regulations – nor trading standards – which enforces the PTRs – had jurisdiction over the company. There is real concern that we will see more of these cases under the 2015 Directive. Transparency and enforcement concerns The real problem is the lack of transparency and confusion for consumers and business. This risk may be partly mitigated in the 2015 Directive because organisers are required to state their geographical address in the pre-contractual information they must supply to consumers (the ‘standard information form’). However, it could be an issue because the geographical address given may not always reflect the actual place of establishment. Where this is the case, consumers may assume they are protected by UK legislation. The uncertainty over the definition of ‘establishment’ will remain unless European courts or the Commission issue specific guidance that will help trading standards in implementation. There are also legitimate concerns from trading standards, backed by ABTA, about the proposed responsibility for enforcing the 2015 Directive against organisers based outside the EU, but selling package holidays within the EU – specifically the UK. A major point in the consultation process concerns the Directive’s requirement that organisers based outside the UK and the EU should comply with the insolvency provisions in the country they are targeting. Where trading standards are expected to obtain the resources to enforce it, this requirement is a major issue. In dIscussIon The current Department for Business, Energy and Industrial Strategy (BEIS), trading standards and travel industry discussions that will affect consumers, business and enforcement include: 1. The need to introduce a single register where all package operators have to record the insolvency protection that they have in place. ABTA, CTSI and the Department for Transport argue that if this option was pursued, then it would need to be a compulsory list, with penalties for non-compliance. This route would have the advantage of giving transparency to consumers, as well as helping the UK to comply with the 2015 Directive, particularly Article 18 (4) 2. The BEIS working group agreeing to the trading standards suggestion that criminal sanctions were required, as well as the possibility of extending the fixed- penalty provisions of the Consumer Rights Act to cover breaches, because this would ensure more effective enforcement 3. Changes to the insolvency protection provisions in the UK. There was agreement that the bonding option would already be compliant with the 2015 Directive, but some changes would be necessary for the trust and insurance options. It was felt bonding would offer immediate protection. Insurance can be slower, and may not always pay out. There is a conceptual delay built in for trust accounts, as the trustee will need to have surety that they have sufficient money available before they pay out claims. There was agreement that the trust account option would be for the trustee to be an approved body, similar to the current situation with the bonding bodies. Credits To share this page, You might also like Bruce Treloar is a CTSI lead officer for click on  in the toolbar A new direction – October 2016 holiday and travel law. Images: Poprotskiy Alexey / Shutterstock