06 Feb

Business travel – the new Package Travel Regulations and TMCs

The following article was first seen in ABTA's Travel Law Today Autumn 2018 edition and written by Ian Skuse, Partner, Blake Morgan.

The Package Travel and Linked Travel Arrangements Regulations 2018 (the Regulations) set out at Clause 3(2) that they do not apply to “packages and linked travel arrangements purchased on the basis of a general agreement.” A general agreement means “an agreement which is concluded between a trader and another person acting for a trade, business, craft or profession, for the purpose of booking travel arrangements in connection with that trade, business, craft or profession”.

This means that business travel should not fall within the scope of the Regulations if the travel is booked by the corporate employer and a business travel specialist under such a framework contract. Regulators will be entitled to ask to see a copy of a general agreement if the Travel Management Company (TMC) claims exemption from the Regulations and the ATOL Regulations.

Business travel can be excluded only where general agreements are in place. Most TMCs will have agreements with clients and in most cases these are likely to exclude those arrangements from the scope of the Regulations. For any TMC or corporate client without adequate contractual provision in place, there is a real risk that business travel sales could fall within the scope of the Regulations requiring full compliance and possibly bonding. Unless the TMC can show that its business travel bookings clearly fall within the terms of this exclusion there is potential liability for the TMC for supplier default and negligence, including any personal injury to the passenger, which may be uninsured. Non-compliance with the Regulations here may give rise to a criminal offence and prosecution. Non-business travel bookings cannot claim exemption from the Regulation under this provision.

Until now, many TMCs have adopted the stance that no contracts are required with the corporate client for business travel bookings as they simply have transaction fees payable, loosely agreed with the client and any additional detail is simply unnecessary. Lawyers in the sector have long tried to explain to TMCs that full contracts protect their business by providing certainty, proper notice periods and liability and indemnity provisions that reflect the agency status of the TMC making the booking under agency law. They also give the TMC a business to sell with a population of clients agreeing to make bookings for a period.

The Regulations therefore impose a further requirement for agreements to be in place. Those TMCs wishing to have this dealt with properly should be looking to adopt a comprehensive written agreement to be signed off by their clients, regulating the relationship between client and agent.

Currently, there is no guidance from Government about the shape and content of the agreement required by the Regulation. However, suggested key terms include:

  1. Commercial terms

The TMC should be appointed as an agent (preferably on an exclusive basis) for a term to carry out business travel bookings in connection with the client’s “trade, business, craft or profession”. The contract should be signed by both parties and provide for termination for breach, non-payment, loss of trading licenses or insolvency.

The services/bookings should be defined to demonstrate those that fall inside and outside the scope of the agreement (so leisure bookings are excluded). Eligible travellers should be defined to prevent misuse of the booking process by those not employees or consultants of the client.

Payment terms should be considered carefully and payment at point of sale agreed by lodge card or other payment solution to prevent the agent having to invoice in arrears and potentially end up financing the client’s BSP without payment of the booking costs.

The agreement can cover additional charges such as Agency Debit Memos, tax, supplier surcharges and hotel bill backs.

The agreement should clarify entitlement to commissions – both front end and override, and whether these fall to the benefit of the client or the agent or are shared.

  1. Liability

The agreement should make clear that the TMC acts as an agent only and does not guarantee the performance of suppliers such as airlines and hotels. There should be a mutual indemnity by which each party indemnifies the other against claims caused by the other party’s negligence. Overall liability is often capped by reference to the total contract value.

  1. Other terms

These can cover confidentiality and data protection, whether TUPE might apply at the end of the term and the process for transferring the client’s business to a new TMC if appropriate. Many agreements include provisions for alternative dispute resolution. The agreement should be made subject to English law and the English courts should have exclusive jurisdiction.

The new ATOL Regulations

As with the Regulations, these were produced at the last minute in June 2018. There is a specific exemption from the requirement to hold an ATOL to sell packages and flights for “a person who is making available flight accommodation under and in accordance with the terms of a general business travel agreement.” The CAA may publish terms to be included in a general business travel agreement for (these purposes) (Reg 10(1)). Reg 10(3) continues “general business travel agreement” means “an agreement which is concluded between a trader and another person, for the purpose of booking travel arrangements in connection with that other person’s trade, business, craft or profession”. The traveller will need to be advised that the protections of the ATOL Regulations will not apply.

What will be an acceptable general business travel agreement?

Until the CAA publishes terms to be included in the agreement, there is doubt about what these agreements need to cover. It is recommended that once the CAA terms are available, there should be a further review of TMC/client contracts to ensure compliance and, where appropriate, new contracts will need to be drafted.