The following article was written by Stephen Mason, Senior Partner, Travlaw LLP or Travel Law Today, 5th Edition which can be read here.
One of the most radical changes in the new Package Travel and Linked Travel Arrangements Regulations 2018 (PTR), in force from 1 July 2018, concerns the regulatory system for financial protection of prepayments made by consumers (and repatriation for those stranded abroad when insolvency strikes).
The current law requires package organisers to be regulated in each country where they sell or market to consumers. The downside to this is that companies wanting to expand and sell in other European countries need to jump through all the regulatory hoops in each country. The upside should be that UK consumers are confident that the holidays they buy are protected by ATOL, or by bonding through ABTA, etc. although LowCostHolidays was a warning that consumers are not always as alert to what they are buying, as they should be.
From 1 July 2018, all this changes. Regulation will now be in the country of establishment of the holiday organiser. So an ATOL, for example, will allow a British company to sell packages to consumers throughout the EU (see new Reg 9C being inserted into the 2012 ATOL Regulations). This presents a real opportunity to companies for expansion. The CAA is gearing up for that change. Non-flight packages will continue to be protected by bonds, insurance or trust accounts, but the same applies there too – the protection enables trans-EU sales.
Note that there are new requirements for Trust Accounts, however. First, there is a new rule that the Trustee must be independent (Reg 23(3)); about time too! Secondly, Reg 24 requires that any package holiday protected by a Trust Account, and involving carriage of passengers, must also be backed up by insurance which covers the cost of repatriation, and, if necessary, accommodation pending the repatriation. We hope there is not the following problem: one reason why Trust Accounts have been popular is because of the difficulty of finding insurance products on the market which provide financial protection. Assuming such products have now become available, why not just have insurance, instead of the having the hassle of both insurance and Trust Account? In addition, if such policies are not available, how will Trust Accounts survive? Hopefully, the market will provide solutions.
Naturally, the same Package Travel Directive enables German (for example) companies to sell to Brits on the reciprocal basis. It theoretically also means that consumer protection might be weakened if companies forum shop around to find the cheapest place to be regulated.
Following the issue of consultations from the DfT and the CAA in February 2018, we now know rather more about how financial protection will work. Consider these points:
Therefore, a massive change is upon us, starting from 1 July. Complaints that this is far too short notice for the industry to achieve full compliance in time have been met by the CAA saying they will be “understanding” in the early days after 1 July, as long as they can see that companies are genuinely moving towards compliance. What sort of law is that?
I have also ignored the impact of Brexit on all the above, as no one knows precisely what will happen. Clearly, all the above law is coming into force in the UK on 1 July, but let us hope the ability to sell cross-border will be maintained after Brexit.
Find ABTA's Q&A for consumers on the Package Travel Regulations here.