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Articles | Mon 18th May, 2020
It’s been a couple of weeks since we last considered the thorny issue of flight and holiday refunds; but the saga continues to rumble on, with no prospect of any resolution any time soon. This week we bring you up to date with the latest emanations from the European Commission, not only in relation to refunds, but in respect of the future of the industry generally within the bloc, and the related issue of freedom of movement.
Refunds: the saga continues…
The Covid-19 pandemic has led to a huge number of cancelled flights: there has been a 90% reduction in air traffic. As attentive readers well know, under the Denied Boarding Regulations (EC) No 261/2004, passengers whose flights are cancelled are entitled to refunds (the alternative of re-routing is not realistic for most passengers at the moment). So far, passengers have been encouraged to accept vouchers in place of refunds. But many passengers have pressed for refunds, which, given that new bookings are down by as much as 90%, means refund requests far outpace new bookings, causing massive cashflow problems for airlines.
It’s easy to see why passengers might prefer a refund to a voucher. The vouchers offered may not be valid for long enough for the passenger to be sure they will use them. And what if the airline goes bust in the mean time?
The irony is that the more passengers press for refunds, the more likely insolvencies are. A classic collective action problem.
These concerns led many EU member states (including France, Ireland and the Netherlands) to call on the EU to amend the Denied Boarding Regulations to remove the entitlement to a refund, and to allow airlines to provide vouchers, only, when flights are cancelled. The small print is interesting: these countries called for the voucher offer to be significantly improved – notably, that there should be a right of reimbursement if the voucher was unused at the end of the period of validity, and some protection for voucher-holders against the risk of airline insolvency.
On Wednesday last week the EU Commission responded to this call with a “Recommendation” – a non-binding suggestion. The Commission took on board the idea of making vouchers more attractive, by recommending (among other things) giving vouchers a minimum validity of 12 months, with automatic redemption if unused at the end of that time. The EU suggests that individual Member States support airlines by guaranteeing the vouchers, clarifying that such schemes would not constitute state aid and would not need prior approval from the Commission. But this will not be accompanied by removing the right to a refund.
If these recommendations are followed, vouchers would certainly become more attractive to consumers, taking at least some of the pressure off airlines (and putting more on the public purse as guarantor). It remains to be seen how many of the recommendations are followed, however, and whether governments will have the appetite to underwrite vouchers.
Also on Wednesday, the Commission announced that it would remind EU countries of their obligations to enforce passenger rights rules, and that legal action against those who do not comply is a possibility. Executive Vice-President Margrethe Vestager said that official letters (the first stage of an infringement procedure) would be sent to 12 countries, reminding them of their obligations to stick to the letter of the law.
“As of today, where we have taken the Commission’s decision on this, letters will be sent to the member states who are in breach of this very fundamental principle. So these letters, they are going off as we speak,” she told reporters.
But she was later contradicted during a press conference by her transport counterpart, Adina Valean, who said that letters were being sent to all Member States, not just the recalcitrant ones.
“This is not an infringement letter. We do not evaluate at this stage who is in infringement. Let’s call it a letter of encouragement,” the Romanian Commissioner said.
Vestager later tweeted that she had spoken in error about “the status of the letter going out today” and apologised for any confusion she may have caused. Perhaps unsurprisingly, Europe’s airlines criticised a ‘lack of leadership and clarity’ from the Commission, with the industry group A4E issuing a statement on the ‘unclear’ recommendations.
“At a time when airlines are facing the greatest crisis in their history, we are disappointed and astonished that the Commission has ignored the request from the majority of member states for a temporary amendment,” said the International Air Transport Association’s regional vice-president for Europe, Rafael Schvartzman.
It does seem that a majority of Member States are in favour of a removal of the right to a refund, so this may well not be the end of the story; it is anticipated that the Council will pronounce on the issue next. Continue to watch this space!
About the author
Andrew Spencer was called to the Bar in 2004, and is listed in the Legal 500 as a Band 1 practitioner in travel law. He acted for the Claimant in the seminal case of Japp v Virgin Holidays Limited [2013] 11 WLUK 131, in which the Court of Appeal considered the time at which applicable local standards should be determined for the purposes of liability under Regulation 15(2) of the Package Travel Regulations; but he is equally comfortable acting for Claimants and Defendants in all travel related claims.
Is Free Movement within the EU Going to Seed?
Sat in lockdown waiting for some grass seed to be delivered, apparently dispatched more than two weeks ago, I wondered whether Member States’ failures to enforce the Third Postal Directive might be the next focus of EU stick-waving.
But with the single market legal order under assault from all sides, it looks like the availability of a parcel service to North London is lower down the pecking order than measures undermining more fundamental freedoms.
On Thursday, the Commission formally opened infringement proceedings against the UK (the right to do so being enshrined in the terms of the Withdrawal Agreement), for its alleged failures in applying EU law on free movement of persons. Those whose memories of Brexit have not been obliviated by the coronavirus pandemic will remember that citizens’ rights were one of the key ‘Phase 1’ hurdles that the Commission insisted be overcome before wider discussions could be had on future trade. Brussels now seemingly takes the UK’s commitments seriously – who would have guessed? Unusually for present times, the Commission’s complaints do not relate to the coronavirus but are instead directed at various measures adopted in the past few years relating to deportation and re-entry, rights to work, and hurdles to claiming job-seekers allowance for EU Citizens.
Meanwhile, remaining Member States are voraciously tearing into the same single market fundamentals from the inside. We saw on 16th March of this year (which seems eons ago) an acceptance from the Commission that, owing to the coronavirus pandemic, restrictive measures at EU internal borders (even within the Schengen Zone) were inevitable. Under Article 29 of the Citizens’ Directive (2004/38/EC), restrictions on freedom of movement (otherwise an anathema for the European Project) are allowed when a Member State is combatting diseases with ‘epidemic potential’. Safe to say Covid-19 has comfortably passed that threshold.
Notwithstanding the concession that some restrictions would pass the sniff test, and would be permissible under EU law, the guidance document repeatedly stresses that any restrictions be ‘non-discriminatory’. This is a reference to the fundamental EU principle of equal treatment, enshrined throughout the acquis and in particular in Articles 20 and 21 of the Charter. The principle is often parsed as “comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified”.
So there is potential for more beef down the line following reports this week that various Member States are entering into mobility agreements between themselves on a bilateral or multi-lateral (where ‘multi’ is only a subset of the 27) basis. The Baltic States (Estonia, Lithuania and Latvia) have opened their borders to each other but the Lithuanian-Polish border will remain closed creating a small fenced-off free movement pocket in the North East of Europe. Austria is considering opening to neighbours Germany and Czechia but not to Italy, Slovenia, Slovakia or Hungary. And Greece (heavily reliant on tourism) is in discussion with certain other Member States about opening up ‘travel corridors’ which would allow those established in Member States with lower Covid-19 risk profiles to travel to consume tourism services across the Hellenic lands.
Talking of beef, readers versed in the 90s era of EU law may recall that public health measures were taken across the EU in 1996 banning the import of British beef, for fear of ‘mad-cow’ disease. At the turn of the millennium the Commission with agreement from all but one Member State lifted the ban; France maintained it and ultimately was slapped down by the Court of Justice. This was an example of the non-discrimination principle in action in the area of goods. Could we be about to see the new British beef saga in the areas of services and persons? Discrimination is allowed where it is “objectively justified”; one could hardly conceive of a two-word phrase more inviting of litigation.
We live in novel times. New medical, epidemiological, sociological, and economic evidence comes out every day, often contradicting that of the day before. With science (the great bastion of the ‘objective’) constantly shifting, it may be very difficult to pin one’s justifications to the mast of objectivity. Member States considering discriminating between the nationals of other EU countries will need to get their expert evidence in order, for the Commission will surely come a-knocking.
About the Author
Tom Yarrow is chambers’ latest acquisition, having been called in 2018. Before joining chambers Tom was a civil servant working in various government departments, including as a policy advisor on the UK-EU Withdrawal Agreement at the Department for Exiting the European Union. During pupillage he worked with the Government Legal Department, practising in public law in the fields of public international law, justice and security, human rights and immigration. He has regularly appeared in judicial review proceedings for the Secretary of State for the Home Department, and as a member of the Attorney General’s ‘junior junior’ scheme, he is able to take instructions directly from government clients. He now practises in all of chambers’ practice areas and is an enthusiastic and valued member of the travel team.
The Joint European Roadmap: Key Provisions
The European Commission has been busy this week. On Wednesday it published its package of guidance and recommendations to help Member States gradually lift their travel bans and restart the tourist industry. As well as its overall strategy, and clarification of its position on refunds and cross-border freedom of movement, the Commission set out criteria for the safe resumption of tourist activities. We read these things so you don’t have to.
The Guidance on transport services aims to protect both transport workers and passengers whilst providing for the resumption of effective international transport as a matter of priority. the Commission is very keen for the current restrictions to be lifted in a non-discriminatory fashion, so that movement between epidemiologically similar countries can be justified, but not movement between countries at different stages in the epidemic. During the gradual transition, and following public health authorities recommendations, the Commission recommends that health checks should be reduced gradually, systematic quarantines (i.e. applied irrespective of symptoms displayed or any test results) should be lifted, and as soon as the public health situation allows, restrictions on individualised transport (that is, cars, motorcycles or bicycles) should be lifted.
As for aircraft, trains and ships, the Commission advises that reasonable measures to limit contact between transport workers and passengers, as well as between passengers, should be taken. Where feasible, distancing practices between passengers should be applied as long as the overall health situation requires it. Other measures recommended in the Guidance include:
In collaboration with the Commission, the European Centre for Disease Prevention and Control and the European Union Aviation Safety Agency will be proposing technical operational guidelines to facilitate a coordinated approach for airlines and airports, and similar guidance will be provided in respect of other pan-European forms of transport.
History suggests that some airlines will be more reluctant to follow the Commission’s Guidance than others; whether it will be a condition for using European airports for the Guidance to be followed remains to be seen, but whether or not it is, it is suggested that failure to comply with what appear to be relatively low-cost solutions would be considered to be negligent, and might even constitute an ‘accident’ within the special meaning of the word given to the word by the Montreal Convention.
The Commission has produced similar, non-binding, guidance in relation to what it describes as ‘tourism services and hospitality establishments’ (hotels and restaurants, to you and me). Again, even though the guidance is not formally binding, suppliers of touristic services would be well advised to follow it; with the effect that tour operators and retailers of travel arrangements may well owe a duty to ensure that it is being followed before offering holidays for sale featuring those establishments. The guidance, which is impressively detailed, covers risk assessment, staff training, provision of information to tourists, social distancing measures, ventilation, prevention and control of infection planning (including what the Commission rather charmingly describes as ‘respiratory etiquette’), PPE, cleaning and disinfection. Retailers should familiarise themselves with the guidance and should, as we speak, be arranging for full audits to be undertaken in respect of all properties offered for sale; a Herculean task, but a necessary one.
For let us imagine for a moment that a daring English tourist books a holiday to Budapest. He – or, as it might be, she – books a package including accommodation at the Prestige Hotel for the weekend of 4th to 6th September 2020. Let us further imagine that the hotel, in what it has to be said would be a wholly uncharacteristic failure, does not follow the guidance provided by the Commission. And let us face the prospect that as a result, the tourist falls ill with Covid-19, having observed the most rigorous standards of hygiene, as is her wont, whist outside the hotel. It seems to the author that on her return to the UK she would be entitled to rely on the failure of the hotel to follow the guidance, voluntary as it is, as founding a claim against the package provider under the Package Travel and Linked Travel Regulations 2018; and indeed a direct claim in negligence against the provider for failing to use a reasonably competent accommodation supplier. Food for thought.
About the author
Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade.
