19
Apr
21
Articles, Travel & Cross Border Claims
The Weekly Roundup: the Caterpillar Wars Edition

We’d be interested to know how many chargeable hours have been spent comparing caterpillar cakes recently; certainly we at 1CL have done very little else this week. Of course, nothing compares to our own Dom Smith’s version, but don’t tell M&S that. And it was in this spirit of original v update that we read and summarised the European Commission report on the application of the new Package Travel Directive, and wondered whether the Lugano Convention will ever replace the recast Brussels Regulation. We were also interested to see that Michael O’Leary’s ongoing quest for victory in Europe remains extant; Ryanair has been unsuccessful in its challenges to the provision of state aid to SAS and Finnair (CasesT-378/20, 379/20). No celebratory Wiggles for Mr O’Leary, then.

 

The EU Commission Report on the Application of Directive (EU) 2015/2302: the New Package Travel Directive

On 26th February this year the Commission published its review of how the new Package Travel Directive is being implemented by Member States. The report is not merely an interesting overview of the implementation of the Directive, however; it is an aid to the understanding and interpretation of the various provisions of domestic law intended to give effect to the Directive. It is not, of course, binding on the English courts (or, for that matter, on the courts of the other Member States); but it is of assistance in determining the intentions of the Commission as to how the Directive is designed to operate.

Refunds

The report makes the point that one of the defining features of the new, as opposed to the original, Directive is the provision of stronger cancellation rights and more assistance to travellers when something goes wrong during a holiday; these new, improved, protections will be in the spotlight in the coming months and years as the Great Refund Saga rumbles ever-closer to litigated resolution. In particular, because the provisions of the new Directive are more consumer-focused than those of the Directive which gave rise to the Package Travel, Package Holidays and Package Tours Regulations 1992, it is doubtful that the ‘flicker of hope’ line of authorities originating in the decision in Lambert v Travelsphere [2005] CLY 1977 will survive the passage of the Package Travel and Linked Travel Arrangements Regulations 2018. The Commission considers the effects of the pandemic and in particular the fact that a large number of would-be tourists still have not received refunds, and reiterates that the pandemic did trigger the right to a refund or, at the consumer’s selection, vouchers. There is concern over the interplay between the traveller’s right to obtain a refund from an airline, a tour operator and any relevant insurer, but the Commission concludes that this ‘requires further analysis’, and warns the industry,

“The upcoming in-depth analysis planned for 2022 will not aim to lower consumer protection. On the contrary, the Commission will assess how the high level of consumer protection provided by the PTD can be ensured, how the rights of consumers can be effectively enforced at all times and how a fairer sharing of the burden among economic operators along the value chain could contribute to this objective.”

Insolvency

The Commission devotes an entire section of the report to the collapse of Thomas Cook in September 2019, which it says ‘sent shock-waves through the whole tourism sector’. The depressing statistics are repeated once more; 21,000 employees, 600,000 holidaymakers, 140,000 repatriations, £350million of UK ATOL settlements alone, and so on. The Commission concludes that ‘the insolvency protection systems appear to have functioned well’, in particular the repatriation arrangements, although a significant number of holidaymakers are still reportedly awaiting refunds for trips untaken, which appears to this author to be a serious failing, given that they ought to have been refunded ‘without undue delay’ over a year ago. The plight of those litigants (and lawyers) owed money by the tour operator is outwith the scope of the report, of course, and other commentators have considered elsewhere the question of whether a tour operator ought to hold insurance to cover these risks, failing which a very large number of litigants have been left with no meaningful recourse.

But the Commission identifies another concern; it appears that insurers are pulling out of the insolvency protection market, so that in future it may become increasingly difficult for entities affected by the operation of the Directive and the implementing Regulations to obtain cover even for repatriation and refunding. The Commission proposes an EU-wide Guarantee Fund as one possible solution; it remains to be seen whether the UK could take advantage of this scheme, but the approach of the Commission to the UK’s proposed accession to the Lugano Convention (about which more below) is not promising in this regard. The report also repeats the call for compulsory insolvency protection for air carriers, which seems to this author to be increasingly irresistible, particularly in the light of the Great Refund Saga.

Conclusion

The report provides interesting reading for those concerned with how the courts are likely to balance the rights of consumers, airlines, tour operators and insurers. Although the Commission does not offer any solutions, it has identified the problems faced by all of these groups as a result of the pandemic and of insolvency, which regrettably is surely likely to trouble us further in this context as governments’ furlough and state aid schemes come to an end. At present the indications are that the Commission will not tolerate any reduction in consumer protection, taking the view that governments can underwrite the cost to tour operators and others via state aid; but this analysis is only as strong as the state aid provided, which to date has been woefully inadequate to the task, or so the tour operators maintain. But if we have learnt one thing from the Thomas Cook experience, it is this: pushing tour operators into insolvency benefits nobody and results in far greater unfairness than might be caused by the provision of state aid or a slight reduction in consumer protection legislation.

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. She was named Best Lawyers’ Travel Lawyer of the Year 2020/2021 and the Lawyer Monthly Women in Law Awards 2020: Personal Injury.

 

Developments in Jurisdiction: the Accession of the UK to the Lugano Convention

It has been a disappointing, if perhaps expected, week on the sunlit uplands of Brexit. And yet it all appeared to be going quite well. Whispers were coming out of tunnels in Brussels that the EU stood ready to agree to the UK’s post-Brexit accession to the Lugano Convention; the FT published a confident article about it; the Optimists began rehearsing their most gracious “I told you so”s. But it appears the journalists had mistaken the gathering clouds for plumes of white smoke, or perhaps in a zeitgeisty ploy were pawns in a deliberate mis-briefing designed to catch a Berlaymont leak. Whatever the reality, Brussels said no.

Why? Well, as I have written about before, the EU fundamentally see judicial cooperation (at least in the civil sphere) as a Single Market issue. For them, not just the best-in-class top-of-the-range Colin-the-caterpillar-esque Brussels regime, but even the on-a-budget for-the-many Cuthbert-the-caterpillar-esque Lugano Convention, are international modūs cooperandi which they see as being enveloped by the European project. Norway and Iceland participate as part of the EEA (adopting single market rules), and Switzerland participates by virtue of being in EFTA along with their unique relationship with the EU, negotiated painstakingly over decades. There is, at least, some consistency in the EU approach, albeit Poland managed to accede to Lugano prior to joining the (then) EC.

There are two driving factors behind the EU’s decision. First, there is the initial bitterness of the divorce, much denied but surely there, pushing the conglomerate towards punishment: both retributive and deterrent (Nexit etc.). I make no comments on the punished’s deserts. Second, there is a possibility (and I put it no higher than that), that keeping the UK out of Lugano allows the legal services market on the continent to take a slice out of the UK’s substantial market share in this area; as with financial services, although as a whole wealth is lost, Brexit provides an opportunity for there to be localised gains on the continent as European courts and legal practitioners pick up litigation from England and Wales.

All may not yet be lost. The first issue, one can see passing (dare I say) quickly. Let a year or so wandering in the wilderness expiate. The second is harder to forecast: will the economic gains to the continental lawyers outweigh the political negatives of blocking citizens and small businesses from having recourse to their home courts? One would hope (from a UK perspective), yes. And it may be a good bet that the hoped for dent in UK export legal services will be small. Contractual (big ticket) matters, for instance, can be reserved by choice of court clauses and the Hague (2005) Convention. It, therefore, may well be that once the chips have fallen, grumpy smaller folk on either side of the Channel will carry the UK back home to Lugano. In the meantime, those of us doing cross-border work do the best we can with the new sections 15A-E of the Civil Jurisdiction and Judgments Act 1982 (which we have previously written about) and the common law.

As a final note – we have been asked about the possibility of replicating Lugano by the UK concluding individual bi-laterals with Member States. Unfortunately, Article 81 TFEU gives the EU competence in the field of civil judicial cooperation, and the Court of Justice has previously given its opinion that because of the unified and coherent system the EU has developed in this area that international agreements concluded between individual Member States and Third Countries would interfere with the EU-internal system. The EU therefore stake a claim to exclusive competence in this area and Member States treating with the UK is therefore forbidden. Silver lining: we can at least do deals with Norway, Switzerland and Iceland (the Lugano EFTA states), as well as Denmark who do not play by EU rules in this area. In fact, as we have previously covered, a deal with Norway has already been concluded.

About the Author

Tom Yarrow was 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.

 

…And Finally…

Last Monday a group of 189 intrepid Dutch tourists travelled to the Greek island of Rhodes for what is being described as a ‘test holiday’. They will stay at the Mitsis Grand Beach hotel throughout, and will not be able to leave the resort. Two scientists will monitor their behaviour on the all inclusive trip, but, like David Attenborough, will not intervene to change the course of events. The tour operator, Sunweb, is hoping that the resulting data will inform future Covid-safe holidays, and the scientists’ report should make for fascinating reading, not least for those practitioners still undertaking gastric illness work. Are we about to get empirical evidence to confirm British tour operators’ suspicion that only British people fall ill whilst on all inclusive holidays?

Written by or involving: Sarah Prager, Thomas Yarrow

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