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The European commission's directive on package travel, package holidays and package tours June 1990—II
ht. J. Hospitality Management Printed in Great Britain
Vol. 11 No. 2, pp. 83-87,
1992
0278-4319192 $5.00 + 0.00 Pergamon Press Ltd
The European Commission’s Directive on package travel, package holidays and package tours June 1990-11 Michael S. Simons University of New South W&es, Sydney, Australia
Introduction The European Commission’s Directive on package travel marks a third and significant step in the development of the community’s policy on tourism. As the preamble to the Directive states, the national laws of Member States reflect disparities in national practices in the protection of tourists, the provision of services and the degree of distortion of competition among travel operators. It was seen that the establishment of common rules in respect to the package of travel tours and holidays would contribute to the elimination of such obstacles and provide a more effective service to community consumers in Member States (Council Directive, 1990). The preamble also stated that the harmonization of legislation on packages would not only stimulate and achieve significant growth and productivity in Member States, but would also attract tourists from outside the community seeking the advantages of guaranteed standards in such packages. It should be noted that it may be some time before this Directive is implemented and Directive 821470iEEC currently applies.
The Directive The aim of the Directive, was to approximate the laws and regulations of the Member States relating to the sale, or offer for sale, of package holidays. Article 1 defined package as a ‘prearranged combination of not less than two services sold at an inclusive price covering a service period of more than 24 hours or including overnight accommodation such as transport, accommodation or other tourist services. . .’ (Council Directive, 1990). The commission in its earlier submission to the Council highlighted the need to prevent the practice of separate billing as a means of circumventing the legislation. Accordingly, in the final draft separate billing was included within Article 2 (Council Directive, 1990). Article 2-Definitions The term travel organiser and travel retailers were specifically defined so as to include any person who organises and sells package travel whether directly or through a retailer. This provision was to take account of the different functions of tour operators and travel agents within the legislation of different Member States (Council Directive, 1990). The definition did not apply to ‘package travel organised occasionally and not in the course of business 83
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Michael
S. Simons
activity’. The final draft also has extended the meaning of package to include all package travel and not just advertised package travel. It appears that the Directive also retains the ‘double agency’ position of the travel agent, although it is not abundantly clear from Article 2 (Downes, 1990). Article 3 Article 3 (5) of the Directive states that any descriptive matter supplied by the organiser or retailer to a consumer, including the price of a package, must not contain misleading information. This means that descriptions must be clear and accurate. The requirement extends not only to tour brochures but other documents including leaflets, circulars, letters and conditions stated on the booking form. The Article was amended to ensure that descriptions will form part of the contract between the tour operator and the consumer. A further requirement under Article 3, is that the essential information must be prominently displayed for the benefit of the consumer. A copy of the main terms must also be included in the brochure. Presumably these requirements are similar to the well established Common Law principles in English and Australian law of bringing notice of any exclusion or disclaimer clause to the attention of the consumer and incorporating such terms in the written document (Olley, 1947). Indeed in the case of several jurisdictions, e.g. the United Kingdom and Australia, such clauses are prohibited by statute in respect to consumer contracts (see S68 Trade Practices Act (CTH)). It should be noted that the requirements under Article 2(b) stating the type of accommodation and including the hotel category may be difficult to observe in principle, as there is no universally applied system of hotel classification. Article 4 Article 4 requires the travel organiser or retailer to provide a standard form of written contract for package holidays. The annexure contains examples of a list of ‘elements’ which depending on the circumstances are to be considered essential. On the other hand the preamble to the annexure contains the overriding statement-‘elements to be included in the contract if relevant to the particular package’. This proviso certainly leaves open, either for the Member State or the tour organiser the discretion to omit or include the matters listed therein. It is also submitted that a further weakness in the Directive is contained in Article 4(iv) which allows the consumer the option of taking out an insurance policy to cover cancellation, assistance and repatriation in the event of accident or illness. A form of compulsory insurance was a principle feature of the earlier draft and is consistent with some other Member State consumer laws, for example Germany, the Netherlands and the United Kingdom (Council Directive, 1990). Article 4(3) gives the consumer the right to transfer a booking in certain circumstances such as illness or a bereavement providing the facts have been communicated to the travel organiser. The person to whom the transfer has been made must satisfy the conditions, if any, applicable to the particular holiday. During a period of 20 days prior to the departure date stipulated, the price stated in the contract shall not be increased, vide Article 4(4b). Article 4(6) provides the consumer with rights of a substituted package or repayment if
The European
Commission’s
Directive-11
85
the organiser cancels the contract. Rights of compensation are spelt out in Article 6(l) and (2) in the event of other grounds of cancellation. A curious feature of the clause is that it excludes overbooking. It is arguable that what is preserved to the consumer is the right to institute a separate Common Law claim for breach of contract, though Article 5(2) seeks to limit the scope of damages (Council Directive, 1990). The expression Force Majeure is defined in Article 6(2) which will provide a sound defence to a tour organiser if such circumstances cause the cancellation of the tour. Article 4(7) sets out additional rights to the consumer in the event that, after departure, the services contracted for are not provided. In that case compensation shall be payable to the consumer based on the difference in value of the services offered and those supplied. Presumably if the compensation offered by the tour organiser is not sufficient the consumer may exercise his or her rights at Civil Law though it is not clear from a reading of the article (Council Resolution, 1981). Article 5 Article 5( 1) of the Directive attempts to clearly establish the liability of the travel organiser or retailer for the proper performance of the contract irrespective of whether such obligations are to be performed by the organiser or retailer or by the supplier of the services. The Article is a marked departure from previous drafts which provide for a regime of limited liability where the failure to act or supply the service was due to a number of reasons including:- being attributable to the consumer, was unavoidable, unforseeable, or was due to a case of Force Majeure (de Vos, 1989). In certain circumstances spelt out in Article 5, for example, in a case arising out of a claim for personal injuries based on the non-performance of services by a tour organiser, retailer, or their agents, such a claim may be recovered within the Member StateMember States may allow compensation to be limited to the international conventions governing such services. In the case of property damage claims, compensation may be limited under the contract provided it is not unreasonable. Article 6 Article 6 requires the organiser or retailer to find appropriate solutions in the case of complaints. It is curious that such an Article is included in this context as most travel agents or professional bodies would insist that their members observe such basic management practices within their codes of conduct (Council Directive, Package Travel, 1988). Article 7 Article 7 has been severely ‘watered down’ from previous drafts. It now requires the organiser and retailer to provide evidence of security for refunds of money paid or for the repatriation of the consumer in the case of insolvency. This requirement is in marked contrast to the 1988 Draft Directive which contained legislation proposing the creation of a National Guarantee Fund, the object of which was to provide a distinct and complimentary safeguard to that of compulsory insurance. The Draft Directive analysed the Guarantee Funds operating in four of the Member States, namely Denmark, the Netherlands, Ireland and the United Kingdom. In Denmark, the scheme is compulsory whereas in the Netherlands it is voluntary and its income is derived when travellers pay the agents the cost of the tour, and the travel agent
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(who is a member of the Fund), pays a proportion of the fees to the Travel Payments Guarantee Fund (Council Directive, Package Travel, 198s). In Ireland the system is different. A form of bond is issued by an insurer. It is compulsory and is established under the domestic law. In the United Kingdom guarantees are provided partly from cash contributions by the travel industry and partly by insurers and banks. The Directive pointed out, the Association of British Travel Agents (ABTA) has taken action to ensure that its members protect its customers by obtaining bonds against insolvency, relevant professional insurance, and pay cash levies into a guarantee fund. The financial status of applicants for membership to ABTA is thoroughly examined before such membership is granted (Council Directive. Package Travel, 1988). As the Draft Directive concluded, each Member State would determine for itself the kind of guarantee scheme it would establish. Article 8
Under Article 8, Member States are empowered to adopt more stringent provisions than those contained in the Directive to protect their consumers. The Directive requires Member States to comply with its measures before 31 December 1992, and inform the Commission of such compliance. Finally, in contrast with the Draft Directive of March 1988, the final Directive has omitted all reference to a complaints procedure. Previously a National Arbitration body was to be established in each Member State for the purpose of settling disputes arising within the national territory and consulting with its counterparts in other countries in relation to disputes arising abroad. The Draft suggested that ‘local tourist industries, whether public or private bodies, investigate complaints from consumers, suggest solutions and endeavour to reach amicable settlement of such complaints’. In the case of serious complaints, such bodies were to provide assistance in the recording of evidence. The Draft also called for the establishment of an efficient and inexpensive procedure for use by the consumer in the resolution of such complaints. These recommendations stand in contrast to the current provision which states: ‘In the case of complaint, the organiser and/or retailer or his local representative . . must make prompt efforts to fnd appropriate solutions’. . .
Conclusion While the above analysis has attempted to comment on the final Directive published only in June 1990, it will be a matter of assessing the impact of the Directive on the tourism industry in the next 12-18 months before it can be precisely stated that the objectives of the Commission have been achieved. It would appear however in view of the deletion of the important provisions of a compulsory insurance scheme, national guarantee funds and national arbitration bodies that the original draft has been severely compromised and has not lived up to the expectations of the original draftpersons.
References Downes, J. (1990) The Proposed Directive or1 Package Holidays md the A BTA code of Conduct. The 6th World Conference of IFTTA, Sydney, May 1990.
The European
Commission’s
Directive-11
87
Draft Directive and Explanatory Note on Package Holidays and Package Tours (1988). Brussels, March 1989. Official Journal of the Council of European Communities (1990) Council Directive (90/314/EEC) 13 June 1990. Olley v. Marlborough Court Hotel Ltd (1947) IKB 532. de Vos, P. (1989) Liability of the Travel Industry Seminar RAI. Amsterdam, Holland. 23rd October, 1989.
About
the Author
Michael S. Simons is a Barrister-at-Law and Senior Lecturer in Hospitality Management, School of Marketing, Faculty of Commerce and Economics, University of New South Wales, Sydney, Australia. He is Chairman of the Australian and South Pacific Section of the International Forum of Travel and Tourism Advocates (IFTTA) and a member of the Board of Directors of IFTTA.
Vol. 11 No. 2, pp. 83-87,
1992
0278-4319192 $5.00 + 0.00 Pergamon Press Ltd
The European Commission’s Directive on package travel, package holidays and package tours June 1990-11 Michael S. Simons University of New South W&es, Sydney, Australia
Introduction The European Commission’s Directive on package travel marks a third and significant step in the development of the community’s policy on tourism. As the preamble to the Directive states, the national laws of Member States reflect disparities in national practices in the protection of tourists, the provision of services and the degree of distortion of competition among travel operators. It was seen that the establishment of common rules in respect to the package of travel tours and holidays would contribute to the elimination of such obstacles and provide a more effective service to community consumers in Member States (Council Directive, 1990). The preamble also stated that the harmonization of legislation on packages would not only stimulate and achieve significant growth and productivity in Member States, but would also attract tourists from outside the community seeking the advantages of guaranteed standards in such packages. It should be noted that it may be some time before this Directive is implemented and Directive 821470iEEC currently applies.
The Directive The aim of the Directive, was to approximate the laws and regulations of the Member States relating to the sale, or offer for sale, of package holidays. Article 1 defined package as a ‘prearranged combination of not less than two services sold at an inclusive price covering a service period of more than 24 hours or including overnight accommodation such as transport, accommodation or other tourist services. . .’ (Council Directive, 1990). The commission in its earlier submission to the Council highlighted the need to prevent the practice of separate billing as a means of circumventing the legislation. Accordingly, in the final draft separate billing was included within Article 2 (Council Directive, 1990). Article 2-Definitions The term travel organiser and travel retailers were specifically defined so as to include any person who organises and sells package travel whether directly or through a retailer. This provision was to take account of the different functions of tour operators and travel agents within the legislation of different Member States (Council Directive, 1990). The definition did not apply to ‘package travel organised occasionally and not in the course of business 83
84
Michael
S. Simons
activity’. The final draft also has extended the meaning of package to include all package travel and not just advertised package travel. It appears that the Directive also retains the ‘double agency’ position of the travel agent, although it is not abundantly clear from Article 2 (Downes, 1990). Article 3 Article 3 (5) of the Directive states that any descriptive matter supplied by the organiser or retailer to a consumer, including the price of a package, must not contain misleading information. This means that descriptions must be clear and accurate. The requirement extends not only to tour brochures but other documents including leaflets, circulars, letters and conditions stated on the booking form. The Article was amended to ensure that descriptions will form part of the contract between the tour operator and the consumer. A further requirement under Article 3, is that the essential information must be prominently displayed for the benefit of the consumer. A copy of the main terms must also be included in the brochure. Presumably these requirements are similar to the well established Common Law principles in English and Australian law of bringing notice of any exclusion or disclaimer clause to the attention of the consumer and incorporating such terms in the written document (Olley, 1947). Indeed in the case of several jurisdictions, e.g. the United Kingdom and Australia, such clauses are prohibited by statute in respect to consumer contracts (see S68 Trade Practices Act (CTH)). It should be noted that the requirements under Article 2(b) stating the type of accommodation and including the hotel category may be difficult to observe in principle, as there is no universally applied system of hotel classification. Article 4 Article 4 requires the travel organiser or retailer to provide a standard form of written contract for package holidays. The annexure contains examples of a list of ‘elements’ which depending on the circumstances are to be considered essential. On the other hand the preamble to the annexure contains the overriding statement-‘elements to be included in the contract if relevant to the particular package’. This proviso certainly leaves open, either for the Member State or the tour organiser the discretion to omit or include the matters listed therein. It is also submitted that a further weakness in the Directive is contained in Article 4(iv) which allows the consumer the option of taking out an insurance policy to cover cancellation, assistance and repatriation in the event of accident or illness. A form of compulsory insurance was a principle feature of the earlier draft and is consistent with some other Member State consumer laws, for example Germany, the Netherlands and the United Kingdom (Council Directive, 1990). Article 4(3) gives the consumer the right to transfer a booking in certain circumstances such as illness or a bereavement providing the facts have been communicated to the travel organiser. The person to whom the transfer has been made must satisfy the conditions, if any, applicable to the particular holiday. During a period of 20 days prior to the departure date stipulated, the price stated in the contract shall not be increased, vide Article 4(4b). Article 4(6) provides the consumer with rights of a substituted package or repayment if
The European
Commission’s
Directive-11
85
the organiser cancels the contract. Rights of compensation are spelt out in Article 6(l) and (2) in the event of other grounds of cancellation. A curious feature of the clause is that it excludes overbooking. It is arguable that what is preserved to the consumer is the right to institute a separate Common Law claim for breach of contract, though Article 5(2) seeks to limit the scope of damages (Council Directive, 1990). The expression Force Majeure is defined in Article 6(2) which will provide a sound defence to a tour organiser if such circumstances cause the cancellation of the tour. Article 4(7) sets out additional rights to the consumer in the event that, after departure, the services contracted for are not provided. In that case compensation shall be payable to the consumer based on the difference in value of the services offered and those supplied. Presumably if the compensation offered by the tour organiser is not sufficient the consumer may exercise his or her rights at Civil Law though it is not clear from a reading of the article (Council Resolution, 1981). Article 5 Article 5( 1) of the Directive attempts to clearly establish the liability of the travel organiser or retailer for the proper performance of the contract irrespective of whether such obligations are to be performed by the organiser or retailer or by the supplier of the services. The Article is a marked departure from previous drafts which provide for a regime of limited liability where the failure to act or supply the service was due to a number of reasons including:- being attributable to the consumer, was unavoidable, unforseeable, or was due to a case of Force Majeure (de Vos, 1989). In certain circumstances spelt out in Article 5, for example, in a case arising out of a claim for personal injuries based on the non-performance of services by a tour organiser, retailer, or their agents, such a claim may be recovered within the Member StateMember States may allow compensation to be limited to the international conventions governing such services. In the case of property damage claims, compensation may be limited under the contract provided it is not unreasonable. Article 6 Article 6 requires the organiser or retailer to find appropriate solutions in the case of complaints. It is curious that such an Article is included in this context as most travel agents or professional bodies would insist that their members observe such basic management practices within their codes of conduct (Council Directive, Package Travel, 1988). Article 7 Article 7 has been severely ‘watered down’ from previous drafts. It now requires the organiser and retailer to provide evidence of security for refunds of money paid or for the repatriation of the consumer in the case of insolvency. This requirement is in marked contrast to the 1988 Draft Directive which contained legislation proposing the creation of a National Guarantee Fund, the object of which was to provide a distinct and complimentary safeguard to that of compulsory insurance. The Draft Directive analysed the Guarantee Funds operating in four of the Member States, namely Denmark, the Netherlands, Ireland and the United Kingdom. In Denmark, the scheme is compulsory whereas in the Netherlands it is voluntary and its income is derived when travellers pay the agents the cost of the tour, and the travel agent
86
Michael S. Simons
(who is a member of the Fund), pays a proportion of the fees to the Travel Payments Guarantee Fund (Council Directive, Package Travel, 198s). In Ireland the system is different. A form of bond is issued by an insurer. It is compulsory and is established under the domestic law. In the United Kingdom guarantees are provided partly from cash contributions by the travel industry and partly by insurers and banks. The Directive pointed out, the Association of British Travel Agents (ABTA) has taken action to ensure that its members protect its customers by obtaining bonds against insolvency, relevant professional insurance, and pay cash levies into a guarantee fund. The financial status of applicants for membership to ABTA is thoroughly examined before such membership is granted (Council Directive. Package Travel, 1988). As the Draft Directive concluded, each Member State would determine for itself the kind of guarantee scheme it would establish. Article 8
Under Article 8, Member States are empowered to adopt more stringent provisions than those contained in the Directive to protect their consumers. The Directive requires Member States to comply with its measures before 31 December 1992, and inform the Commission of such compliance. Finally, in contrast with the Draft Directive of March 1988, the final Directive has omitted all reference to a complaints procedure. Previously a National Arbitration body was to be established in each Member State for the purpose of settling disputes arising within the national territory and consulting with its counterparts in other countries in relation to disputes arising abroad. The Draft suggested that ‘local tourist industries, whether public or private bodies, investigate complaints from consumers, suggest solutions and endeavour to reach amicable settlement of such complaints’. In the case of serious complaints, such bodies were to provide assistance in the recording of evidence. The Draft also called for the establishment of an efficient and inexpensive procedure for use by the consumer in the resolution of such complaints. These recommendations stand in contrast to the current provision which states: ‘In the case of complaint, the organiser and/or retailer or his local representative . . must make prompt efforts to fnd appropriate solutions’. . .
Conclusion While the above analysis has attempted to comment on the final Directive published only in June 1990, it will be a matter of assessing the impact of the Directive on the tourism industry in the next 12-18 months before it can be precisely stated that the objectives of the Commission have been achieved. It would appear however in view of the deletion of the important provisions of a compulsory insurance scheme, national guarantee funds and national arbitration bodies that the original draft has been severely compromised and has not lived up to the expectations of the original draftpersons.
References Downes, J. (1990) The Proposed Directive or1 Package Holidays md the A BTA code of Conduct. The 6th World Conference of IFTTA, Sydney, May 1990.
The European
Commission’s
Directive-11
87
Draft Directive and Explanatory Note on Package Holidays and Package Tours (1988). Brussels, March 1989. Official Journal of the Council of European Communities (1990) Council Directive (90/314/EEC) 13 June 1990. Olley v. Marlborough Court Hotel Ltd (1947) IKB 532. de Vos, P. (1989) Liability of the Travel Industry Seminar RAI. Amsterdam, Holland. 23rd October, 1989.
About
the Author
Michael S. Simons is a Barrister-at-Law and Senior Lecturer in Hospitality Management, School of Marketing, Faculty of Commerce and Economics, University of New South Wales, Sydney, Australia. He is Chairman of the Australian and South Pacific Section of the International Forum of Travel and Tourism Advocates (IFTTA) and a member of the Board of Directors of IFTTA.