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ATOL guidance could complicate dynamic packaging – 26 Apr 2007

Government guidance on whether dynamically packaged holidays require ATOL cover could be tougher than expected and tighter than an original Civil Aviation Authority guidance note.

The Department of Trade and Industry guidance is expected by the end of May, having originally been anticipated early in the year.

A senior source warned: “The DTI could go further than the original guidance. The issue could become a lot more technical and difficult for agents.”

It was CAA guidance issued in March 2005 that triggered a legal challenge by ABTA and resulted in a Court of Appeal hearing. There has been widespread confusion about what constitutes a package and what sales require ATOL cover since the ruling in November.

According to the source, DTI guidance could leave agents with “a demanding process to sell a non-package”.

ABTA head of legal services Simon Bunce conceded: “Some people who do not have ATOLs will realise they need them.”

However, he added: “Some businesses will feel they can get rid of their ATOL. We are looking for practical guidance that allows businesses to assess what they are doing in today’sconditions.”

A spokesman for the DTI said the guidance was still being drafted. The CAA declined to comment.

Quadrant Chambers lawyer Robert Lawson, who acted in the Court of Appeal case, told an ABTA law seminar last week: “If you sell a holiday as a dynamic package, it is a package.”

The DTI guidance is expected to advise what sales lie outside the ATOL regulations. It is likely the industry will be allowed six weeks to respond, followed by a similar period before the guidance becomes formal, probably at the height of the summer.

How ATOL cover is provided should change next year, with an expected shift from bonding to a levy per passenger. But the DTI note could provide the best guide to who requires an ATOL for several years, until the definition of a package is updated in European law.

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