A no-deal Brexit could torpedo a key benefit of the EU Package Travel Directive, warns Chris Photi
UK Package Travel Regulations (PTRs) which came into force in July brought mutual recognition of consumer financial-protection regimes across the EU, in line with Europe’s Package Travel Directive.
It meant UK-based travel businesses could sell EU-wide under UK protection rules and businesses based elsewhere in the EU could sell into the UK under the rules of another member state.
But a no-deal Brexit threatens these arrangements and, rather than await the outcome of Brexit negotiations, UK and EU regulators appear intent on preparing for no deal.
Chris Photi, a leading travel industry accountant and senior partner at White Hart Associates in London, warns this will be to the detriment of businesses in the UK and EU.
He writes in the latest Travel Weekly: “The PTRs require the UK accept insolvency protections put in place by traders established in other member states. In turn, traders established in the UK benefit from recognition of their insolvency protection by EU member states.
“The CAA and Abta heralded this as an opportunity for UK Atol holders. Yet things are likely to change dramatically in the event of a no-deal Brexit.
“Insolvency protection will remain the same for UK consumers after March 2019 if there is no deal, but the mutual recognition element will presumably cease. EU member states will not recognise UK insolvency protection.
“There will be a need to amend the PTRs so EU traders selling packages or Linked Travel Arrangements in the UK will be required to comply with insolvency-protection obligations under the PTRs (Atol, bonds, insurance or trusts), taking us back to where we were before July.
“It will be a major concern to the UK industry that EU states will be unlikely to recognise UK insolvency protection. Traders may need once again to comply with multiple insolvency and licensing regimes across the EU. Similarly, EU-based traders which market and sell packages in the UK will be required to comply with UK insolvency-protection rules.
“In the circumstances, it makes sense for larger travel organisations to consider setting up a place of establishment in another EU state to avail themselves of the mutual-recognition arrangements and avoid having to apply for multiple EU licences.
“The thinking of regulators appears clear. The CAA ‘withdrew’ the Atols of several EU companies without a UK place of establishment at the end of September. In the event of no deal, they will have to re-apply for Atols.
“Similarly, UK tour operators without a place of establishment in Ireland have been advised by the Irish Commission for Aviation Regulation (CAR) that their CAR licences will not be renewed at the end of October.
“Surely it is not beyond the wit of UK and Irish regulators to allow an interim renewal of licences, especially as many licences run until the spring 2019 renewals anyway?
“The CAA and Abta welcomed reform of the PTRs while arguing strongly for consumer protection to be based not on the place of establishment but the place of sale. A no-deal Brexit could deliver their wish. But I wonder how much this will ultimately cost the UK travel industry?”