Cross-border trading and EU package law reform dominated last week’s Travlaw Big Tent event discussion. Ian Taylor reports
Fears grow for protection across Europe
Government and regulators are concerned at moves by holiday firms in one EU country to sell primarily in another and alarmed at a proposal to drop regulation altogether on firms outside Europe.
Companies’ ability to sell across EU borders forms a key part of the European single market. It’s the reason the Atol
Regulations were amended in 2012 to allow EU-based firms outside Britain to sell holidays to UK consumers without an Atol. They simply have to comply with the rules where they are established.
Lowcostholidays acted in line with this revised regulation when it moved to Spain from November 1.
Accountant Chris Photi of White Hart Associates told a Travlaw event in London last week: “The 2012 regulations allow an exemption: if you set up in an EU state you don’t need an Atol. If you do it legally, there is little anyone can do.”
CAA head of Atol Andy Cohen agreed but pointed out that the regulator in the country where sales are made retains responsibility for informing consumers of the level of protection. Cohen said: “At the moment it is a question of where sales are made.”
However, the CAA is alarmed at Package Travel Directive (PTD) proposals that would transfer regulatory responsibility to the country where a company is based. This could remove non-EU companies from the need to comply at all.
Kevin Davis, consumer and competition policy manager at the Department for Business (BIS), warned: “You might have a business, where a substantial amount of business is done in one state, set up in another state. That would defeat the rationale of the directive.”
Davis, who represents the government in talks with the EC Council of Ministers, said: “We tend to favour the status quo.”
Enforcers of package travel rules across Europe expressed concern following a meeting in November. The CAA issued a summary of its views last week, noting “serious concerns over the options given to travel firms to establish themselves in member states with the most favourable regime, irrespective of where they target business”. It warned a switch from requiring firms to abide by regulations in the market where they sell “will create a gap in protection”.
The enforcement bodies point out this would exclude non-EEA (European Economic Area) organisers from regulation and create “an uneven competitive environment” for EU-based companies, with a “risk that internet-based firms will move operations outside the EEA to avoid these obligations”.
They also declare the proposed mutual recognition of member states’ protection regimes “a mistake . . . without establishing that all schemes provide sufficient protection”.
The enforcers warn of “severe consequences for consumers” who would need to seek assistance and refunds in a different member state from where they live, and of added cost and complexity for companies because “each scheme will have to make provisions for consumers from different states”.
Abta head of financial protection John de Vial told the Travlaw event: “Free movement should be a good thing for business, but there needs to be minimum standards.”
Atol: Government to delay reform until package directive is revised
Reform of the Atol scheme is on hold until the Package Travel Directive is revised, despite the government’s call for evidence on the next stage of reform last year.
Kevin Davis, of the consumer and competition policy directorate at the Department for Business, Innovation and Skills (BIS), confirmed: “We need the directive completed before Atol reform can be completed.”
Abta head of financial protection John de Vial said this made sense. But he told the Travlaw event: “We would like one set of regulations and one licensing regime. We’re looking for one government department to take the lead, and for a single package regime that retains the current flexibility.”
At present, BIS enforces the Package Travel Regulations and the Department for Transport the Atol Regulations.
Leading industry accountant Chris Photi of White Hart Associates said: “We’ve had eight years of Atol reform. The industry is sick of Atol reform. It has gone on too long.”
He added: “The [current] Atol Protection Contribution scheme was wrong from day one. We gave the two largest operators their £500 million bonds back and one of the big two nearly failed two years ago.
“The big two say they pay 50% of the [Air Travel Trust] fund but a huge insurance premium comes out of the fund because of the risk of one of the two failing.
“The exposure is huge. They should be made to do their own thing. Everyone else could work on [the basis of] the fund.”
Lowcostholidays: CAA ‘happy’ about OTA’s Spain switch
The Civil Aviation Authority’s Andy Cohen described the regulator as “very happy” with the progress of talks with online travel agency Lowcostholidays Spain, formerly Lowcostholidays UK, following the company’s move to Majorca in November.
The CAA has taken a tough line over the potential impact on consumers of the company’s relocation, issuing a series of statements querying the level of financial protection that would result.
Lowcostholidays UK was among the 20 biggest Atol-holders licensed by the CAA when it moved its base on November 1, meaning it no longer requires an Atol.But head of Atol Cohen told the Travlaw Big Tent Event: “We are open to the fact that firms wholly established in another EU state can make available packages in the UK without an Atol.”
He pointed out that the CAA was involved in drafting the regulatory change that incorporated this position into the Atol Regulations in 2012.
However, Cohen said: “It’s our job to protect consumers. That is why we came out so robustly at the time [of the relocation].
“We were concerned about consumers not being given the full picture to make an informed choice. I’m pleased to say many of the issues have been addressed and we are in dialogue with the company. We are all very happy with that.”
PTD: European MPs keen to make PTD amendments before July elections
Committees of the European Parliament are rushing to complete the process of amending the revised Package Travel Directive (PTD), published last July, before European elections in May.
Euro MPs (MEPs) hope to take amendments to the European Parliament for a vote before a cessation in April, according to Kevin Davis of the consumer and competition policy directorate at the UK’s Department for Business, Innovation and Skills (BIS).
The directive is currently being pored over by MEPS on the Internal Market Committee and the Transport Committee.
However, Davis described progress through the Council of Ministers, which is also examining the proposed directive, as “pretty slow”.
Davis told industry figures at the Travlaw Big Tent Event in London last week: “The European Parliament is desperately trying to reach agreement before the European elections. It’s pressing ahead very quickly
to present amendments.”
But referring to a sub-group of the Council of Ministers that he attends, Davis said: “We’ve had four meetings and read as far as Article 12 of the directive – about halfway through.”
He added: “The elections in May will be followed by [formation of] a new [European] Commission about October.
“By the time there is a new Parliament everyone will have disappeared for the summer. My feeling is things will have ground to a halt. I would be surprised if there is agreement reached by the end
of the year.”
Davis noted: “If Parliament gets to vote [on MEPs’ amendments] that position
will be carried forward [to the next parliament]. If it does not, the new parliament will pick it up from the start.”
Decisions on what is included in a directive rest ultimately with the Council of Ministers. Its decisions require a ‘qualified majority’ of member states representing at least 65% of the EU population.
A reformed Package Travel Directive is not expected to be incorporated into UK regulations until 2017 at the earliest.
Amendments: UK to oppose liability and cooling off
The UK government will oppose two significant proposed amendments to the Package Travel Directive (PTD).
One is a proposal to allow consumers a “cooling-off period” after making a travel purchase. This previously appeared as an amendment to the European Consumer Rights Directive of 2011, but was removed following lobbying by Abta and others.
The other is a proposal that agents share joint liability with travel organisers for the delivery of holidays defined as packages under the directive.
Kevin Davis of the UK’s Department for Business (BIS) told the Travlaw event: “Cooling off is not an issue in Council of Ministers’ meetings. The proposal has come from MEPs.
“No member state is pushing for a right of withdrawal [for consumers]. I don’t get the sense there is much support for it.”
He said: “The argument is that it was excluded from the Consumer Rights Directive on the grounds that it would be included in the revised PTD. But that is not our recollection or our view.
“Our view is that a right of withdrawal does not fit in the travel sector.”
On extending liability to agents, Davis said: “Some member states – France and 12 others – apply joint liability on the business partners in a transaction so there is liability on agents as well as suppliers.
“The proposed directive as it stands places all liabilities on the organiser and we are content with that.
“We certainly would not support anything that enforced joint liability, but we wouldn’t object to allowing member states to take an individual approach.”
Abta head of financial protection John de Vial said: “Some markets have an issue with doorstep selling of travel and they are keen on a cooling-off period, but we could continue to do it differently in different member states.”
He added: “The Council of Ministers has not taken a position that it wants to see any of the amendments in the directive, but it is important we keep running our arguments.”