A leading industry lawyer has warned Europe’s new Package Travel Directive could trigger “a vicious circle” of rising costs.
Stephen Mason (pictured), senior partner at Travlaw, told an Abta law seminar in London: “If you sell in a lot of countries, the UK regulator will have to protect all the packages.
“Vice versa, other regulators will protect packages in the UK. It is creating a complicated scheme.”
The directive will shift responsibility for regulating consumer financial protection from the place of sale of travel to the place of establishment of the travel business or ‘organiser’.
Mason said: “A business in the EU will be governed where it’s established. If a business is outside the EU it’s governed by the regulations of the state where it’s selling.”
The draft directive is near to being finalised in trilogue talks between the Council of Europe, European Parliament and European Commission. It is expected to be agreed next month.
Mason noted: “Member states will have to recognise any insolvency protection a trader provides under the rules of the member state of its establishment.
“It will no longer be possible for the UK regulator to say, for example, we don’t recognise the Latvian system of protection. It will be obliged to.
“How is that going to work in practice?
“If an organiser goes bust and is established in Latvia, how does a UK consumer stranded in Kenya get repatriated?”
Mason asked: “Will it be more costly? What are the implications for the Air Travel Trust?
“If a company is selling across Europe, what steps are the trustees and the CAA going to take to cover the liability?
“What will it mean for the UK protection scheme?
“What if one or more leading players decide to jump ship to another place of establishment?”
Mason warned: “It could become a vicious circle if costs go up. Could there be a tipping point where the Atol scheme becomes unviable?”