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Travel law

The Cancellation of the Package Travel: Is the Organizer No Longer Crying Out in Vain?

If unavoidable and extraordinary circumstances occur at the destination or in its immediate vicinity, which significantly affect the execution of the package travel, the traveller has the right to terminate the package travel contract before the start of the trip without paying a termination fee. The traveller is then entitled to a full refund of all amounts paid for the package travel within fourteen days. This arrangement became unstable when organizers had to massively refund their travellers during the COVID-19 crisis without being able to count on (quick) refunds from service providers. The European Commission acknowledges this problem and addresses it in its Proposal for a Directive of the European Parliament and the Council to amend Directive (EU) 2015/2302 to more effectively protect travellers and simplify and clarify certain aspects of the directive. This paper discusses that proposal.

Unavoidable and Extraordinary Circumstances: A Wrench in the Works

The traveller can cancel their package travel contract free of charge due to unavoidable and extraordinary circumstances. The organizer sees their income dry up. It’s no wonder that more than one legal case has been fought over the concept of 'unavoidable and extraordinary circumstances.' The Travel Act defines these circumstances as 'a situation that arises independently of the will of the party invoking it and the consequences of which could not be avoided despite all reasonable precautionary measures.' In the aftermath of the COVID-19 crisis, cases where the traveller feared that the package travel could not take place (while the organizer believed it could) or that it could take place but with restrictions, often became contentious. When the organizer handled this well, travellers who wanted to invoke unavoidable and extraordinary circumstances often found themselves without recourse. Pessimists were proven wrong. Courts often gave more weight to the organizer's assessment than to the traveller’s fears.

With its proposal for a directive, the commission wants to make it easier for travellers to invoke unavoidable and extraordinary circumstances. The proposal stipulates that the traveller can terminate the contract if it can reasonably be expected that the execution of the package travel contract will be significantly affected by unavoidable and extraordinary circumstances. A Belgian magistrate recently ruled in favour of the organizer in such cases: 'The reasons cited by the plaintiffs for cancelling the trip, although understandable, are rather subjective. The plaintiffs do not objectively demonstrate that the presence of the virus at the time of the trip’s cancellation was of such nature as to have significant consequences for the execution of the package travel or for passenger transport to the destination.' This judgment is somewhat objectified by giving particular weight to official warnings from the authorities of the departure or destination country when assessing unavoidable and extraordinary circumstances. Unavoidable and extraordinary circumstances at the departure location are now also considered.

If the amendment is adopted as proposed, the balance will shift further in favour of the traveller. The cases in which they can cancel free of charge will expand significantly. The organizer will face more travellers wanting (and able) to cancel their package travel contracts free of charge.

Refund within Fourteen Days: A Mirage

Anyone claiming that organizers can always refund travellers within fourteen days upon cancellation due to unavoidable and extraordinary circumstances is living in a fantasy. If organizers want to refund their travellers within fourteen days without using their own funds, they need quick refunds from the service providers they work with. However, these providers often refuse to comply. The European Commission identified the lack of these B2B refunds as one of the three major challenges with the current regulations.

The European Commission tries to address this by introducing a new provision stating that when a service provider cancels or fails to provide a service that is part of a package travel, the service provider must refund all payments made by the organizer within seven days. For various reasons, however, this right of recourse risks being ineffective.

First, the obligation for (quick) refunds applies only when the service provider cancels the service. The cases where either the traveller or the organizer terminates the package travel contract due to unavoidable and extraordinary circumstances are not addressed. It is precisely these cases where organizers need quick refunds from travel service providers. For cancellations by airlines, the new provision adds little. Under the passenger regulation, airlines are already required to refund the passenger (here also the traveller) within seven days. However, practice shows that this rarely happens.

Furthermore, situations will arise where the package travel contract is terminated due to unavoidable and extraordinary circumstances, but the travel service provider can still deliver the service. In such situations, the organizer cannot claim a refund from the service provider. The obligations of the various actors in the travel sector remain loosely connected. If the European Commission truly wants to enable organizers to meet their obligations, the right of recourse must be aligned with cases where the package travel can be terminated due to unavoidable and extraordinary circumstances.

Thirdly, the service that is cancelled and thus must be refunded often represents only one part of the package travel. The absence of this service can jeopardize the entire package travel. Consider, for example, a trip to a distant destination where the outbound flight is suddenly cancelled. The refund of what the organizer had already paid for this flight is a drop in the ocean. This refund in no way enables the organizer to refund the traveller the full travel sum.

Moreover, the question arises as to how this obligation for travel service providers will be legally framed. Does the new paragraph form an autonomous legal basis? Can the travel service provider waive the obligation? How can it be enforced? What about service providers not established in a member state? Besides these legal questions, the new paragraph creates inequality between travel services that are part of a package travel and those that are not. To the extent that the travel service provider is aware of this, they might start treating these services (financially) differently.

The new paragraph that the European Commission wants to introduce does not help the organizer when either they or the traveller terminates the package travel contract due to unavoidable circumstances. Given the expansion of such cases in the proposed directive, they will occur more frequently. The organizer risks continuing to cry out in vain.