Following a consultation on the Consumer Rights Act 2015 (the ‘Act’), the Government has confirmed that the way in which transport operators cap their liability to customers to compensate for delays or cancellations to services must be consistent with the requirements of the Act.

The Act will apply in full to the aviation and maritime sectors with effect on 1 October 2016. However, the rail industry has been given a further limited exemption of 12 months to review and align its compensation schemes. This excludes operators of metros, subways, trams and tourist railways, as these operators have been caught by the Act since 1 October 2015.

This means that transport operators will not be able to limit their liability to compensate passengers for a breach of the Act to less than the price paid to travel with effect on and from:

  • 1 October 2016 for transport operators within the aviation and maritime sectors; and
  • 1 October 2017 for train operating companies.

All other requirements of the Act that apply to the aviation, maritime and rail sectors will come into force on 1 October 2016.

The full Consultation Response can be read at https://www.gov.uk/government/consultations/rail-aviation-and-maritime-applying-the-consumer-rights-act.

The scope of the Consumer Rights Act 2015

The Act came into force on 1 October 2015 to provide consumers with a clear understanding of their rights and remedies regarding the supply of goods and services and was intended to apply to all consumers across all sectors.

Whilst the consultation was being undertaken, the aviation, maritime and rail sectors benefited from an exemption to certain provisions of the Act (known as the services chapter) until 6 April 2016.

Amongst other things, the services chapter provides consumers with a statutory right to require the contracted services to be provided with reasonable care and skill. It also provides, under section 57(3), that the compensation payable to consumers resulting from a breach by the service provider of the consumer’s rights under the Act must not be limited to anything less than the price paid for the service. To enforce these rights to compensation, consumers are entitled to take their claim before the courts, providing they can demonstrate that the service received was not provided in accordance with the Act, such as without reasonable skill and care.

Exemption in relation to transport operators?

The Government was keen to seek industry views on the application of section 57(3). Given that passengers are already entitled to compensation through either (a) existing industry schemes in the rail sector (i.e. the National Conditions of Carriage and Delay Repay) or (b) EU and international regimes in the aviation and maritime sectors (e.g. Carriage by Air Conventions and EU Maritime Passenger Rights Regulation), the consultation sought to understand whether the application of section 57(3) could lead to a significant increase in industry costs (both through additional compensation payable and the administrative costs of defending claims through the courts) or whether a separate arrangement would potentially confuse passengers about their rights, given the overlap between industry schemes, EU and international regimes and the Act.

For these reasons the Government was considering a further, long term, exemption of the application of section 57(3) to the aviation, maritime and rail sectors. Pending the outcome of the consultation the application of the services chapter to transport operators in the aviation, maritime and rail sectors was further delayed until 1 October 2016.

The Government’s response

On 7 July 2016, the Government responded to the consultation, deciding that the exemption of the aviation, maritime and rail sectors from section 57(3) will not be continued and therefore section 57(3) should apply to operators within these sectors. The Act will apply in full to the aviation and maritime sectors with effect on 1 October 2016.

In relation to the rail sector, the implementation of the services chapter will happen in two phases. Although the services chapter will apply to train operators from 1 October 2016, section 57(3) will not apply until 1 October 2017. The further 12 months exemption has been allowed to afford the sector the time to align existing compensation schemes - which are expected to remain the main means of obtaining redress – with section 57(3).

The Government’s rationale in reaching the decision not to exempt aviation, maritime and rail sectors from section 57(3) was that the risks of adopting the exemption were outweighed by the benefits which arise for passengers from having the Act applying in full. The Government analysed the impact of the Act on bus, light rail and metro service providers and concluded that no disproportionate costs had arisen in those sectors from not having an exemption. It also stated that the consumers using aviation, maritime and rail operators’ services should not be denied rights that they would enjoy in other sectors.

Implications for transport operators

From 1 October 2016 transport operators in the aviation and maritime sectors will not be able to limit their liability to less than the price paid if they fail to provide a passenger service with reasonable care and skill and this causes a delay or cancellation and in the case of aviation, a denied boarding or downgrading. This means that they can no longer rely on contract terms that limit the amount of a refund to less than the full ticket price. In these circumstances, consumers may pursue claims for refunds through the courts. With respect to aviation passenger services, the courts will also take into account international agreements, such as the Montreal Convention, when assessing the level of damages.

Rail operators can continue to limit compensation for delays and cancellations to less than the ticket price, but only until 30 September 2017. After that date, their exemption from section 57(3) will no longer apply and they also will no longer be able to limit their liability to less than the full ticket price.

It is worth remembering that compensation entitlement under the Act for the full price paid is not automatic. A passenger seeking full compensation would need to demonstrate that the operator had not acted with reasonable skill and care in providing the services and that as a result the passenger had suffered a loss up to the value of the price paid. It is also worth noting that consumers in these sectors will still have access to existing industry compensation schemes and their existing contractual rights.

Given that many consumer groups already point out that passengers find existing methods of seeking compensation too difficult, complex or time consuming, it is questionable whether significant numbers of passengers would have the appetite or the awareness to pursue a claim before the courts. However, the transport sector must be alive to this possibility, together with the continued risk of adverse publicity with a public facing service.