winter 2016
travel newsletter
Preparing for the new Package Travel Directive
Booking conditions review -
out with the old and in with the new!
The text of the Package Travel Directive (the Directive) was published in the Official Journal of the European Union on 11 December 2015 and all member states will now have to adopt and publish by 1 January 2018 the laws, regulations and administrative provisions necessary to comply with the Directive and take steps to apply those measures fully by 1 July 2018. The title of the new Directive is `Directive (EU) 2015/2302 on Package Travel and Linked Travel Arrangements.'
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Brexit impact on aviation and travel Page 4
Industry spotlight on VAT, agency and credit card fees
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Gastric illness claims Page 12
Welcome
Welcome to the winter edition of our travel newsletter. It's been a turbulent year for the industry with the EU referendum and a number of holiday hotspots essentially closed for business as a result of security threats, but by no means has the industry been defeated. As usual, the travel industry never fails to reinvent itself and innovate like no other. However, along with innovation and change come inevitable legal issues and we have selected a number of hot topics to draw your attention to. These include the rise in gastric illness claims, the Consumer Rights Act, the ATOL consultation and the outlook post-Brexit. We hope you enjoy reading this issue and please feel free to get in touch with the team if you have any queries.
Joanna Kolatsis Partner, Head of Aviation and Travel joanna.kolatsis@hilldickinson.com
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The definition of a `package holiday' is expanded to include a combination of at least two different types of travel services (e.g. carriage of passengers, accommodation, rental of cars, other motor vehicles or motorcycles and any other tourist service) for the purpose of the same trip or holiday when they are either:
(i) purchased from a single point of sale and selected before the traveller agrees to pay;
(ii) offered for sale or sold at an inclusive price;
(iii)advertised or sold under the term `package' or similar;
(iv)package travel gift boxes; or
(v) purchased from separate traders through linked online booking processes where the traveller's name, payment details and email address are transmitted from one trader to another and the latter contract is concluded within 24 hours of the first.
The expanded scope means that traders in holidays who may previously not have been caught by the package travel regime may well be now as it will not only cover the traditional `package' holiday but also all sales concluded at a single point of sale - the traditional OTA model. If this is the case, the booking terms and conditions currently in use may well require a substantial review and significant amendment, not only to include the new requirements but also the old (where maintained).
`Linked travel arrangement' is defined in the Directive as at least two different types of travel services purchased for the purpose of the same trip or holiday, not constituting a package, resulting in the conclusion of separate contracts with the individual travel service providers. This arises if a trader facilitates on the occasion of a single visit the separate selection and separate payment of each travel service by travellers. A `linked travel arrangement' will also arise where the trader facilitates the procurement, in a targeted manner, of at least one additional travel service from another trader where a contract with such
other trader is concluded at the latest 24 hours after the confirmation of the booking of the first travel service.
Either of the scenarios above may capture `flight-plus' type arrangements and/or stop-over services offered by airlines where there is no transfer of traveller data - so do not fall within the expanded scope of what is considered a `package'. This may, depending on the technical integration and terms of business, also cover `click-through' or white label products and/or affiliate arrangements often utilised by airlines to offer `extra' travel services to travellers such as accommodation inventoried by a third party, but accessed through a separate portal hosted on the airline's website, but ultimately creating a separate contract between the traveller and third party.
Cruises, whether they include flights or not, fall within the definition of a package. Shore excursions will also be included in the package if sold at the same time, within 24 hours or are, by virtue of the terms and conditions of booking, contractually incorporated as part of the original cruises package. Such terms are becoming the norm given many P&I insurers only cover such shore excursions if these are part of the cruise contract. It is important to diarise the updating of booking terms and conditions which will apply to packages and LTAs under the new regime from 1 July 2018.
So what, then, is going out as the old and coming in as the new? What will organisers and traders have to ensure are adequately covered in their booking terms and conditions and other documentation when selling package holidays and linked travel arrangements?
It would seem there are more new requirements coming in than going out.
Specific rules on brochures are definitely now out and there is no strict requirement on publishing prices, provided the traveller is made aware of the price of the holiday or cruise prior to the conclusion of the booking. That said, commercial pricing strategies of organisers and traders
travel newsletter winter 2016
will still need to be compliant with the relevant consumer protection legislation, including the Consumer Protection from Unfair Trading Regulations 2008, the Consumer Rights Act 2015 (as enforced by the relevant Trading Standards Institute), as well as the Advertising Standards Code of Practice, which arguably goes even further than the Directive in terms of pricing transparency and the prohibition of unfair terms. Of course in addition, organisers and traders must also be alive to the current proactivity of the Competition and Markets Authority, which has recently honed in on industry players seemingly profiting from the taking of disproportionate non-refundable deposits - which is the subject of a separate article in this newsletter.
New rights are given to the traveller to terminate the contract, which may or not provide for payment of a termination fee. No reason needs to be given and this can be a commercial difficulty for holiday organisers in seeking to set the right level of such termination fees. It is recommended that this should be scaled according to the time of cancellation.
Another new provision allows a traveller to cancel without penalty in circumstances where unavoidable and extraordinary circumstances will significantly affect the performance of the package, either at the place of destination or in its immediate vicinity. This means that travellers can cancel cruises if, for example, there has been a terrorist attack, extreme weather conditions, severe illness etc. in a resort. This is not so straightforward for cruises, where itineraries can be changed, and careful wording will be needed to minimise the commercial impact of this new provision. There is currently little guidance on what is meant by `immediate vicinity' and, subject to anything further materialising in the relevant national legislation, this will likely be judged on a case by case basis.
The traveller is also given a right of compensation for loss of enjoyment of the holiday where there are substantial problems in the performance of the relevant travel services. This is likely to impinge on quality complaints. The traveller must also be given information on whether the holiday is generally suitable for persons with reduced mobility and of the organiser's and trader's in-house complaint handling procedures and alternative dispute resolution mechanisms. Again these will need to be clearly set out in the booking terms and conditions.
Where linked travel arrangements are concerned the traveller must be informed in language specifically drafted under the Directive that they are not buying a package and that individual travel service providers are solely responsible for the performance of their contract. This is something that should be flagged throughout the booking process. Traders facilitating linked travel arrangements are also required to provide insolvency protection for the refund of payments they receive.
It is clear, then, that there are a number of important new requirements introduced by the Directive and, significantly, all the elements discussed here, together with additional matters including information relating to bonding must be captured in the booking terms and conditions and confirmation documentations transmitted to the travellers.
The Department for Transport (DfT) and Department for Business Energy and Industrial Strategy (BEIS) are working together to implement the new Directive, which will be undertaken in two phases; phase one will focus on ATOL reform (for which DfT takes responsibility) and phase two, changes to the Package Travel Regulations (which falls within BEIS's remit). Despite indications that phase one of the consultation would commence in the summer of 2016, the uncertainty surrounding the UK's membership of the EU following the
Brexit referendum has inevitably seen a shift in focus which has delayed the process. The first stage of the consultation (undertaken by DfT) has however now commenced and will close very shortly on 24 November 2016, focussing on proposed changes to the ATOL scheme to ensure that it is consistent with the new Directive. Whilst no timeline has yet been given for a further consultation on changes to the Package Travel Regulations it is highly unlikely that the UK Government will simply decide not to go ahead with the reforms irrespective of the manner in which the UK exits the EU. We discuss the ATOL consultation separately in this newsletter.
Whilst, 1 July 2018 may seem a long way off (even more so given the current political apathy for anything not directly related to the triggering of Article 50), now is the time to start making plans to ensure full compliance with your new and amended responsibilities. Ideally all
organisers should be looking now to diarise a review for winter (2016) for all relevant documentation provided to passengers including invoices and confirmation receipts to ensure these are amended and fully compliant for holidays and cruises going on sale from 1 July 2018.
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travel newsletter winter 2016
Brexit impact on aviation and travel
On 23 June 2016, the UK voted in favour of leaving the European Union (EU). The referendum result is as historic as it is unprecedented, when the UK will become the first member state ever to exit the EU. The following day saw sterling drop in value and worldwide financial markets shaken. The British prime minister, David Cameron, resigned and was succeeded by Theresa May after a brief leadership contest. The new prime minister's mantra has been `Brexit means Brexit' and we are fed a daily diet of stories, sound-bites, (often heated) debate and analysis of the UK's future political, economic and legal landscape. On 3 November 2016, the High Court ruled that only the UK Parliament can trigger the now famous Article 50 of the Lisbon Treaty and not the Government in reliance of its royal prerogative. We await the outcome of the Government's appeal to the Supreme Court in December 2016.
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Brexit has created a period of considerable legal uncertainty for business in many, if not all, sectors even though formal notice to leave is not due to be given until March 2017, assuming of course that target date is still valid, and the two-year transition period is triggered. Nowhere does the seismic change in the geo-political landscape continue to be more keenly felt than in the aviation and travel industries, particularly with respect to traffic rights, airline ownership, passenger rights and consumer protection for holidaymakers.
Britain's vote to leave the EU raises a big question mark over how existing traffic rights will be managed. Access to the single aviation market will technically cease, which would jeopardise the sorts of freedoms to establish and operate within the EU that has enabled lowcost carriers, in particular, to proliferate over the last twenty years. Both Ryanair and easyJet have been very vocal. The former has considered favouring European destinations for new aircraft entering service and the latter has been looking at possibilities of acquiring an AOC in another member state in order to be able to continue operating its existing local flight network within the EU. From a legal perspective, Britain will need to negotiate continued access either by entering into an agreement to join the European Common Aviation Area (ECAA), or by signing a bilateral agreement with the EU or by reverting to traditional bilateral agreements with individual countries. Used by Norway for its access to the single aviation market, the ECAA route may be the most appropriate solution, but it will be conditional upon Britain continuing to accept EU aviation legislation (on safety, traffic management, airport operations, social rules and consumer protection etc.) and closer economic cooperation with the EU. A bilateral agreement with the EU, which would be similar to the Swiss approach, is likely to require similar legal concessions as the rules of the game for operating in the EU aviation club. Finally, negotiating multiple bilateral agreements with individual states in order to replicate the various freedoms generated by EU open skies will be challenging. Beyond the single market, Brexit continues to call into question the UK's rights under various EU-level agreements with third countries. For example, decisions still need to
be made about whether to negotiate continued access to the EU-US open skies agreement or agree a new UK-US bilateral directly. The same goes for EU agreements with China, Mexico, the Gulf states and ASEAN countries etc.
UK airline ownership clauses in many of the UK bilateral agreements had originally been softened to comply with EU rules. The UK could in theory decide to roll back the broader EU ownership test and revert to UK ownership, but such a move might be viewed as protectionist and significantly impact on negotiations to stay part of the single aviation market. Ominously, the EU and the rest of the world hesitate to negotiate with the UK until it leaves, making predictions on any of the above a bit of a fool's game.
Elsewhere, it remains to be seen in the cruise industry how they will adapt policy in the wake of Brexit and what the effect on cruise travel of Britain leaving the EU will have. For example, the decision may have a big impact on the frequency of international sailings based in UK ports such as Southampton as well as voyages to and from British home ports and destinations. This is especially the case if UK holidaymakers favour `staycations' due to the exchange rate. The impact on relationships with suppliers and consumers from European source markets is difficult to predict.
From last April onwards, the Department for Transport (DfT) had been due to consult on the implementation of Directive (EU) 2015/2302 on Package Travel and Linked Travel Arrangements (PTD2) prior to it coming into force in July 2018. On 28 October 2016, the Government launched the first of two consultations on ATOL reform, which closes on 24 November 2016 (see our separate article on the ATOL consultation), This will eventually be followed by the long awaited consultation on PTD2 and on how to adapt domestic legislation, notably the Package Travel, Package Holidays and Package Tours Regulations 1992. The DfT heavily caveated its ATOL consultation with the spectre of Brexit negotiations and it is the first example in the travel industry of the practical complexity of unravelling the legal basis of EU package travel legislation. If the Government implements PTD2 in full and national draftsmen rely on it when transposing it into UK law, then
the legal basis of the statute may become questionable and might be challenged. So much legislation has been `copied and pasted' in order to transpose EU law into English law in compliance with the UK's obligations under its own European Communities Act 1972. The `great repeal bill' will have its work cut out.
In the meantime, Regulation EC 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights (261) and Regulation EC 1107/2006 concerning the rights of disabled persons and persons with
reduced mobility when travelling by air (1107) are two key pieces of EU passenger rights legislation that continue to be directly applicable in the UK. This will eventually change and require the UK to develop its own laws to protect passengers in the UK albeit British carriers operating within the EU will continue to comply with their 261 and 1107 obligations.
In December 2015, the EU announced an ambitious package of reforms to make the EU single aviation market more competitive. Shaping this vision through its Aviation Package will be done without the UK being able to influence from within the EU though. Whether this will be a good or bad thing only time will tell, but for example questions have already been raised about how successful bilateral negotiations between the EU, led predominantly by Germany and France, and Turkey, the UAE, Qatar and the ASEAN bloc are likely to be. The UK is seen as a liberalising voice. The same goes for the development of Single European Skies and the ETS Scheme. On the domestic front, the travel industry largely breathed a sigh of relief when the Government announced its decision to grant Heathrow permission to build a third runway on 25 October 2016. Mr Cameron never had to deviate from his famous `no ifs, no buts, no third runway' but legal challenges will no doubt abound before a spade is ever deployed. The foreign secretary has threatened to lie in front of the bulldozers. That might provide a rare moment of hilarity as the country navigates its path through turbulent times.
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travel newsletter winter 2016
Regulation (EC) No 261/2004
and extraordinary circumstances -
so what's left?
The Oxford English Dictionary defines `extraordinary' as something which is `very unusual or remarkable', a word that aptly and rather ironically describes the status quo that airlines subject to Regulation (EC) 261/2004 have been left with following a spate of case law (at both national and EU levels) over recent years that has all but done away with the defence of `extraordinary circumstances.'
A reminder of the basics
As its full title suggests, the all too familiar `Regulation (EC) 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights' (the Regulation) governs the circumstances in which a carrier operating flights into and out of the EU must assist and compensate passengers who are disrupted. This includes where they are denied boarding, are downgraded or are subject to flight cancellations or delays. Whilst a carrier will always be obliged to provide assistance to disrupted passengers, Article 5(3) of the Regulation states that a carrier `shall not be obliged to pay compensation... if it can prove that the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.' Whilst unhelpfully not defined in the Regulation, and with no plans to define it in any reformed regulation, what is considered an `extraordinary circumstance' appears to have evolved over the years to effectively exclude everything and anything that is deemed to be within the control of the carrier regardless of degree. It is perhaps easier to accept, albeit begrudgingly, that a technical defect is something that, being inherent in the day to day operations of a carrier,
is something that is not necessarily `extraordinary' (or at least is to some degree - although there is of course much room for debate on the subject). However, it is with much concern that we note that the judiciary (at least in England and Wales) is also willing to do away with the notion that an `act of God' is something that is entirely outside of mankind's control. As our airline readers will be all too aware, in a case heard before the Manchester County Court in April 2015, the Court held that a bird strike is something that `happens every day' and is therefore far from unusual or remarkable.
A reminder of the status quo
We know that both the EU Commission (the Commission) and the National Enforcement Bodies (NEBs) are reluctant to be pinned down to an exhaustive list of what is and what is not an `extraordinary circumstance, suffice to say that the list of what `is', becomes more concise almost daily. The Interpretive Guidelines published by the EU Commission in June 20161 merely memorialise the status quo created by the judiciary - at the date of drafting. If the build-up hasn't already reinforced the bleak outlook for airlines subject to the regulation, here's a little reminder of what's in and what's out for England and Wales:
In Out
Unruly/disruptive behaviour*
Latent manufacturing defects
Technical delays
Medical emergencies
Damage to aircraft by mobile staircase
War/political instability
Bird strikes
`Knock-on' delays due to bad weather in previous flight**
Sabotage
Lightning strikes (where delay caused by inspecting damage)
Security
Crew out of hours
Certain meteorological conditions
Pilot sickness (where illness occurred in location where airline did not have hub)
Natural disaster or similar events
Absence of correct flight documentation
Air traffic management
SAFA inspections
Industrial action***
Unexpected flight safety shortcomings
* The Interpretative Guidelines do not expressly refer to unruly or disruptive passengers as category of extraordinary circumstances in their own right. The Birmingham County Court recently held that compensation was payable when a passenger on a previous flight accidentally damaged the aircraft's emergency door requiring replacement parts.
** The Interpretative Guidelines do refer to airport congestion due to bad weather, but it is more likely to be deemed extraordinary if the `knock-on' effect is a result of an ATC decision rather than the airline's own operational planning. In 2013, Macclesfield County Court allowed compensation because the `knock on' effect was caused by bad weather on a separate route.
***Industrial action by third parties such as airport workers or ATC will be deemed extraordinary circumstances. Strikes by the airline's own crew might be, depending on the circumstances. The Interpretative Guidelines do not consider this specifically.
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1Commission Notice C(2016) 3502, 10 June 2016 - Interpretative Guidelines on Regulation (EC) No 261/2004
Cyber risks and the new General Data Protection Regulation - what this means for the travel industry
Data protection has never been a topic to fire the imagination. However, data protection and cyber risk management are becoming increasingly important to all businesses, not least the marine, cruise, aviation and wider travel industry. Here are two major reasons why anyone involved in this sector should pay attention:
1. failure to protect computer system security and data can result in serious harm to your reputation and significant financial loss; and
2. increasingly laws mandate personal data protection with failure to comply resulting in significant fines.
EU laws are at the vanguard of data protection law worldwide. Therefore, we will first look at what constitutes cyber risk and then go on to outline the latest EU regulation on data protection (which is expected to have a significant impact).
Cyber risk
Cyber risk includes financial fraud, data theft and denial of service attacks via access to computer systems by third parties as well as internal breaches by employees deliberately or inadvertently allowing access to data or disclosing it themselves. Financial fraud can be a direct attempt to divert funds from a genuine to a fake account, data theft can be used to perpetrate fraud or cause reputational damage, and denial of service can be used to apply extortion with the threat of or actual reputational damage and interruption to business.
The extraordinary pace of developments in information technology, explosion of data and amplified reliance on computer systems has not only opened opportunities to the travel industry (e.g. on-line sales, access to more customers, targeted marketing, integrated systems etc.), it has also increasingly exposed the industry to cyber risks. For example, several hotels, travel websites and airlines are believed to have been victims of cyber hacks with vast amounts of client personal data (in some cases this included credit card data) having been stolen, one example being hacks into frequent flyer accounts. Many industries (including the travel industry) have been afflicted by fraudsters hacking into email accounts of creditors and then simply requesting payments, in some cases of very large amounts of money such as the completion payment upon sale of a house, into fraudster's accounts. The degrees of sophistication vary; we have even see fraudsters go to the lengths of setting up fake websites.
The costs of failing to properly manage cyber risks are potentially high and can take various forms even before we consider any legal penalties. A company may directly suffer financial loss (e.g. as a victim of a fraud) or indirectly suffer damage (e.g. reputational damage and loss of business but also claims by defrauded parties on the basis that the company should have better protected their personal data). In addition to having financial implications, hacks can have safety implications: you may recall that in 2015 a passenger claimed he had been able to hack into flight controls via his under-seat entertainment unit. Science fiction is becoming reality.
Law making can take years which means the law tends to lag behind actual developments. It is therefore unsurprising that data protection legislation is only enacted several years after cyber risks become known. That said, data protection legislation has now been enacted in most key jurisdictions (including most recently a new cyber-security law in China1) and is increasingly being strengthened: data subjects are being given more rights (including the right to sue data controllers) and data protection authorities' abilities to impose sanctions are also being considerably strengthened. This is especially true within the EU.
A new EU data protection framework and a significant increase in fines
The EU has spearheaded the development of data protection laws and many countries carefully follow what the EU is doing before enacting their own legislations. This, together with the scale of the EU market, make it especially important for businesses to be aware of EU data protection law and its implications for them.
The founding ethos of the EU has always been to create a common market. In that context, one irritation has been the patchwork of data protection laws and data protection authorities that persisted within its borders. But now, following four years of intense negotiations, a new EU-wide data protection framework has been introduced which represents the most significant change in data protection in the EU in 20 years. On 4 May 2016, the General Data Protection Regulation 2016/67 (the Regulation) was published in the Official Journal of the EU.
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travel newsletter winter 2016
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Member states are not required to apply it until 25 May 2018 when it will replace the current directive (Data Protection Directive 95/46/EC) the core rules of which it retains and builds on. The Regulation will be directly applicable in all EU member states without the need for implementing national legislation2. Even in the light of Brexit, it is unlikely that the UK will have left the EU by then and so this new legislation will still affect businesses based here as well as in other member states. Moreover, as we will discuss in the section on extra-territoriality, UK businesses that service EU customers will continue to be caught by the Regulation even after Brexit. The UK regulator, the Information Commissioner's Office (ICO), has already said that even if the Regulation is rejected by the UK Government, laws which the EU deems adequate or essentially equivalent will be required in order to continuing trading with the EU - as there would need to be a legal basis for data to flow between Europe and the UK3.
The new Regulation sets out strict obligations on those holding personal data4, bestows specific rights on those who are the subjects of that data including the right to be forgotten, and lays down clear remedies and penalties for breaches of the provisions. It also expands on current rules governing how and under what safeguards, e.g. consent of the data subject (which is harder to obtain under the Regulation than under the existing Directive), data can be transferred out of the EU and extends to data processors and controllers5 outside the EU.
Key aspects of the Regulation that bear closer investigation include extra-territoriality, data processing and security, data breaches and sanctions.
Extra-territoriality
The Regulation makes it clear that it will have extra-territorial effect. It will apply to any data controllers and processors worldwide so long as they either offer goods and services to, or monitor data subjects in the EU. Subject to limited exemptions, foreign businesses caught by the Regulation will need to appoint a representative in the EU. That representative will have to accept liability for breaches of the Regulation.
Data processing and security
There are new positive obligations on data controllers to be able to demonstrate that processing is performed in accordance with the Regulation. In other words, it will no longer be enough for data controllers to comply solely with the six general principles (which have been retained and developed from the current directive), they will also be able to demonstrate that they comply with them. In practice, for those businesses carrying out `systematic and extensive evaluation' of individuals resulting in legal effects or significantly affects those individuals, this will mean at the very least conducting a data protection impact assessment. Furthermore, depending on the types of data processing they do and who their lead supervisory authority is, businesses may need to appoint data protection officers (DPOs).
The basic principle is simple: personal data must be kept secure (and this might require introducing encryption).
Data breaches
Where a personal data breach occurs, this must be notified to the relevant supervisory authority without undue delay, generally not later than 72 hours after the entity controlling the data becomes aware of it. Where the personal data breach is likely to result in a `high risk' to the protection of a data subject's personal data, the controller must notify the breach to the data subject without undue delay. This obligation is not, however, absolute i.e.
if it can be shown that the risk of the data breach causing harm is unlikely, for example if it is encrypted. Where there is a personal data breach affecting data subjects from multiple member states, the supervisory authorities of all the members states involved are required to work together following receipt of notification of that breach. The general idea is that the supervisory authority of the member state in which the business has its main establishment should be the lead supervisory authority - we will see how this plays out in practice.
Sanctions
The aspect of the Regulation that has particularly caught the attention of management is the increased sanctions for breaches. The Regulation contains a specific regime for the calculation and imposition of stringent fines which can range from up to 10 million, or 2% of annual worldwide turnover in the preceding financial year, or, for serious infringements, up to 20 million, or 4% of annual worldwide turnover (whichever is higher). Moreover, data subjects will have the right to a judicial remedy if they consider their rights under the Regulation have been infringed and will be entitled to receive compensation for both material and non-material damage (e.g. distress) incurred.
Supervisory authorities will have nonmonetary power in addition to audit, issue warnings and issue a temporary and permanent ban on processing.
How to prepare
There is no question that cyber risks will continue to grow. Thus it makes good business sense for businesses to consider how to exclude or at least manage them. In addition, the obligations under the new Regulation are onerous and the sanctions stiff and other regulators (including China) are also introducing hard-hitting measures. It is not enough to sit back and hope for the best or rely on your existing insurance programme to take care of any problems.
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Businesses such as cruise and travel operators and carriers, ports, off-shore facilities and any related business that holds or processes personal data of employees, passengers or other service users such as hotels and terminals need to assess their data protections regimes in light of actual cyber risks they face, the Regulation and any other applicable data protection laws. The deadline of 25 May 2018 set by the Regulation will help focus minds on tackling the increasingly important task of data protection. It is likely that businesses will need to update their compliance programmes. The aim is not just to comply with the letter of the law, but to also successfully manage cyber risks.
For more information or assistance on this complex but wide-ranging area, please contact Hill Dickinson's specialist cyber risks team.
1http://www.scmp.com/news/china/policiespolitics/article/2043646/china-pushesthrough-cybersecurity-legislation-heavily
2The harmonization is not perfect, there are a number of derogations by member states.
3https://ico.org.uk/about-the-ico/news-andevents/news-and-blogs/2016/09/transparencytrust-and-progressive-data-protection/
4Personal data is information relating to an identified or identifiable natural person. The data subject is the natural person to whom the personal data relates.
5Businesses processing personal data fall into one of two categories: 1. controller or 2. processor. A controller determines the purpose and means of processing. A processor just acts on the instructions of the controller. The Regulation imposes more obligations and liabilities on processors than the current directive which focused primarily on controllers.
Seafarers and
automatic enrolment
The Pensions Regulator (TPR) had issued a compliance notice to a Bermuda-incorporated cruise company requiring all Britishdomiciled workers to be assessed for auto-enrolment. In response, the employer brought a judicial review on the basis that the ships operated principally outside of UK waters and therefore the workers should not be subject to UK auto-enrolment legislation.
The question in R (Fleet Maritime Services (Bermuda) Limited) -v- The Pensions Regulator was whether seafarers employed by the claimant fell within the territorial scope of the Pensions Act 2008 (the Act), as TPR maintained, so as to qualify for automatic enrolment into a pension scheme in accordance with the Act. This hinged on the meaning of section 1(1)(a) of the Act, which defines a worker `who is working or ordinarily works in Great Britain under the worker's contract'.
The legal rights of `peripatetic' employees, such as airline pilots or expatriate workers who are posted overseas for extended periods, has been a grey area for a long time. The Court followed the Lawson -v- Serco approach to determining a peripatetic worker's `base' for the purposes of unfair dismissal jurisdiction and concluded that the approach was also applicable to the Act.
The High Court therefore determined that British-domiciled workers were subject to auto-enrolment requirements if their work normally started and ended from a British port but not if they usually travel to a non-British port to join the ship. In this case, the time spent traveling between British and foreign ports was paid but was regarded as commuting time rather than actual working time.
Leggat J concluded that `a seafarer who lives in Great Britain but who works on a ship which spends all or most of its time outside Great Britain and whose tours of duty do not habitually begin and end in Great Britain cannot be regarded as based in Great Britain or as a worker who ordinarily works in Great Britain under the worker's contract.' For the Act to apply, some degree of regularity is also required as a single tour cannot establish a base.
The Court therefore found that TPR had erred in issuing the compliance notice.
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travel newsletter winter 2016
Travel industry in the spotlight once again with VAT flat rate scheme, the issue of agency and airline credit card fees
When Benjamin Franklin penned his famous quote about the certainty of taxes, he would probably not have been thinking about VAT and the travel industry.
In June 2016, the travel press reported on HMRC's investigation into the eligibility of self-employed individuals and small businesses operating under the Travel Counsellors franchise to benefit from the VAT flat rate scheme. The flat rate scheme was introduced in the 2002 budget and is largely designed to reduce bureaucracy. Governed by various provisions in the VAT Regulations 1995, self-employed agents and small businesses can use it to collect and pay a single flat rate of VAT over their gross turnover thereby simplifying their accounting records. The flat rate is an average percentage and is generally lower than the standard VAT rates applicable, which can
represent significant savings especially in the travel sector where margins are often tight. For example, under the flat rate scheme, Travel Counsellors agents only have to account for 10.5% VAT on the commissions earned and can retain 9.5% of it.
To be eligible for the flat rate scheme, businesses must be VAT-registered businesses and have a maximum taxable turnover of 150,000 per annum (excluding VAT). However, it is the third part of the criteria that HMRC has shone a spotlight on - `association' with another business. According to paragraph 3.8 of VAT Notice 733, `association' means being under the dominant influence of another, the two businesses are closely bound by financial, economic and organisational links or if one business takes directions from another. In Travel Counsellors' case, HMRC has questioned whether the franchisees of Travel Counsellors are truly independent. As a worst case scenario, if HMRC deems that
Travel Counsellors and its franchisees are `associated' businesses, those franchisees will be ineligible for the flat rate scheme and HMRC will be able to recover the balance of payments of VAT at 20%. Although HMRC will look at the documentation as a starting point for the assessment, it will nevertheless look behind the franchise contract at the commercial reality of the relationship.
HMRC does not shy away from casting an eye over agency arrangements within the travel industry. The recent collapse of the Lowcostholidays Group once again calls into question the dayto-day reality of who is selling what to whom. Ostensibly the main concern is for consumers who are either out of pocket or risk being stranded as a result of their chosen bed bank running out of money. However, some within the industry believe that HMRC will take an interest in the arrangements between hotels and UK-based bed banks and determine whether those bed banks
truly are agents for the hotel or whether they act as principal and should be accounting for the VAT. Whilst HMRC must have been disappointed when in 2014 the Supreme Court ruled that Med Hotels was merely an agent in supplying accommodation to travellers in HMRC -v- Secret Hotels2 [2014] UKSC 16 and even more disappointed following the affirmation of the approach this year in Hotels4u.com Ltd -v- HMRC [2016] UKFTT 718 (TC), it will consider each case on its facts. The current uncertainty with the Brexit vote also raises the concern as to whether there will be changes ahead.
Finally, airlines recently featured in the press following allegations by a consumer group that airlines had been applying excessive credit card fees when processing transactions. The airlines targeted maintain that they only pass on the charges they incur in processing the credit card transactions. Couple this with a recent decision in the Competition Appeal Tribunal in the case
of Sainsbury's Supermarkets Limited -v- Mastercard Inc., and it could lead to an interesting set of circumstances for the travel and aviation industries. In this case, Sainsbury's were successful in obtaining judgment against Mastercard (to the tune of 69 million plus compound interest) for charging excessive multilateral interchange fees (MIFs) in breach of competition law. This is of particular interest to any businesses with high volumes of credit card sales through Mastercard or Visa schemes in recent years. Any claim in relation to MIFs can only be made within a specific period. Anyone with any interest in pursuing such a claim should not delay obtaining legal advice as to the merits of their case.
If you have any queries or concerns about MIFs, the HMRC flat rate scheme, and/or your agency or contractual relationships, please feel free to contact our specialist tax and regulatory lawyers who are always happy to provide you with any assistance.
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travel newsletter winter 2016
A year on from the successful judgment of Nolan -v- TUI UK Ltd., our gastric illness specialists consider whether the principles can be applied across the industry
The travel industry has been troubled by a spike in the number of norovirus and gastric illness claims being pursued against tour operators and/or hoteliers. These often take the form of group actions which can cost a substantial amount in damages and costs, and are further complicated when combined (as they generally are) with quality complaints.
At present there is only one norovirus case which has been successfully defended at trial. This was last year's case of Nolan -v- TUI UK Ltd where Hill Dickinson successfully defended an action brought by 43 claimants regarding an outbreak of norovirus on a cruise ship in 2009. This was a landmark case for the cruise industry and was widely hailed as establishing clear principles for cruise operators in resisting such actions.
There has been some concern around the recent Court of Appeal judgment in the case Swift -v- Fred Olsen Cruise Lines and whether or not this has undermined the judgment in Nolan -vTUI UK Ltd. The defendant, Fred Olsen Cruise Lines (FOCL), had appealed a first instance decision in favour of 16 claimants seeking damages in respect of norovirus on a number of cruises on "MS BOUDICCA" in 2011.
The judge at first instance had accepted that the FOCL norovirus outbreak and control plan `was consistent with industry standards, but that it had not been adequately implemented' on the cruises in question. FOCL based their appeal on four separate, but related grounds. However, the three appeal judges unanimously dismissed the appeal on all four grounds, but principally because, on the totality of the evidence, while the outbreak plan itself followed industry practice, there were multiple failures in its implementation and not merely isolated instances.
The general premise for defending viral or bacterial gastric illness claims has not, therefore, changed. However, given the rise in similar claims being brought in the case of land-based bookings, the question now arises: can Nolan be used by hoteliers and tour operators to defend norovirus and/or gastric claims or are the principles it establishes limited to the context of cruise ships? While there is as yet no case law, the answer must be `yes'. To some extent, it is obviously easier to take control of an illness which is occurring on board a ship, however tour operators and hoteliers/resort operators should still work together to ensure these gastric illnesses are both reported and managed effectively.
First of all, tour and resort operators/ hoteliers should ensure that booking terms and conditions require guests as far as possible to report any illnesses they experience whilst on holiday. Upon making such a report, guests should then be encouraged to visit a local doctor to obtain medical assistance. Systems (of which an industry standard outbreak plan will form a major part) should also be in place geared to i) preventing illness, ii) identifying the illness at an early stage, iii) monitoring and controlling the illness to limit spread, and iv) reducing the incidence of illness through timely implementation of the outbreak plan (Prevention of Spread of Infection (POSI) controls). Hoteliers/resort operators should also have adequate reporting procedures to inform tour operators of any reports of illnesses, and have testing procedures in place so that, when a number of illnesses are reported, guests are tested to identify whether the illness is viral/ bacterial.
This distinction, which proved crucial to the outcome in Nolan, is important as claimants' solicitors often allege more than one pathogen as the source of the illness. If guests have been tested, however, then the pathogen will have been identified when it comes to defending an action. This is also important as the procedures necessary to reduce illnesses differ depending on whether they are bacterial or viral in origin. It is also relevant for defending a case as the documentary evidence required to show prevention and control of an illness, again differs depending on the pathogen.
If the requisite industry standard procedures/plans have been adopted and implemented, the cases of Nolan and Swift can assist any tour or resort operator/hotelier with defending norovirus and other gastric illness claims.
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L l
cati cati
why
n, applicable n, law and
l cati n: jurisdiction matter
It is important to establish at the outset of any case the applicable law and jurisdiction to the underlying dispute. This is somewhat difficult in cases with an international element, or where parties are based in different countries, or if an activity/accident occurs abroad. There are therefore often circumstances where both the English and foreign courts can have jurisdiction to decide a matter. Consequently, this complex area of law, more often than not, tends to require the advice of a legally qualified expert.
Harmonised rules apply in the EU for determining the law applicable to a dispute and the relevant jurisdiction. If a defendant is not domiciled in a contracting state then the English courts determine jurisdiction in accordance with the common law, giving the English courts discretion to decline to exercise their jurisdiction, if the courts of another forum are considered to be more appropriate. The common law approach to jurisdiction has been restricted by the implementation of Brussels Regulation (Recast) which applies to legal proceedings instituted on or after 10 January 2015.
The starting point under Brussels Regulation (Recast) is the domicile of the defendant (Article 4). In multi-party cases, claimants can seek to rely on Article 8(1) which provides that, where there are multiple defendants and the claims are closely connected, a claimant may bring proceedings in the place where one of the defendants are domiciled. This could apply where a claimant sues both the hotelier and the tour operator or the contracting carrier and performing carrier.
In relation to the law to be applied, Rome I (the law applicable to contractual obligations) and Rome II (the law applicable to non-contractual obligations) are the relevant pieces of legislation. A key principle of both Rome I and II is that
a choice of law made by the parties will generally be upheld. Where no choice has been made the parties will have to look to Rome I and Rome II for determining the applicable law.
Where there is a contract between the parties, for example, booking terms and conditions or conditions of carriage, these will usually specify the law and jurisdiction to be applied. Where no choice of law has been made in the contract, Rome I contains mechanisms for determining the applicable law.
Non-contractual relationships are much more difficult. The starting point rule under Rome II for tort/delicts is that the law to be applied will be that of the country in which the damage occurred irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occurred. However, it will not always be obvious where the place the damage occurred is, for example, if an accident occurred on a cruise ship which is not in a port.
There is however an exception to the general rule that where the parties have the same habitual residence at the time of the damage, the law of that country shall apply and an `escape clause' where the tort is `manifestly more closely connected
with another country'. The latter is seen as a common sense clause and has only succeeded in one case - Marshall -v- Motor Insurers Bereau [2015] which highlights the exceptional nature of this rule. This was a multi-party case and the court recognised the difficulties with such cases and used the escape clause to make all the claims subject to French law. Multi-party cases therefore seem the most obvious cases for the courts to apply the escape clause.
This is a quick overview of a complex area of law. Each case will have to be analysed on its own particular facts to determine the applicable law and jurisdiction. Potential litigants should bear in mind that there will be circumstances where the jurisdiction can be one country, and the law to be applied that of another.
On the much-discussed topic of Brexit, the Brussels Regulation (Recast), Rome I and Rome II will continue to apply in the immediate aftermath of our departure from the EU. The difficulty in the long term is whether the English courts will still continue to follow European court case law on these once the UK is no longer part of the European Community. Another difficulty is what will occur in a case where the damage occurs preBrexit; what line will the courts take as to whether or not Rome II will still apply?
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Tourism, travel and the Consumer Rights Act
Depending on your viewpoint, the Consumer Rights Act 2015 (CRA) either complements or competes with existing consumer rights legislation in the travel industry. Either way, there is a concern amongst business that the CRA simply disrupts existing regulatory regimes and adds unnecessary complexity. Two significant factors now point towards businesses having to revisit commercial models and brace for impact against yet more layers of enhanced consumer protection. One is the Government's decision to remove CRA exemptions from the aviation, maritime and rail sectors in respect of delay compensation rights. The other is the deeper investigation into deposits and cancellation terms of certain tour operators currently being considered by the Competition and Markets Authority (CMA).
CRA wades in on delay compensation
On 6 September 2016, the Government announced that the provisions originally exempting aviation, maritime and rail services from certain parts of the CRA would no longer apply. From an industry perspective, the decision was a disappointing one but it did not entirely surprise. Consumer bodies such as Which? and MoneySavingExpert had lobbied the Government just as hard as the airlines and the industry bodies that represent them in order to prevent what they believe is an unnecessary layer of consumer legislation to sit alongside established compensation rules.
Since 1 October 2016 consumers can therefore bring an action under the CRA to recover losses caused by delay. The reason they might do that is to recover up to the full amount of the price paid for the airline ticket, which could be much higher than the standard bands of compensation
payable under Regulation (EU) 261/2004 (the Regulation). The industry had hoped to be exempt from s57(3) of the CRA, which prohibits traders from limiting their liability to less than the price paid, but the Government rejected this proposal in favour of full application of the CRA. Consumers will nevertheless have to go to court and prove that the airline's failure of its duty of care resulted in a delay or cancellation and caused the consumer greater loss than it would otherwise be entitled to under the Regulation; arguably much harder and more costly too. The perceived wisdom is therefore that the Regulation's claim regime will continue to be relied upon by consumers and claims management companies for these claims. Incidentally, the Montreal Convention 1999 (the Convention) already provides passengers with the ability to claim higher amounts than under the Regulation, although the time limit for bringing Convention claims is two years. This differs from
the Regulation, which provides for a statute of limitations based on whatever the relevant national law says. This distinction was tested and confirmed by the Court of Appeal in Dawson -v- Thomson Airlines back in 2014. The CRA also follows national law and the six-year limitation period.
It is worth noting that Article 12 of the Regulation states that compensation does not prejudice passengers' rights to further compensation. That said, Article 12 does state that EU 261 compensation can be (and in practice this is often the case) deducted from any other compensatory payments.
Looking more broadly at passenger delay claims, primacy of specific aviation regulation (by virtue of s53(2) of the CRA) might be more relevant to claims brought under the Convention. According to the Government, claims falling under the Convention continue to be exclusive (para 2.8 of its response to the consultation) as follows:
14
`In aviation, the Government was concerned in particular to preserve the existing position where the Carriage by Air Conventions remain the exclusive basis of claim on routes to which they apply. This remains the Government's position. However, the Government considers that the existing position in relation to the exclusivity of claims can be achieved not only by a specific exemption, but also through section 53 of the CRA. Given that most air routes are governed by one of the Carriage by Air Conventions, the scope for additional claims under the CRA will in practice be limited in the aviation sector. The Government has therefore concluded that the balance lies in favour of bringing the CRA (including section 53) into force in full.'
Theoretically, this means that the limit of liability in respect of delay claims (4,150 SDRs) under Article 19 of the Convention would apply. This would be particularly useful if a claimant made some outrageous demand under the CRA for damages suffered due to the delay that went far beyond the usual compensation amounts under EU 261 amounts. A claimant might have a degree of success in claiming greater sums under the CRA than it would under the Regulation, but the Convention's SDR limit under Article 19 would still apply accordingly. The passenger would of course have to prove the `damage' suffered. Likewise, under Article 19, airlines will also not be liable under the Convention if they can show `that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them
to take such measures'. Over time, we might expect to see general claims against airlines and operators that fall within the CRA regime, such as a failed promise to provide on-board WiFi or a particular in-flight menu, whilst pure delay claims remain the preserve of the Regulation. Having three different protective regimes imposed on the industry is not particularly comforting and the legislative overlap is confusing and unhelpful.
No refunds
Regulators have increasingly taken a dim view of some companies in the travel industry who have seemingly profited from refusing to refund large deposits that holidaymakers have paid and have then had to cancel the holiday through no fault of their own. It calls into question whether some cancellation terms comply with the CRA and how wide of the mark tour operators and travel companies have become.
On 23 March 2016, the CMA issued a series of leaflets, entitled Writing fair contracts: guidance for businesses, to ensure it complies with the CRA. Guidance includes information on deposits, advance payments and cancellation charges, when and how to cancel a contract, excessive charges and disproportionate sanctions, variation clauses and other terms that can be unfair.
However, it recently reported that more than half of all businesses are unaware that some of the terms and conditions that they have habitually been applying would be deemed unfair under the CRA and therefore unenforceable.
Under paragraph 5 (CRA Part 1 of Schedule 2), `a term which has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied' is an example of what may be regarded as unfair according to s63 of the CRA. The CMA is taking issue with what it perceives as businesses hedging their bets against cancellation and pocketing deposit amounts far in excess of any outlay it might commit to or pay in advance to supplier to secure accommodation, event venues, flight seats or other services.
The CMA believes that some companies are exaggerating the difficulty of reselling tickets or package holidays and may take more substantive action over time if companies do not alter their behaviour. The broad nature of the CRA may also have an impact on the no-refund policies favoured by airlines, especially the LCCs who have made non-refundability a bedrock policy in order to offer low fares. Several big-name tour operators have faced scrutiny and have been the subject of media-driven investigation into their practice of charging consumers large deposits.
Whilst enhanced consumer protection is generally applauded, the impact of the CRA on the highly competitive, low-margin industry is likely to continue being disruptive albeit so far relatively untested in the courts.
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Spotlight on fraud in the travel industry
You do not have to look far to note the growing trend of fraudulent activities within the travel industry. The recent criminal conviction of independent travel agent Rita Hunter (former director of Hunters Travel Limited and Platinum Travel Limited) for the fraudulent use of customer credit cards to pay for unauthorised holiday bookings and diverting customer moneys into a personal bank account demonstrates the impact that one individual can have on a number of well-established travel consortiums. Despite several thorough due diligence measures being in place, the fraudsters are becoming increasingly more resistant.
But is not just fraud from within the travel industry from a business to business point that poses a problem for the travel industry, since fraudsters posing as card holders frequently use stolen credit cards to pay for holiday bookings. There is also the issue of chargebacks by card holders for services that they had actually benefited from.
All of the above is costing a significant amount to the travel industry. Whilst there are protections and mechanisms in place for consumers to recover moneys that they have been defrauded of, there is no such protection for fraud in the business to business remit. Travel consortium Advantage Travel Centres Limited is calling for the industry to come together to create a `watch list' for any individuals that are known to have been convicted of fraud, or are being investigated, in order to raise the alarm sooner.
The Prevention of Fraud in Travel (PROFiT) has been working closely with the travel industry and the
City of London Police to set up a portal for this purpose.
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travel newsletter winter 2016
Department for Transport consults on ATOL
The Department for Transport's (DfT) consultation on proposed changes to the Air Travel Organisers' Licencing (ATOL) scheme closes shortly (on 24 November 2016). The one-month consultation period has been considerably shortly than the usual three-month timeframe for consultations on previous changes to ATOL. However, the Government will be mindful that legislative changes will need to go through Parliament quickly in order to meet the 1 January 2018 deadline for implementing Directive (EU) 2015/2302 on Package Travel and Linked Travel Arrangements (PTD2). It's noteworthy that the Government intends to adhere to that timetable, given the state of flux when it comes to EU matters. Furthermore, marketbased solutions feature prominently, as the Government continues to explore the notion of shifting responsibility for insolvency protection from government coffers to industry ones.
Launched late October 2016, this was the first of two Government consultations, the second of which will cover changes to the UK Package Travel Regulations. The ATOL consultation has focused on three aspects, namely: 1) proposals for strengthening the ATOL scheme and ensuring enhanced customer protection in line with PTD2; 2) reforming ATOL regulatory framework for the longer term; and 3) evaluation of the 2012 ATOL regulations.
Breaking it down into a series of 14 specific questions, the DfT indicated that strengthening ATOL to align with PTD2 is the preferred option. This is instead of doing nothing and keeping the regulations in their present form or leaving it to the market to generate solutions for compliance. The government has nevertheless been open to market-based solutions as part of the ATOL reform, for example in assessing the treatment of the new Linked Travel Arrangements and its current approach to flightonly sales. The ATOL scheme itself is not specifically mandated under either the original Package Travel Directive or PTD2 so the Government does in theory have some future lateral movement to encourage the development of commercial bonding or tailored insurance products to meet compliance needs.
A return to bonding may not be welcomed by the industry having had the bond market decimated with the introduction of the ATOL Protection Contribution (APC). That would make sense if it wishes to reduce the Air Travel Trust's exposure to market volatility. However, there appears to have been no rush to do so at present and the outcome of the consultation is highly unlikely to lead to the ATOL scheme being significantly wound back or abolished. As part of the longer term vision, it also wished to look at alternatives to the current flat rate levy and consider possibilities like risk-based, turnover-based or holiday-
cost-based measurements, especially to encourage EU businesses to establish themselves in the UK and use the ATOL scheme to trade across the EEA as single vehicle of compliance under PTD2.
As mentioned above, the counterpoint to making the ATOL scheme the `gold standard' and encouraging EU businesses to establish in the UK and adopt it will be the heightened exposure when dealing with potential repatriation and refunds of a broader range of EU citizens, following the collapse of a UK-based travel business selling into the EU. For the Government at least, that may make pushing such protection out to the market more appetizing.
Speaking of the EU, the DfT has naturally recognised that Britain's future relationship with it will have a big impact on driving these changes. It acknowledged that PTD2 was designed to `harmonise rights and obligations across Europe, in order to ensure a consistent level of protection and support cross-border sales in the travel market' as well as to `prevent insolvency protection obligations from acting as an obstacle to the free movement of services' (paragraph 43, page 13). However, with some of the bellicose rhetoric that continues to emanate from certain parts of the government, it will undoubtedly serve as an example of how Brexit will dominate legislative, political and legal discourse in the travel industry for years to come.
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travel newsletter winter 2016
Mediation versus litigation: when less is more
The case of Briggs & 598 others -v- First Choice Holidays and Flights Limited has seen a significant ruling from Master James at the Senior Courts Costs Office. This decision by Master James looked at a number of preliminary costs issues relevant to a group litigation action for damages for personal injury and loss of enjoyment of holidays.
The claim related to a group action brought by no less than 599 claimants who holidayed at a Turkish resort in the summer of 2009 which had been booked though the defendant tour operator. Of the 599 claimants, 447 suffered from illness, typically gastrointestinal, and 152 had to endure substandard accommodation and service.
The 599 claims were concluded in six tranches for approximately 1.7 million in total plus costs. The claimants' solicitors, well-known claimant firm Irwin Mitchell, sought to recover costs in the sum of approximately 4.5 million made up of 2 million in base profit costs and a further 2.5 million in additional liabilities. 1.8 million was paid on account of costs by the defendant.
Irwin Mitchell proceeded to request an interim costs certificate in the sum of 881,000 following settlement of
the claims and the application for the same was considered by Master James. Various issues were considered including but not limited to the following:
the delay in the claimants' pursuance of commencing detailed assessment proceedings;
the more significant delay in requesting the detailed assessment hearing;
the hourly rates sought;
the appropriate success fee for the two rounds of conditional fee agreements entered;
whether the costs incurred were reasonable and proportionate;
whether the interim costs certificate should be issued; and
the method under which the 152 noninjured claimants had pursued their claims.
In reaching her decision, Master James held as follows:
the delay in the claimants' pursuance of commencing detailed assessment proceedings was minimal and did not justify any sanction;
the more significant delay in requesting the detailed assessment hearing attracted an interest penalty;
the hourly rates sought were allowed but the amount of time spent by individual fee earners and the grade of fee earner utilised was scrutinised;
the appropriate success fee was 43% for the first round and 25% for the second round; and
the costs incurred were not found to be proportionate upon application of the pre-Jackson CPR 44.4(3) test.
The certificate was refused in the basis that the amount already paid on account by the defendant was reasonable.
Turning to the 152 non-injured claimants, Master James found that the appropriate procedure to have been used in pursuing these claims should have been through the ABTA mediation scheme which covers non personal injury claims of up to 25,000 per booking. Of the 152 non-injured claimants, all of these claims would have been adequately covered by the scheme. If this procedure had been used in respect of these claims, then the costs incurred would have come in at around the 40,000 mark rather than the exorbitant 465,000 base costs claimed for this selection of claimants.
Master James held that it was `neither reasonable nor proportionate' to incur costs of just shy of half a million pounds in respect of these 152 claimants' claims by way of group litigation and further noted that, rather than saving costs by including the non-injured claimants within the group litigation, quite the opposite had occurred.
Whilst it is noted that the ABTA scheme is voluntary, this was not deemed to have mattered. In reaching a decision as to the amount which should be allowed, the Master restricted the recoverable sums payable by the defendant to what would have been payable within the ABTA mediation scheme. In terms of the likely individual fees, this varied from 108 - 264 per claimant depending on the size of the claim. It was deemed to be appropriate to disallow any sums beyond the ABTA fees under CPR 44.4(1), the same having been unreasonably incurred.
It is noted that the claimants have appealed the judgment but as it currently stands, this case directly highlights the principle of proportionality in practice and the impact that the same can have upon litigation. It also highlights the importance that must be placed upon considering proportionality at the outset of litigation and when deciding which course of action to take based
on the individual circumstances of the claims in question. The loss in terms of costs suffered as a result of the claimants' solicitors' decision not to use the ABTA mediation scheme is significant and is a stark warning to all solicitors faced with this choice in the future.
For further details in respect of this case or indeed any other costs matter please refer to our costs team.
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travel newsletter winter 2016
Meet the travel and leisure team
If you have any queries about any of the articles featured, please feel free to contact one of the team.
Joanna Kolatsis Aviation, travel and leisure Partner +44 (0)20 7280 9103 joanna.kolatsis@hilldickinson.com Maria Pittordis Marine, trade and energy Partner +44 (0)20 7280 9296 maria.pittordis@hilldickinson.com John Caddies Marine, travel and leisure Partner +44 (0)20 7280 9290 john.caddies@hilldickinson.com Dan Rubin Employment Partner +44 (0)161 838 4919 dan.rubin@hilldickinson.com David Scott Travel and leisure Partner +44 (0)151 600 8265 david.scott@hilldickinson.com Iain Donaldson Tax Partner +44 (0)20 7280 9146 iain.donaldson@hilldickinson.com Roderick Palmer Aircraft finance Partner +44 (0)20 7280 9137 roderick.palmer@hilldickinson.com Caroline Thomas Partner Shipping +852 2525 7019 carolinethomas@laracyco.com Javed Ali Aviation, travel and leisure Consultant +44 (0)20 7280 9247 javed.ali@hilldickinson.com
Saleema Brohi Consultant Aviation +44 (0)7970 028 852 saleema.brohi@hilldickinson.com Andrew Hill Profin Senior Associate +44 (0)20 7280 9338 andrew.hill@hilldickinson.com
Jonathan Russell Aircraft finance Senior Associate +44 (0)20 7283 4287 jonathan.russell@hilldickinson.com
Rhian Hughes Corporate Senior Associate +44 (0)161 838 4970 rhian.hughes@hilldickinson.com Alexander Freeman Aviation, travel and leisure Associate +30 210 428 4770 alexander.freeman@hilldickinson.com Laura Halfhide Aviation, travel and leisure Associate +44 (0)20 7280 9254 laura.halfhide@hilldickinson.com Alastair Long Aviation, travel and leisure Associate +44 (0)20 7280 9193 alastair.long@hilldickinson.com Lucy Schofield Aviation, travel and leisure Associate +44 (0)20 7280 9272 lucy.schofield@hilldickinson.com Laura Dobbs Marine, travel and leisure Associate +44 (0)20 7280 9293 laura.dobbs@hilldickinson.com Sarah Barnes Marine, travel and leisure Associate +44 (0)20 7280 9302 sarah.barnes@hilldickinson.com Leigh Nagler Costs Associate +44 (0)20 7280 9181 leigh.nagler@hilldickinson.com Mona Jackson Pensions Associate +44 (0)161 817 7212 mona.jackson@hilldickinson.com Charlie McCausland Marine, travel and leisure Paralegal +44 (0)20 7280 9198 charlie.mccausland@hilldickinson.com
Upcoming events
The team will be attending the following events over the next few months:
28 November 2016 1 December 2016 2 December 2016 7 December 2016 8 December 2016 25 January 2017 3 February 2017 21 February 2017
ABTA Over 50s Market seminar, Hill Dickinson, London Travel Weekly Business Breakfast, London ERAA Industry Affairs Group, Brussels AWTE Christmas Lunch, London ITT Christmas Party, London AirlinesUK annual dinner, London BAR UK general meeting, London ABTA Travel Finance Seminar, Hill Dickinson London
hilldickinson.com
London Piraeus Singapore Monaco Hong Kong Liverpool Manchester Sheffield
Editor: Joanna Kolatsis +44 (0)20 7280 9103 joanna.kolatsis@hilldickinson.com Editorial contact: Margaret Pinder margaret.pinder@hilldickinson.com
Letters to the editors
We welcome any comments readers may have on the articles in this newsletter, or on any related topic, and would be happy to publish suitable commentary in a subsequent edition. Please contact the editorial team, whose details appear above.
About Hill Dickinson The Hill Dickinson Group offers a comprehensive range of legal services from offices in London, Piraeus, Singapore, Monaco, Hong Kong, Liverpool, Manchester and Sheffield Collectively the firms have more than 1150 people including 190 partners and legal directors.
The information and any commentary contained in this newsletter are for general purposes only and do not constitute legal or any other type of professional advice. We do not accept and, to the extent permitted by law, exclude liability to any person for any loss which may arise from relying upon or otherwise using the information contained in this newsletter. Whilst every effort has been made when producing this newsletter, no liability is accepted for any error or omission. If you have a particular query or issue, we would strongly advise you to contact a member of the travel team, who will be happy to provide specific advice, rather than relying on the information or comments in this newsletter.
