Mark Pestronk
Q: I have been reading that the European Union is about to update its 1990 Package Travel Directive, which is a set of regulations governing tours and other travel components that get combined. If we send travelers to Europe on an FIT or group basis, would the regulations apply to us? What if we form a joint venture with an EU-based travel agency to handle our corporate or leisure clients?
A: By American standards, packaged travel is very highly regulated in Europe. If you know nothing about those regulations, you would be astounded by the liability and other obligations that they impose on tour operators and retail agencies that package travel on an FIT or group basis.
For example, the packager is responsible to the consumer for whatever goes wrong on the trip, with rare exceptions. The packager must reimburse clients not only for lost portions of the trip but also for inconvenience and loss of enjoyment.
Similarly, if a client gets stranded due to an airline's cessation of service, the packager must pay the costs involved in repatriating the travelers. Disclaimers protecting sellers against liability for the acts or omissions of suppliers are not only not allowed but actually illegal.
Against this background, the EU is going to impose even more obligations on travel sellers under new rules that will be enacted by the end of 2015, leaving about two years for the 28 EU member countries to adopt mirroring legislation.
The chief focus of the new rules will be online sales, which no one thought to regulate in 1990 because, as hard to imagine as it is, there was no Internet. If a tour operator or a retailer offers online booking for air plus a hotel or car in one session or series of sessions within 24 hours, the purchase will be deemed a package subject to the regulations.
Further, if a supplier, operator or agency sells one mode of travel online and then provides a link to another seller or supplier's website for other elements, the first seller will have certain financial responsibilities for the entire trip, even if it has no idea of what was purchased. Finally, the new rules will beef up other protections such as limiting cancellation penalties and price increases and allowing free transfers of packages.
Neither the old nor the new rules specify whether non-EU-based companies must obey them, and my research has revealed no court precedents or scholarly articles on the subject. However, since the rules are designed to protect EU consumers, it probably follows that they don't apply to U.S. companies that send their clients to Europe.
Of course, if you establish an office in an EU country, the rules will apply to your office there. In addition, the new rules can be interpreted to mean that some of the consumer protections will apply to your U.S. parent company's travelers in the EU.
If you form a joint venture with an EU agency or operator, the EU would see the venture as a partnership located in the EU, so the venture's activities would be subject to the regulation.
However, the new rules clarify that the consumer protections do not apply to business travel that is arranged pursuant to a "general agreement" between an agency and a corporation.