After many months of pronouncements and much posturing the CAA has finally issued proceedings against a travel company under their interpretation of the BERR guidance and what constitutes a package. The unfortunate recipient is the market leader in the online dynamic packaging sector, Travel Republic.
Twice ABTA and the CAA have jousted in the courts over what constitutes a package with ABTA “winning” the original Judicial Review and the subsequent appeal. What a waste of time that all was! It appears we are now no further forward three years on! I believe the CAA wish to have the issue finally resolved in this case so that if they lose they can return to Government and obtain the change in law they say they have been promised if that eventuality arises.
I speak daily with the great and good of the legal fraternity that advise the travel industry and the majority believe the CAA will lose this case. After all ABTA “won” and have continued to allow Travel Republic to remain a valued member of the association having no doubt reviewed their trading practices, sales documentation and terms and conditions, as they do with all their members.
There is a lot riding on it too given the recent demise of XL. A number of “dynamic packaging” agents have had their customers make XL reimbursement claims to the CAA. After much industry debate and three months after XL’s failure the CAA confirmed they would pay these claims but would then issue legal proceedings against what is believed to be twelve larger agents to reclaim the monies reimbursed to the consumer on the basis that these agents really sold a package and should therefore assume responsibility as a principal. There are many millions of £s in claims.
Why are these agents so reluctant to assume principal status? Incredibly if you ask each agent you will find differing reasons. Logically the first reason is so as to avoid consumer exposure in relation to a large supplier failure such as XL. Another reason is the high cost of obtaining and maintaining an ATOL due to the CAA “free asset” requirement and the impossibility of obtaining start up bonding given the state of the bond insurance market. Other agents will sight the legal exposure of public and products liability of being a principal and finally and perhaps most markedly, is the reluctance is to pay TOMS VAT – many business models in this sector will not work if such a substantial proportion of margin is paid across to HMRC.
There is no doubt that this land mark case will finally clear up one of the biggest anomalies in travel law and take away so many uncertainties that perplex travel companies not to say their professional and legal advisers too!
