This article was first published by Lexis+ on 20 June 2023, and was co-authored by Lara Francioni, Trainee Solicitor, London.
This case involved an application for the annulment of national legislation in France, Order No 2020-315 (the legislation) relating to package travel arrangements, which was created in light of the coronavirus (COVID-19) pandemic.
The legislation was drafted with the aim of minimising disruption and maintaining the financial stability of tour operators. However, this was challenged by two consumer protection associations as being contrary to Article 12 of Directive (EU) 2015/2302 (the EU Package Travel Directive), which entitles consumers to a refund within 14 days of termination of a package holiday contract where the cancellation has occurred due to ‘unavoidable and extraordinary circumstances’.
The Court of Justice considered whether the pandemic would fall under the definition of ‘unavoidable and extraordinary circumstances’ within the Directive and outlined consumer rights in relation refunds and reimbursement under package travel arrangements. It was found that EU Member States cannot adopt national law which modifies the obligations of tour operators to reimburse consumers in full.
What are the practical implications of this case?
This significant case summarises the rights of consumers who have entered into a package travel arrangement within an EU Member State, which has been cancelled either by the consumer or the tour operator due to an ‘unavoidable and extraordinary circumstance’. These issues are considered in the context of the coronavirus pandemic.
As evidenced under Article 12(2 to 4) of Directive (EU) 2015/2302 consumers have considerably more rights in relation to the cancellation of package travel arrangements due to ‘unavoidable and extraordinary circumstances’ than tour operators. Tour operators have to ensure that refunds are provided to consumers as a sum of money and within the time frame of 14 days post termination of the package travel arrangement.
Some protection is provided to tour operators through Article 12(3)(b) of Directive (EU) 2015/2302. This states that they do not have to pay any compensation to consumers in addition to a refund following the cancellation of a package travel arrangement, even if the cancellation is as a result of the tour operator.
Additionally, this case clarified that tour operators cannot claim that events such as a global health pandemic are ‘force majeure’ events which would entitle them to deviate from provisions of EU law. This case confirms that EU legislation takes precedence over any national legislation which impedes on the rights of consumers who have entered into package travel arrangements. Any conflicting legislation will require annulment.
This judgment reiterates the emphasis placed on consumer protection in relation to package travel arrangements in EU Member States. In the event of any future ‘unavoidable and extraordinary circumstances’ such as another global pandemic, tour operators will need to be prepared for the possibility of having to issue a high volume of refunds to customers and ensure compliance with EU consumer protection rights.
Furthermore, individual governments within EU Member States will also have to ensure that any national legislation drafted is compliant with relevant EU Directives.
What was the background?
This case was initially brought by two French consumer protection associations who challenged the validity of the French legislation. The French legislation was initially implemented by the French Government to safeguard the cash flow and solvency of tour operators who were being faced with cancellations on an unprecedented scale, with a very limited number of new bookings. The French Government was aware that the issuing of immediate refunds to consumers could jeopardize the existence of tour operators and, in turn, destroy the possibility for customers to be able to obtain refunds for any payments made.
The French legislation therefore permitted tour operators to provide a ‘voucher’ for any package holidays which were terminated between 1 March to 15 September 2020 instead of a cash refund. The terms of the French legislation stated that voucher had to be provided within three months of the date of termination with a validity of 18 months from the date of issue.
The two consumer protection associations, brought an application before the the Conseil d’Etat (Council of State, France) for annulment of the French legislation, claiming that the provisions of that legislation were contrary to the EU Package Travel Directive.
Issues in dispute
- Is the tour operator obliged to provide a cash refund rather than a voucher/ credit note to the customer?
- Does the tour operator have to reimburse customers within 14 days?
- Must an EU Member State annul national legislation which is incompatible with EU Directives?
What did the court decide?
Question one – meaning of refunds
When considering the first issue on whether the tour operator was obliged to pay a refund as a sum of money to the consumer on termination, the court considered the wording of Articles 12(2) and 12(3) of Directive (EU) 2015/2302. The EU Package Travel Directive does not include any definition of ‘refund’ but the court considered the meaning under EU law by considering the meaning of the term in everyday language, while also taking into account the context (Kuoni Travel Case C‑578/19).
However, the court confirmed that the wording used in one language version of a provision of EU law cannot serve as the sole basis for that interpretation (Banca Transilvania Case C‑81/19) and as such, the definition of ‘refund’ would be determined on a case-by-case basis.
It was held in this case that there is no wording which confirms the possibility of ‘replacing’ the obligation to pay a sum of money and therefore, a valid refund has to comprise cash. By providing a cash refund, consumers are able to use the money to ‘dispose of freely’, which better contributes to the protection of their interests. However, the court confirmed that if a consumer voluntarily opts for a voucher instead of a sum of money refund, this would be valid, in so far as such a possibility does not deprive travellers of their right to that reimbursement in money.
Question two – reimbursing consumers
In relation to the reimbursement of consumers who had terminated their package travel arrangements, the court held that a consumer must be reimbursed within 14 days in accordance with Article 12(4) of Directive (EU) 2015/2302. Further, any national legislation which releases a tour operator from their reimbursement obligations under Article 12 of Directive (EU) 2015/2302 is contrary to the Directive.
The court considered the definition of ‘unavoidable and extraordinary circumstances’ as defined in Article 3(12) of Directive (EU) 2015/2302. It was held that a global health crisis is clearly ‘beyond all control’ and it provides a ‘serious risk to human health’ in accordance with Recital 31 of the EU Package Travel Directive, which should give rise to the right for a full refund.
The court also clarified that EU Member States cannot adopt national legislation which releases package travel organisers from their obligation to reimburse and claim reliance on ‘force majeure’ in the context of a situation such as a global health crisis.
Question three – relationship between EU Directives and national legislation
As per the principle of sincere cooperation laid out in Article 4(3) TFEU, Member States are required to nullify the unlawful consequences of an infringement of EU law. It was held in this case that however serious the financial consequences of the coronavirus pandemic were on tour operators, the threat to the economic interests of operators is not serious enough to count as an overriding consideration and EU law must prevail.
The court provided guidance on disputes between national legislation and EU laws which must be complied with by Member States. In rare circumstances, if there is for example, a genuine and serious threat of disruption to the electricity supply of a Member State, a national provision may be authorised to apply despite conflicting with EU Directives (Inter-Environnement Wallonie Case C‑411/17).