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Opinion & Analysis

Cancelled package tour refunds

By Jamie Hammond

Covid has touched the lives of millions of people throughout the world, often in a devastating and tragic manner in matters of health and well-being principally but also in business and wider commercial affairs.

The travel and holiday industry has been no exception, with a myriad of companies, both large and small, going under. But what is less appreciated is that individual and family holiday makers have also felt the lash of Covid, with pre-booked holidays cancelled as a result with corresponding loss of often high deposits and advance payments, frequently representing savings built up over several years with great effort and sacrifice.

When, as so often has happened as a result of Covid, such holidays are cancelled and the deposit or advance payments lost with the travel agents explaining, with some force, that such payments have been forwarded to hotels and tourist agents abroad, the attitude has been generally one of resignation that these are simply not recoverable. This is not the case in all situations.

In 1990 the EU, then the European Economic Community, created legislation designed to protect travellers who had booked package holidays through travel agents and other holiday providers. Article 4 of Directive (90/314) provides that consumers are entitled to a refund as soon as possible of all advance payments made pursuant to the package holiday if it is cancelled by the organiser for whatever reason, other than the fault of the consumer, before the agreed date of departure.

This Directive was transposed into Gibraltar law in 1994 as the Package Travel, Package Holidays and Package Tours Act (“the Act”). Section 13(8)(b) provides the same protection to consumers afforded under the EU Directive. It is explicit; “The organiser may terminate the package travel contract and provide the traveller with a full refund of any payments made for the package, but shall not be liable for additional compensation if the organiser is prevented from performing the contract because of unavoidable and extraordinary circumstances and notifies the traveller of the termination of the contract, without undue delay, before the start of the package.”

Consumers whose package holidays have been cancelled by agents will thus be entitled to a full refund of all monies paid to the organising agent for the holiday. Section 13(10) provides that this must be refunded within 14 days. If the holiday has been cancelled as a result of unavoidable and extraordinary circumstances such as the Covid pandemic, no additional compensation for the loss of the enjoyment of the holiday may be recovered so long as the organiser provides notice of the cancellation without undue delay.

It is important to note that the holiday booked must be a package within the definition in the Act in order for this section to be relied on. Section 2(2)(a) provides that a package holiday must include a combination of at least two different types of travel services organised by one trader for the purpose of the same trip. Travel services include the carriage of passengers, accommodation, the rental of cars and tours. Provision is made at sub-paragraph (b) where it is not clear whether the services have been combined by one trader. Alternative remedies must be sought for cancelled holidays which do not meet the definition of a package, such as remedies sought through the law of frustrated contracts.

In an open letter dated 13th May 2021 the UK Competition and Markets Authority gave clear guidance on the UK equivalent of our Package Travel Act to address a justification which had been given frequently by organisers in not refunding consumers: “we discovered that some organisers were not providing refunds to consumers unless and until they had themselves received back the payments they had made to airlines or accommodation providers.

However, the fact that an organiser has not itself been refunded by third parties does not in any way relieve organisers of their duties under the PTRs. It is organisers that are legally obliged to refund consumers in these situations, irrespective of whether funds are first received back from third party service providers.” The Gibraltar Office of Fair Trading has provided similar advice in their Consumer Awareness: Covid-19 Travel Cancellations publication issued on 4th June 2020.

In summary, those who have booked package holidays in recent times and paid deposits or otherwise advanced payments, and then had their holidays cancelled as a result of Covid, and who have not been refunded the money paid under the package travel contract, are entitled to a full refund of the money they paid towards their package.

Jamie Hammond is a trainee barrister with Ellul & Co.

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