Lawyers to the travel and leisure industry
travellers’checks
Spring 2003
contents
Air rage
1
The Civil
Aviation Authority
3
Mediation – an alternative
means of resolving claims
6
Competition issues
7
School tours
a question of safety
8
Who to contact
8
HAPPY NEW YEAR!
Welcome to the first edition
Air rage – an increasing phenomenon
of Travellers’ Checks for
2003. The New Year brings
a new look to Travellers’
Checks which we hope you
will enjoy. It also marks
the official launch of our
expanded Travel and Leisure
Industry Group which now
includes a number of other
industry specialists across
the firm, providing you with
a full range of legal services.
We will be issuing a “who's
who” guide in the next
few months. For details of
our seminar please see the
back page.
www.ngj.co.uk
Conviction for Endangering
Safety of Aircraft
In September last year an airline passenger
who insisted on playing a computer game
on his mobile phone was jailed for four
months. Mr Chopdat was returning from his
honeymoon in Egypt when he was seen
with his mobile switched on. It is believed he
was playing a game. He had been warned
twice by cabin staff and once by a passenger
to switch off the phone, triggering an
argument during the Air 2000 flight on
which there were 206 other holidaymakers
and six cabin crew. It was alleged that
Chopdat became aggressive and threatened
to slap another passenger before the crew
radioed ahead to Manchester to secure Mr
Chopdat's arrest upon his arrival. Chopdat
was found guilty by a jury of endangering
the safety of an aircraft, and could have
faced a maximum two year jail term under
measures introduced by the Air Navigation
Order 1995. Judge Timothy Mort said “This
sentence must be imposed to deter other
people,” and called for the seizure of all
mobile phones from passengers boarding
flights to ensure air safety.
The jury was told that mobile phones
transmit radio signals that can interfere with
an aircraft's navigational system, potentially
with fatal consequences. Sentencing
Chopdat, the judge said there had been 20
recorded incidents involving mobile phones
aboard flights. One caused the autopilot to
malfunction and another affected radio
transmissions.
Reporting Incidents
Most reported cases are of a more
travellers’checks
...Air rage continued
Custodial Sentences
That sentence is indicative of the
increasingly dim view that the courts are
taking of individuals who believe they are a
law unto themselves. Take the sentences
handed down to Messrs Chopdat and
Whitehouse for their mobile phone
indiscretions, and add to them other
examples such as Mr James Ryan, who
unsuccessfully appealed in 2001 against a
15 month prison term for smoking in the
lavatory of an aircraft, or Mr Julian Ayodeji,
who received 8 months for being drunk on
an aeroplane. In addition, the attack on Ms
Weir resulted in the government amending
the Air Navigation Order to ban passengers
from interfering with crew at work, in what
can be seen as part of a bigger picture of a
system fighting back.
confrontational nature. Since 1999, at the
request of the Department for Transport, UK
airlines have been reporting incidents of
disruptive behaviour on board their aircraft
to the CAA on a common reporting basis. In
the year to 31 March 2002 a total of 1055
incidents were reported. These ranged from
minor infringements to serious misbehaviour.
Putting the figure in context, during the 12
month period covered by the data, UK
airlines operated about 1.1 million passenger
flights and carried about 104 million
passengers. In that period only 52 ‘serious’
incidents were recorded but there is an
increase in incidents.
Financial Cost
Incidents of air rage can have a serious
detrimental effect on the smooth running of
flights, and such occurrences represent a
severe financial penalty where forced landing
or divert becomes an inevitable
consequence. According to the reports
submitted by airlines, anywhere between 6
and 13 aircraft a year have to divert when
in the air, while another 3 to 10 are forced
to discontinue taxi or take-off procedures
and return to their stand. Schedules are
then disrupted and flights delayed.
Depending on the severity of the delays,
airlines or operators may then be faced with
compensating irate passengers whose
holidays may have been ruined as a result of
troublemakers. Then comes the Catch-22
choice of whether to sue the individual or to
accept the loss and so avoid the time and
expense of a civil court case.
Incidents of violence are all too common,
such as the case of the banker who
assaulted an attendant before defecating on
a first-class food cart, or the group of
drunken tourists on an Airtours flight who
were apparently so unruly over the Atlantic
that the crew enlisted the help of a wrestling
team to restrain them. Cabin crew and
2
Operators’ Liability
Incidents of air rage can have
a serious detrimental effect
on the smooth running of
flights. And represesent a
severe financial penalty
where forced landing or
divert becomes an inevitable
consequence
passengers have been threatened, punched,
choked and worse – in November 1998 an
air stewardess, Fiona Weir, was left scarred
for life when a drunken tourist attacked her
with a broken vodka bottle on board a flight
to Malaga. In 2001 the attacker was jailed
for four years and ordered to pay £6,000
compensation to Ms Weir.
This is good news for the travel industry,
as it should mean that even if tour
operators decide not to sue
troublemakers the culprits should not get
away with their misdeeds. It is to be
hoped, moreover, that the recent string of
convictions will deter future incidents. A
problem for operators arises if other
passengers are injured. For example, if a
passenger becomes involves in a fight and
hits another passenger, or gets drunk and
trips over a trolley, this may result in an
injury and the operator could be sued for
damages. Regulation 15 of the Package
Travel Regulations renders an operator
liable for the acts and omissions of its
suppliers i.e. the carrier. It could be
argued that the carrier’s conduct led to
the incident if, for example, the carrier
had allowed a passenger to consume
copious amounts of alcohol.
All the indications are that operators will be
aided in their battle against air rage by the
authorities, especially the courts, who have
clearly rejected the idea that the customer is
always right.
Spring 2003
The Civil Aviation Authority
We are very grateful to Helen Simpson,
Director of The Consumer Protection Group
of The CAA for this article on the difficult
and contentious issue of split contracts.
The CAA’s consultation on its proposal for an
amendment to the ATOL Regulations to deal
with “contract splitting” has drawn to an
end. Perhaps now is an appropriate time to
remind readers why we are seeking changes
and how we envisage they might be
implemented, as well as to look at the
responses to the consultation and at the way
forward from here.
ATOL Regulations
The original ATOL Regulations were made in
1972 and were part of the UK’s framework
long before the Package Travel Directive
came along in 1990, so it’s perhaps not
surprising that the ATOL Regulations do not
use the same language as the Package Travel
Regulations which implemented the
Directive. The ATOL Regulations (and their
enabling primary legislation, Section 71 of
the Civil Aviation Act 1982) do not mention
packages. They refer instead to “making
available flight accommodation”, though
ATOL does provide financial protection for
entire package holidays where an operator
sells the non-flight components of a package
under a single contract along with the flight.
ATOL is thus the main instrument by which
the financial security required by Article 7 of
the Directive is achieved, and conversely
Article 7 could be said now to be the
primary reason for ATOL.
This mismatch of language has existed for
ten years, and in the mid-1990’s it became
clear that some operators had identified a
loophole that allowed them to avoid
licensing for air-based packages by
“contract splitting”. This practice, which
has increased so that it is now done on a
significant scale, usually involves an agent
selling a flight either as a ticket provider or,
more usually, as the agent of an ATOL
holder (both of these categories being
excluded from licensing by the Regulations)
and selling accommodation under a
separate contract. This would clearly be a
“package” for Package Travel Regulations
purposes since those Regulations
specifically state that their provisions
cannot be avoided by issuing separate
invoices, and the accommodation may be
covered by a non-licensable bond or a
trust account. However, neither the flight
sale nor the accommodation provision
requires an ATOL, and there is no
mechanism to ensure that when the two
items are sold together as a package they
need to be licensed.
Loophole in Consumer Protection
The result is that for some air holidays the
protection that was envisaged by the
Package Travel Directive becomes unreliable
– even though the product appears to the
customer to be a package and will be one
for the Directive’s purposes. This may arise
because the agent breaches The Package
Travel Regulations and omits to put in place
any protection for the non-ATOL
components, or it may be that there is
separate protection. In the latter case there
can still be a problem: if an agent selling
split contract packages fails, the cost of
a customer’s villa may be refunded
by a trade body bond
but the customer may
then be left with
a flight which he
cannot use because
the villa is unavailable.
3
travellers’checks
The original ATOL
Alternatively, he may have a commitment to
a villa to which he has no flight.
Regulations were made in
1972 and were part of the
UK’s framework long before
the Package Travel Directive
came along in 1990, so it’s
perhaps not surprising that
the ATOL Regulations do not
use the same language as
the Package Travel
Regulations
The CAA believes that this position is
unsatisfactory in terms of the requirements
of the Package Travel Directive,
incomprehensible to customers and unfair to
those operators who obtain licences and
bonds to sell packages correctly. It has
therefore stated an intention to recommend
to the Department for Transport a change in
the ATOL Regulations to close the loophole.
Essentially, it suggests that this could be
done by bringing the terminology of the
ATOL Regulations into line with that of the
Package Travel Regulations and placing limits
on the exclusion from licensing that ticket
providers and agents for ATOL holders
currently enjoy: these exclusions would
remain, but they would not apply in
circumstances where the person selling a
flight also sold other facilities in such a way
that the components became a package in
the terminology of the Package Travel
Regulations. The net effect would be that
any agents creating flight packages would
need to hold an ATOL.
“Pre-arranged”?
There are some hostages in adopting the
definitions in existing legislation, and in the
case of the Package Travel Regulations, some
of the terminology has been at least open to
argument. In particular, there is currently
some debate about the proper interpretation
of the criterion “pre-arranged” and the CAA
sees this as an important restriction on the
scope of licensing. It does not see an
advantage in licensing every travel agent
who simultaneously supplies, at the
customer’s request and choice, more than
one travel related item; the cost of this
would be out of all proportion to the
problem or the benefits.
The CAA has therefore said that it proposes
to focus on circumstances where there is
evidence of pre-arrangement before the
4
facilities are offered to the customer – where a
brochure is published, though it might contain
a menu of flights and accommodation for the
customer to construct his own tailor made
package; or where advertising (including
through such media as Teletext) offers what
appears to be a package. There might
possibly be other indicators – perhaps the
making by agents of advance payments to
suppliers, or the taking of block commitments.
There will no doubt be further legal debate
about the correct interpretation of the term
and this will affect the scope of licensing at
the margins, but we believe that this
approach is a reasonable balance that will
catch the clear package sales that are currently
avoiding licensing by an artificial device.
CAA’s Proposals
In putting together its proposals, the CAA
had very much in mind the need to minimise
regulatory intervention as far as possible,
particularly where small firms were
concerned. This led us to give particular
thought to how the extension of licensing
might be brought about, and to think
radically about processes. Two proposals
emerged from this. First, we intend to
streamline our own licensing processes for
firms with a small amount of business, and
we are currently looking at how far we can
do this without exposing the Air Travel Trust
Fund to unnecessary risks. Second, we have
indicated that where there is already bonding
or other protection in place with a trade body
for accommodation sales, we shall try to use
these arrangements as a basis for licensing.
Ideally, this would mean that the trade body
did the filtering and processing and the CAA
Spring 2003
was able to grant an ATOL on the basis for a
certificate from that body.
We are having discussions with the potential
“franchisees” and before we go down this
path there is a lot of work to be done to
ensure that arrangements are effective and
acceptable. Any licences granted this way
must ensure that customers are just as fully
protected as under a standard ATOL; if they
are to have the backing of the Air Travel
Trust Fund, there will also be a critical need
to ensure that the trade body arrangements
are sufficiently rigorous so that the Fund is
not exposed to unnecessary calls. There may
be a choice here between approaches: on
the one hand there could be systems
involving tight controls over trade body
standards, and on the other there might be
a more delegated approach provided that
the trade body itself had sufficient incentive
to impose effective controls. And there
seems to us to be no reason of basic
principle why different delegation terms
should not exist in parallel, reflecting the
approaches of different trade organisations.
Responses to Consultation
The responses we have had so far to the
consultation paper indicate considerable
support in the industry for our proposals,
and only minor dissent from some
unlicensed companies who argue that noone has so far suffered from their selling
methods; unfortunately, that is always true
until a failure occurs. Probably more
significant is the fact that a large number of
responses have argued that this change is
not sufficiently major to deal with the real
changes in selling methods, which relate to
sales through websites (particularly those of
the “no-frills” airlines) where flights and
accommodation are bought from separate
suppliers connected by website links.
These responses echo the ideas we set out in
our consultation paper under the heading
“Wider Issues”. We explained that the issue of
no-frills airlines and sales of separate holiday
components is not one that is currently within
the CAA’s powers to deal with, nor can it be
remedied by an amendment to the
subordinate legislation; this simply illustrates
the fact that the primary legislation on which
ATOL is based is over thirty years old and the
way holidays are sold has changed significantly,
particularly in the last few years. Possibly
customers who buy separate holiday
components in this way genuinely do not
want protection and understand that they do
not get the other benefits of the Package
Travel Directive, such as single-point product
liability; it is just as possible however that many
have no idea that they are giving up these
benefits when they buy separately the holiday
items that they might have bought from a
single source in the past, and recent evidence
has suggested that customers believe that
financial protection extends well beyond its
actual limits.
We shall be looking
carefully at the bigger
picture in months ahead so
as to decide whether we
should put a case to
Government for a change
in primary legislation, or
indeed for a change at
European level in the
Package Travel Directive
Although we cannot deal with the issue in
the short term, we asked respondents to
express views on how the system should be
based in the future, and what the scope of
travel protection should be. We shall be
looking carefully at the bigger picture in
months ahead so as to decide whether we
should put a case to Government for a
change in primary legislation, or indeed for
a change at European level in the Package
Travel Directive. In parallel, we hope to
recommend changes to the ATOL
Regulations to deal with the narrower
problem, and the target – which is an
ambitious one – is to have new Regulations
in place from April 2003.
5
travellers’checks
Mediation – an alternative
means of resolving claims
The Civil Procedure Rules implemented in
April 1999 encourage parties to mediate at
an early stage in litigation both as a means
of resolving disputes efficiently and of
ensuring that court resources are allocated to
those cases that which are unable to be
settled in this way. Some three years later,
mediations are taking place with increasing
frequency.
Recent Cases
Last year two decisions of the Court
highlighted that parties should not dismiss
the possibility of mediation lightly.
In Dunnett v Railtrack the Court of Appeal
penalised Railtrack for failing to mediate. Ms
Dunnett's three horses had been killed when
they ran onto the railway line as a result of
the gate to the paddock, replaced by
Railtrack, not being padlocked. Although
the court agreed that Railtrack was not
liable for damages, it refused to award its
considerable costs because it had ignored
the Judge’s earlier suggestion to mediate.
In June 2002 the case of Hurst v Leeming
gave judicial guidelines as to when it is
appropriate to refuse to mediate. Mr Hurst
had withdrawn his claim but argued that
costs should be paid by the defendant
because he had refused offers to mediate,
both before and after proceedings had been
issued. Mr Justice Lightman gave the
following guidelines in his judgment:
6
The level of costs already incurred was a
factor to be considered, but not
determinative, as to whether a mediation
should proceed.
Whilst all allegations of negligence are
serious, these in themselves are not a
reason to refuse to mediate.
Believing that you will win your case is not
an adequate reason for refusing to
mediate.
The Judge said that the real issue to be
considered is whether mediation has any real
prospect of success. In the Hurst case, he did
not consider that mediation would have
been successful and therefore did not
impose any cost sanctions for Mr Leeming's
refusal to mediate.
Our Experience
Our experience of mediation has been
largely very positive. We recently settled a
substantial claim on behalf of a leading tour
operator for approximately one-third of the
claimed value. This was a particularly
satisfactory outcome as the position on
liability was weak. Given the court’s ability to
impose costs penalty on parties who refuse
to mediate, and their increasing willingness
to impose them, you would be well advised
to consider the benefits of mediating at a
very early stage.
Benefits of Mediation
Control Resolving a dispute in this way
means that parties control the outcome. A
mediator cannot impose a decision on the
disputants unless and until agreement is
reached and signed off at the conclusion of
the mediation.
Management Tool Being informal, flexible
and providing the possibility of an early
resolution, mediation is much more suitable
in situations where the parties want to
preserve a commercial relationship.
Flexibility A mediation can be set up
quickly and in any location of the parties’
choosing. Discussions need not only relate to
the matters in dispute, but can encompass
any aspect of the business relationship
between the parties. This gives room for
more settlement options and is wider
ranging than resolution of a dispute in Court,
where a Judge can only make reference to
the issues before the court. A mediator is
able to recognise and promote common
interests to the mutual advantage of the
parties. It thereby preserves commercial
relationships and business confidentiality.
Confidentiality The mediation agreement
generally provides that the process is
confidential and discussions are conducted
on a without prejudice basis. Conversely,
litigation can often attract unwelcome
publicity.
Are there any disadvantages
of Mediation?
There may be. Not all cases are suitable for
mediation. For example, mediation is not
suitable:
where there are no substantial issues in
dispute, such as a straightforward debt
claim where the debtor may have no
genuine interest in settlement;
where a party wishes to obtain a legal
precedent;
where one of the parties seeks to obtain
publicity;
where a protective court order is required;
where one of the parties is seeking to
apply leverage.
Spring 2003
Competition issues
BA’s pricing policies reviewed
The Office of Fair Trading has found that
British Airways had not infringed the
Competition Act by making low booking
payments to travel agents. This decision
arose out of a complaint made by ABTA in
response to the reduction by BA in June
2002 of payments made to travel agents for
booking BA short haul flights. BA reduced
payments from £6 to £2.50 for economy
flights and from £11 to £5 for premium
tickets. ABTA argued that these lower
payments did not allow travel agents to
cover their costs and that therefore BA was
abusing its dominant position by not paying
a reasonable level of remuneration.
Chapter II of the Competition Act prohibits
the abuse of a dominant position and
infringements can lead to fines of up to ten
per cent of UK turnover, hence the
seriousness of the complaint. In any case
involving Chapter II, the OFT has to consider
separately:
whether the company in question enjoys
a dominant position on any one or more
markets and
whether it has abused that position of
dominance.
In most cases involving airlines, markets are
defined in terms of point to point routes.
Frustratingly the OFT did not resolve the
issue as to whether BA was dominant on
any particular market, but chose instead to
assess whether, in the event that it was, the
reduction in payments could constitute an
abuse. Its conclusion was that there was no
abuse by BA in this case since travel agents
were free to recoup their costs through
charging customers a mark up or service fee
(notwithstanding the fact that such charges
would probably result in travel agents losing
business to BA’s own online booking
services). The OFT concluded that it was
reasonable for ticket prices to reflect sales’
costs and that as a result the additional
services that travel agents could offer such as
searching for available routes and schedules,
could properly be reflected in a higher price
to be charged to customers than would be
levied by an online retailer.
State Aid for Airlines
Meanwhile, in Brussels, the Commission has
recently concluded its examination of the
issues surrounding Greece's support for its
ailing national carrier, Olympic Airways.
There has been a long legacy within Europe
of national carriers needing (and receiving)
financial support in difficult times. The
European Commission has attempted to
enforce the provision of the Treaty of Rome
relating to state aid, which in very general
terms mean that aid which distorts
competition within the EU is unlawful.
In this case the Commission has called upon
Greece to recover part of the aid previously
granted to Olympic Airways, as well as new
aid granted unlawfully after 1998,
representing a total of 194 million euros. This
enabled Olympic to benefit from preferential
treatment compared with its competitors
and therefore distorted competition in the
common market. Certain aid was found to
be lawful, however, such as a loan on
commercial terms, compensation received
for moving to the new airport of Spata, and
the application of reduced VAT for flights on
domestic routes.
Commission that any proposed aid is lawful
– it is commonly the case that third parties
(such as competing airlines) will raise a
complaint with the Commission in cases
whether they believe that aid has been
unlawfully granted. Whilst such complaints
are never resolved quickly, they are taken
seriously by the Commission. This case and
others like it, show that the opportunities for
national governments to support their
national carriers financially without scrutiny
are becoming few and far between.
For further information please contact
Neil Baylis.
It is commonly the case that
competing airlines will raise a
complaint with the Commission
in cases whether they believe
that aid has been unlawfully
granted
Although state aid is primarily an issue for
national governments – it being they who
are required to seek clearance from the
7
travellers’checks
School tours – a question of safety
DfES Guidelines for school trips
considers the criminal law and, in particular,
the possibility of a corporate manslaughter
prosecution in the event of a death resulting
from gross negligence.
The safety of young persons on educational
visits and holidays overseas has long been a
matter of concern to operators, teachers and
parents alike. In recent years, a number of
high profile tragedies has increased public
awareness and led to calls for safety
procedures to be improved.
The seminar also addresses practical
solutions to potential liability, whether you
are a tour operator, a transport provider or a
teacher or Educational Visits Co-ordinator
involved in the planning of trips for groups
of young people.
Seminar 5 February 2003
At the end of last year the Department for
Education and Skills issued new guidelines
entitled “Standards for Local Education
Authorities in Overseeing Educational Visits.”
These are likely to have far-reaching effects
on the obligations of operators of school
tours and on coach operators who provide
transport for educational visits. Operators
need to have documented safety
management systems in place and to be
able to provide external verification of their
health and safety policies. Proper emergency
procedures and contingency plans need to
be provided.
Our seminar explains the legal obligations
imposed on operators and transport
providers. It covers the potential liability of
operators and transport providers for claims
for damages for personal injuries. It also
Who to contact
For further information contact
Cynthia Barbor, Tim Robinson,
Laura Harcombe or Polly Rogers.
cynthia.barbor@ngj.co.uk
tim.robinson@ngj.co.uk
laura.harcombe@ngj.co.uk
polly.rogers@ngj.co.uk
8
The speakers are:
Cynthia Barbor – Partner and Head of
the Travel and Leisure Industry Group
at Nicholson Graham & Jones.
Cynthia Barbor has over 20 years of
experience of advising companies in the
travel industry on health and safety issues.
She has dealt with numerous claims arising
from injuries and deaths overseas and has
been instrumental in developing risk
management programmes, health and
safety policies and emergency procedures for
many companies.
Peter Gomersall – CPT Insurance and
Risk Solutions.
Peter is a Director of Belmont International
Limited and has been involved in the
passenger transport industry for over 15
years. Belmont International were appointed
brokers to The Confederation of Passenger
Nicholson Graham & Jones
110 Cannon Street, London EC4N 6AR
020 7648 9000
Internationally a member of GlobaLex
The contents of these notes have been
gathered from various sources. You
should take advice before acting on any
material covered in Travellers’ Checks.
Transport UK in June 2002 and are working
exclusively with members to develop a broad
range of products and services including
pro-active risk management and loss control
measures for the benefit of members.
The evening will be chaired by John Miller,
Managing Director of Travel Risk
Management Limited and Chairman of
CPT's Claims & Insurance Group.
Coffee will be served from 5.30pm and
the seminar will start promptly at 6.00pm.
Following the presentations there will be a
panel discussion, debate and questions. The
panel will include Alan Scoles, Director of
Shearings Holidays and Chairman of Coach
Marque and Glyn Moore, Risk Manager,
Belmont International and Alan Edmondson,
from The European Tour Operators’
Association.
The formal session will last for approximately
1 hour 30 minutes. Wine and canapés will
then be served and we hope that you will
stay for an informal discussion and to enjoy
our hospitality.
If you would like to attend please
contact Angela Geere by email:
angela.geere@ngj.co.uk or telephone
020 7648 9000.