Guarantee funds for the travel industry: protection of the consumer against the insolvency of his organizer/retailer

Abstract

One of the problems addressed by the EU Directive on Package Travel (1990) is that of travellers who find themselves stranded in their holiday destination when their tour operator suddenly goes bankrupt. The recent insolvency of Austrian and German tour operators illustrates the relevance of this question. This paper argues that travellers should be protected against the risk of insolvency of tour operators. The paper sets out the reasons for this, the various ways of insolvency protection, and the implementation of the Package Travel Directive. It then sets out what is secured by the guarantee, the obligations of the organizer and retailer, the cross-border implications, the possibility to choose freely the means of security, guarantee funds, insurance and social security, bonds and guarantees, trusts, and EC implications. It is argued that Member States should provide a higher standard of protection than the minimum standard of the Directive. A traveller should be entitled to compensation not only for immaterial damage but also for pure economic loss, such as the higher costs of an equivalent trip. The paper also argues that refund of prepayments should not be limited to the period before the trip has started. The traveller should also be reimbursed for extra costs incurred if he decides to stay at his destination. Finally, a traveller should be entitled to take care of his own repatriation, should he wish to do so. The paper finally argues that Member States should be held liable for late implementation of the Directive.