ATOL: procuring and facilitating - Rhys Griffiths writes in ABTA's Travel Law Today

May 28, 2019

The Package Travel Directive (EU) 2015/2302 (PTD) came into force in the UK on 1 July 2018. It had been a long time coming and so there had been plenty of discussion about its key features before it came into force – the six new ‘package’ categories, a new type of regulated holiday called a ‘linked travel arrangement’ and mutual recognition of insolvency protection regimes across the EU.

What perhaps flew under the radar was not any aspect of the PTD, but rather changes made to the ATOL Regulations at the same time, which significantly broadened its coverage. In particular, changes aimed at closing the gap in coverage for companies acting as an ‘agent for the consumer’, in fact not only closed the gap but expanded the ATOL Regulations to cover other business models not previously within its scope. This article shall look at these changes.

Agent for the consumer

The old ATOL Regulations (ie before the changes made on 1 July 2018) were quite narrowly drafted. They applied to companies that ‘in the United Kingdom make available flight accommodation’. The Court of Appeal[1] had previously considered the meaning of this phrase and essentially decided that it captured those companies that acted on the supply side in the sale of flights. Crucially, the Court of Appeal decided that companies could only be said to be making available flight accommodation if they had the ability or the legal right to dispose of the flight, ie those on the supply side with legal authority to sell the flight, such as an airline, tour operator or a sales agent appointed by either the airline or the tour operator. The Court of Appeal did not consider that those on the purchasing side, including agents acting for purchasers, fell within the definition.

This case ultimately enabled travel agents to adopt a model whereby they would source flights as an ‘agent for the consumer’. Legally, this put such travel agents outside of the ATOL Regulations because – as per the Court of Appeal’s guidance – they were not making available flight accommodation.

The Civil Aviation Authority (CAA) did not like this situation and challenged the agent for the consumer model adopted by some travel agents. However, in order to avoid a protracted legal battle on this particular issue, a deal was struck whereby travel agents voluntarily agreed to put such sales through the ATOL scheme, in return for a partial refund of the ATOL Protection Contribution (APC). This kept the peace, at least until the Government took the opportunity to close the loophole when it changed the ATOL Regulations in 2018 as part of measures made to implement the PTD.

The Department for Transport issued a consultation on reforming the ATOL scheme in February 2018, which made it clear that one of its objectives was to bring the agent for the consumer model within the ATOL scheme. This objective ultimately found its way into Regulation 9B, which brings within the ATOL scheme those companies that ‘procure flight accommodation on behalf of a consumer’ as an agent for the consumer. Therefore, while one will still see some travel agents adopt this model for other good reasons (eg where they are not formally appointed as a sales agent for the airline), it is now clear that such transactions are caught by the ATOL Regulations. The main practical consequence of this change is the loss of the valuable APC refund, which was withdrawn by the CAA when the changes came into effect.

Facilitating the sale of flights

The changes made to the ATOL Regulations on 1 July 2018 also introduced a further category of regulated activity. These changes not only closed off any possibility of a reprieve to the agent for the consumer model in a different format, but also broadened the reach of the ATOL Regulations to cover other business models. In short, if a company facilitates another company to make available flight accommodation (whether flight-only or flight-inclusive packages), then the facilitating company will be within the scope of ATOL if three conditions are satisfied: (i) the facilitating company is acting in the course of a business; (ii) the facilitation is not limited to arranging payment; and (iii) the facilitating company receives the customer’s payment and passes it in whole or in part to the company that makes available the flight accommodation.

On the face of it, this new category is capable of capturing many organisations. The term ‘facilitate’ is a very broad one indeed. It does not carry any special legal meaning. Rather, it will be given its normal and ordinary meaning, which in this context will mean doing something that assists or makes it easier for another to sell flights.

For online transactions, one could say that a number of different players in the customer’s booking journey facilitate the making available of the flight – the internet service provider (eg BT), web browser (eg Microsoft) or search engine (Google, etc.). In fact, the only real limitation on the application of ATOL to these facilitators is that the facilitator must also handle the customer’s payment. With the ongoing development of payment solutions by some of these facilitators (eg Google Pay and Microsoft Pay), we could see some interesting debate around the applicability of ATOL to these internet giants.

What is perhaps of more interest is the applicability of this new rule to internet platforms that merely create a forum for parties to buy and sell travel services. These platforms are not ‘organisers’ or ‘retailers’ of package holidays in the traditional sense, and so they are likely to fall outside the PTD. These platforms are also not likely to be making available flight accommodation, because as per the guidance from the Court of Appeal, they do not have legal authority to sell flights – they merely create the forum in which other parties sell. They might therefore otherwise fall outside the ATOL Regulations. However, such platforms clearly ‘facilitate’ others to make available flight accommodation and so they are potentially within the scope of this new regulation. The crucial factor is likely to be whether they process the customer’s payment. If they do, they will be within the scope of the ATOL Regulations.

Rhys Griffiths is a partner and the head of travel at Fox Williams LLP.  He can be contacted at rgriffiths@foxwilliams.com and +44 (0)20 7614 2553.

This article was first published in ABTA’s Travel Law Today, May 2019.


[1] Civil Aviation Authority V Jet Services Limited [2001] EWCA Civ 610


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