1 Olivier DUGARDYN & Pieter WAEGEMANS 22 nd IFTTA International Conference, Rome, 1-5 September 2010 About Eyjafjallajökull and other similar events. A legal and practical analysis of “Force Majeure” in the travel sector

2 I. INTRODUCTION -The volcanic eruption caused an unprecedented crisis that has resulted in an almost complete lock-down of European airspace -7 million travelers stranded, millions of others had to cancel their trip -The economic impact is huge : 5 billion USD of lost GDP (2.6 billion USD for the European travel sector) according to a study from Oxford Economics

3 -The ash cloud gave rise to serious legal discussions: is this Force Majeure or not ? What is Force Majeure? What are the precise rights and obligations of the parties to the travel contract ? -No one anticipated an event of this magnitude, not the travel and airline sectors, certainly not the legislator. But it can happen again: Volcano Katla is still rumbling in Iceland

4 -Purpose of our presentation : 1/ How is Force Majeure defined in the travel sector ? When can an event be considered as Force Majeure (volcanic eruptions, hurricanes, technical problems with airplanes, strikes bankruptcies,…) ? 2/If an event is proven to be a case of Force Majeure, what are the consequences for the parties to the travel contract ? What are the rights and obligations of the consumers, of the suppliers of travel services, of the travel agents,… ? Who supports the financial consequences ?

5 II. ABOUT “FORCE MAJEURE” IN THE TRAVEL SECTOR -The notion of Force Majeure in the area of travel law -No common notion of Force Majeure (Package Directive, Passenger Rights Regulation, Montreal Convention) -No common notion of Force Majeure in the different EU Member states (no harmonized implementation of the Package Travel Directive) - Check which material you are dealing with (passenger rights as such, package traveller rights,..)

A.1 The Package Travel Directive and its mplementation - Principle of the Directive (consumer protection): liability of the tour- operator in case of defective performance, unless e.g. a case of Force Majeure. - Exoneration of liability (to a certain extent) in case of “Force majeure” - But: what does this notion of Force Majeure means?

Force majeure - Recital 18 - Package Travel Directive: “Whereas the organizer and/or retailer party to the contract should be liable to the consumer for the proper performance of the obligations arising from the contract; whereas, moreover, the organizer and/or retailer should be liable for the damage resulting for the consumer from failure to perform or improper performance of the contract unless the defects in the performance of the contract are attributable neither to any fault of theirs nor to that of another supplier of services.” Force majeure - Article/Section 4, par. 6 - Package Travel Directive: “unusual and unforeseeable circumstances beyond the control of the party by whom it is pleaded, the consequences of which could not have been avoided even if all due care had been exercised”

What does this mean in practice? Check the exact national implementation acts Belgian implementation act: Law of 16 February 1994: 4 criterions in case law and developed by legal scholars:  “inevitable”  “unforeseeable”  “beyond the control”  “making the execution of the contract impossible” But again: what does this mean in practice?

Examples drawn from practice -Tsunami 2003: family heading of to Sri Lanka/Thailand -Hurricanes: plane taking of while Mich is « on » -Bankrupcy of suppliers -Terror attacks of 9/11: « fear » -Volcano eruption and ash cloud 2010

Force Majeure is interpreted very strictly – an interpreation in concreto has to be conducted (e.g. tsunami case) Burden of proof

A.2 The European Passenger Rights Regulation n° 261/2004 Basic principle: liability of the operating carrier in case of denied boarding, cancellation or long delays of flights Exoneration (to a certain extent) in case of “extra-ordinary circumstances” which could “not have been avoided even if all reasonable measures had been taken” (art. 5 (3) Passenger Rights Regulation) What does this notion mean?

Judgment of the ECJ in the Wallentin-Hermann / Alitalia case (C-549/07) Interpretation by of “extra-ordinary circumstances” considering (par. 12):  the usual meaning of this words in everyday language,  the context in which they occur,  the purposes of the Regulation (ensuring a high level of consumer protection – avoiding the inconvenience of passengers in case of… - strict interpretation as a derogation ton the general principle)  the explanation in the preambule (extra-ordinary circumstances may occur in case of political instability, meteorological conditions incompatible with the operation of the flight concerned, security risks, unexpected flight safety shortcomings and strikes that affect the operation of an air carrier – par. 22). What does this mean in practice?

Criterion: ECJ-Wallentin-case - par. 23 (confirmed in ECJ-Sturgeon- case – C/432-07): ‘extraordinary’ only if the circumstances relate to an event which is:  not inherent in the normal exercise of the activity of the air carrier concerned, and  beyond the actual control of that carrier on account of its nature or origin What about technical problems of the aircraft?

Technical problems “Technical problems which come to light during maintenance of aircraft or on account of failure to carry out such maintenance cannot constitute, in themselves, ‘extraordinary circumstances’” Technical problems: extra-ordinary character is possible “to the extent that they stem from events which are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its actual control”  e.g. hidden manufacturing defect which impinges on flight safety relating to an airplane already in service  e.g. damage to an aircraft caused by acts of sabotage or terrorism Technical problems: the frequency of the technical problems experienced by an air carrier is not in itself a factor from which the presence or absence of ‘extraordinary circumstances’

Interpretation of “all reasonable measures”: take all measures that meet conditions that are technically and economically viable for the air carrier Interpretation of “all reasonable measures”: where does this end?: “intolerable sacrifices in the light of the capacities of the undertaking”

Some examples drawn from practice -Alitalia strike on Monday, departure on Tuesday -General strike « announced » in Greece : the Champions League soccer game Panathinaikos-Standard Liège -Bird strike on the take off / landing strip -Volcano eruption / ash cloud 2010

One big line: very strict interpretation of the possibilities of exoneration of liability of the operating carrier Burden of proof

18 III.LEGAL CONSEQUENCES OF “FORCE MAJEURE” A distinction must be made between the following situations: A)the consumer bought only an airline ticket (flight only) B)the consumer bought a package C)the consumer bought one separate travel service (ex. hotel accomodation, holiday home,…)

19 A)FLIGHT ONLY A.1 The ticket was purchased directly from the airline -> Legal basis = Regulation (EC) 261/2004 -The Regulation applies to : a) flights departing from an airport located in the EU, Norway, Iceland and Switzerland (regular and non regular flights), including flights operated within a package tour b) flights parting from an airport located in a third country to an airport in the EU, Norway, Iceland and Switzerland if the operating air carrier is a Community carrier. c) the operating carrier

20 -In case of cancelation of the flight, the carrier is always obliged: a) to reimburse the price of the ticket or to re-route the passenger (art.8) b) to assist the passenger = offer, free of charge, meals and refreshments, two telephone calls or s and (!) hotel accommodation during the whole period preceding the rerouting even in case of Force Majeure (art.9) ! But, NO INDEMNITY is due (art. 5 § 3) !

21 - Remarks : - the consumer can freely opt between reimbursement or rerouting (if he chooses to be reimbursed, the airline has no duty to care anymore) - the airline can re-route the passenger through other modes of transport – train, rail etc. - the airline must reimburse the full price of the ticket, including taxes and surcharges

22 A.2 The ticket was purchased through a travel agent -> Legal basis = Council Directive (90/314/EEC) of 13 June 1990 on package travel + Belgian Law of 16 February 1994 on travel contracts The travel agent has a general duty of care. He gas an obligation to assist his stranded clients (best effort).

23 B. PACKAGES -> Legal basis = Council Directive (90/314/EEC) of 13 June 1990 on package travel + Belgian Law of 16 February 1994 on travel contracts (LTC) -In this scenario, the consumer bought the package from the “organizer” (tour operator), directly or through the “retailer” (travel agent, or the travel agent composed himself a package, which makes him a tour operator (CJ, Club Tour Case) - A distinction must be made between (1) a traveler who has not departed yet when Force Majeure occurs and (2) the traveler who is stranded abroad during the tour

24 1. Force Majeure before departure - In general, if the tour cannot be performed (wholly (art 14 LTC) or partially (art. 13 LTC)) => the tour operator is obliged: 1/ first, to propose to the traveler alterations or an alternative tour (different destination, different dates,…) 2/ if the traveler does not accept the new offer, the latter can claim reimbursement of the price of the tour (eventually with additional damages) - If the non-performance is due to Force Majeure => the same rules apply, BUT no damages can be claimed, because the tour operator is not liable (art. 18 §2 LTC Civil Code).

25 - Despite Force Majeure, the price needs to be reimbursed ??? The travel contract is a synallagmatic (bilateral) contract = a contract that creates reciprocal obligations between parties : The tour operator organizer must provide a tour, The traveler must pay and consume the tour The impossibility to perform the travel contract for reasons of Force Majeure relieves the tour operator from his obligation to deliver the services contracted for. Inversely, the traveler is relieved from his obligation to pay !  If the price has already been paid, the traveler has the right to be reimbursed ! This principle is extremely difficult to explain to travel professionals, who often have already paid the service suppliers abroad and who will maybe never recover that money…

26 2. Force Majeure after departure: the traveler is stranded… 2.1 Alternative arrangements or repatriation - In general, if during the tour, the tour operator is unable to procure certain services, he is obliged (art 15 LTC): 1/ to make all suitable alternative arrangements (at no extra cost) for the continuation of the package 2/ if it is impossible to make such arrangements or these are not accepted by the consumer for good reasons, the tour operator shall provide the consumer, at no extra cost, with equivalent transport back to the place of departure (+ eventually pay compensation)

27 - In case of Force Majeure, NO COMPENSATION is due ! But the tour operator will have to repatriate the traveller free of charge ! -No reimbursement (the traveler could claim reimbursement of unperformed services that can be individualized)

Duty of care The tour operator is obliged to assist the travelers who are in trouble. For instance, he must provide accomodation until the traveler is repatriated. BUT, according to Belgian law, he will have the right to charge to the travelers the costs that he has incurred for assisting him ! Remark: A duty of care also rests on the travel agent, but it is less stringent (best effort).

29 C. ONE SEPARATE TRAVEL SERVICE C.1 Separate travel service bought from a tour operator (Ex: hotel accomodation, holiday home,…) This situation is not covered by the Law of 16 February 1994 and the Directive 90/314/EEC because a package needs at least two travel services. New case law : application of the principles of the Law « by analogy » In case of Force Majeure, the rules as set out above, will apply. C.2 Separate travel service bought through a travel agent Since, under Belgian law, the travel agent is never liable for the execution of the travel service itself, if a case of Force Majeur occurs, the traveler will have to act directly againts the supplier (with the assistance of the travel agent).

30 IV. SUMMARY If an event is proven to be a case of Force Majeure => 1) Flight Only The airline must reimburse or reroute+ assist the passenger (including paying accomodation). 2)Package The tour operator must reimburse the traveler who has not departed yet The tour operator must make arrangements for the continuation of the tour of the stranded traveler OR repatriate the him free of charge. The tour operator must also assist the traveler (BUT the costs of this assistance can be charged to the traveler)

31 If the tour includes air transportation (for which Regulation 261/2004 applies), lhe consumer will also benefits from the assistance of the airline. These prtotections are cumulative. The travel agent is never liable for the execution of the tour. But he is submitted to an overall duty of care. He has also the right to charge the travelletr with the assistance costs. 3) Seperate travel services The seperate travel services sold by a tour operator, will be treated as packages by analogy (pursuant to recent case law) The customer who buys his trip directly from the local supplier, will be on his own…

32 V.A SELECTION OF PENDING CASES -A tour operator offers his stranded customers an alternative flight back home fromThailand, but the customers refuse and return home by their own means. They now claim reimbursement of the (expensive) flights they bought; -An airline carries the travelers from La Réunion to Marseille instead of the Brussels. The customers claim payment from the tour operator of their train expenses between Marseilles and their home town (100km from Brussels); -Air France refused to repatriate 100 travelers from Mauritius to Paris, saying that Air Mauritius was the operating carrier (in code share). Air Mauritius is not a community carrier... -A cruise company in Fort Lauderdale refuses to reimburse the cruises it sold to European customers, saying that it was not affected by the ash cloud and that the cruises were performed as foreseen; -Some airlines refuse to pay more than one night of accomodation to the stranded passengers, stating that the Regulation 261/2004 is to severe;

33 THANK YOU FOR YOUR ATTENTION !