travellers checks Spring 2003 contents Air rage 1 The C ivil - - PDF document

contents

The C ivil 3 Aviation Authority Mediation – an alternative 6 means

• f res
• lving claims

S chool tours 8 a ques tion of s afety Who to contact 8 Air rage 1 C

• mpetition is

s ues 7

Air rage – an increasing phenomenon

Spring 2003

Lawyers to the travel and leisure industry

travellers’

checks

www.ngj.co.uk

Conviction for Endangering Safety of Aircraft

In S eptember last year an airline passenger who insisted on playing a computer game

• n his mobile phone was jailed for four
• months. Mr Chopdat was returning from his

honeymoon in E gypt 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

HAPPY NEW YEAR!

Welcome to the first edition

• f 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

• ur seminar please see the

back page.

faced a maximum two year jail term under measures introduced by the Air Navigation Order 1995. J udge 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. S entencing 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

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confrontational nature. S ince 1999, at the request of the Department for T ransport, 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. P utting 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

• r 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. S chedules 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

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. T ake the sentences handed down to Messrs Chopdat and Whitehouse for their mobile phone indiscretions, and add to them other examples such as Mr J ames Ryan, who unsuccessfully appealed in 2001 against a 15 month prison term for smoking in the lavatory of an aircraft, or Mr J ulian 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.

Operators’ Liability

This is good news for the travel industry, as it should mean that even if tour

• perators 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

T ravel 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.

Incidents of air rage can have a serious detrimental effect

• n 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, F iona 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.

...Air rage continued

Loophole in Consumer Protection

The result is that for some air holidays the protection that was envisaged by the P ackage T ravel 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 P ackage T ravel R egulations 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.

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The CAA’s consultation on its proposal for an amendment to the ATOL R egulations to deal with “ contract splitting” has drawn to an

• end. P

erhaps 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 R egulations were made in 1972 and were part of the UK’s framework long before the P ackage T ravel Directive came along in 1990, so it’s perhaps not surprising that the ATOL R egulations do not use the same language as the P ackage T ravel R egulations which implemented the

• Directive. The ATOL R

egulations (and their enabling primary legislation, S ection 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 P ackage T ravel 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.

The Civil Aviation Authority

We are very grateful to Helen S impson, Director of The Consumer P rotection Group

• f The CAA for this article on the difficult

and contentious issue of split contracts.

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Alternatively , he may have a commitment to a villa to which he has no flight. The CAA believes that this position is unsatisfactory in terms of the requirements

• f the P

ackage T ravel 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 T ransport a change in the ATOL R egulations to close the loophole. E ssentially , it suggests that this could be done by bringing the terminology of the ATOL R egulations into line with that of the P ackage T ravel R egulations and placing limits

• n 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 P ackage T ravel R

• egulations. 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 P ackage T ravel R egulations, some

• f the terminology has been at least open to
• argument. In particular, there is currently

some debate about the proper interpretation

• f 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

• ne 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 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 T eletext) 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. T wo proposals emerged from this. F irst, 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 T ravel T rust F und to unnecessary risks. S econd, we have indicated that where there is already bonding

• r 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

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

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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 T ravel T rust F und, there will also be a critical need to ensure that the trade body arrangements are sufficiently rigorous so that the F und 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 no-

• ne has so far suffered from their selling

methods; unfortunately , that is always true until a failure occurs. P robably 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

• ur 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. P

• ssibly

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 P ackage T ravel 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. 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 E uropean level in the P ackage T ravel Directive. In parallel, we hope to recommend changes to the ATOL R egulations to deal with the narrower problem, and the target – which is an ambitious one – is to have new R egulations in place from April 2003.

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

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The Civil P rocedure R ules implemented in April 1999 encourage parties to mediate at an early stage in litigation both as a means

• f resolving disputes efficiently and of

ensuring that court resources are allocated to those cases that which are unable to be settled in this way . S

• me 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 R ailtrack the Court of Appeal penalised R ailtrack 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 R ailtrack, not being padlocked. Although the court agreed that R ailtrack was not liable for damages, it refused to award its considerable costs because it had ignored the J udge’s earlier suggestion to mediate. In J une 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 J

ustice Lightman gave the following guidelines in his judgment: 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 J udge 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

• perator 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 R esolving 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 T

• ol Being informal, flexible

Mediation – an alternative means of resolving claims

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 J udge 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

• n a without prejudice basis. Conversely

, litigation can often attract unwelcome publicity .

Are there any disadvantages

• f Mediation?

There may be. Not all cases are suitable for

• mediation. F
• r 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.

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BA’s pricing policies reviewed The Office of F air T rading 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 ABT A in response to the reduction by BA in J une 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. ABT

A 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 OF T 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. F rustratingly the OF T 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 OF T 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 E urope

• f national carriers needing (and receiving)

financial support in difficult times. The E uropean Commission has attempted to enforce the provision of the T reaty of R

• me

relating to state aid, which in very general terms mean that aid which distorts competition within the E U 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 S pata, and the application of reduced VAT for flights on domestic routes. Although state aid is primarily an issue for national governments – it being they who are required to seek clearance from the

Competition issues

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

• thers 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

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S eminar 5 F ebruary 2003

DfES Guidelines for school trips

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. At the end of last year the Department for E ducation and S kills issued new guidelines entitled “ S tandards for Local E ducation Authorities in Overseeing E ducational Visits.” These are likely to have far-reaching effects

• n 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. P roper 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
• perators and transport providers for claims

for damages for personal injuries. It also 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 seminar also addresses practical solutions to potential liability , whether you are a tour operator, a transport provider or a teacher or E ducational Visits Co-ordinator involved in the planning of trips for groups

• f young people.

The speakers are: Cynthia Barbor – Partner and Head of the T ravel and Leisure Industry Group at Nicholson Graham & J

• nes.

Cynthia Barbor has over 20 years of experience of advising companies in the travel industry on health and safety issues. S he 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. P eter 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 P assenger T ransport UK in J une 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 J

• hn Miller,

Managing Director of T ravel R isk Management Limited and Chairman of CP T's Claims & Insurance Group. C

• ffee will be s

erved from 5.30pm and the s eminar will s tart promptly at 6.00pm. F

• llowing the presentations there will be a

panel discussion, debate and questions. The panel will include Alan S coles, Director of S hearings Holidays and Chairman of Coach Marque and Glyn Moore, R isk Manager, Belmont International and Alan E dmondson, from The E uropean T

• ur 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

• ur hospitality

. If you would like to attend please contact Angela Geere by email: angela.geere@ ngj.co.uk or telephone 020 7648 9000.

S chool tours – a question of safety

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 Nichols

• n Graham & J
• nes

110 C annon S treet, London E C 4N 6AR 020 7648 9000 Internationally a member of GlobaLex The contents

• f thes

e notes have been gathered from various s

• urces

. You s hould take advice before acting on any material covered in T ravellers ’ C hecks .