COVID-19 and the right to terminate a package travel contract: two CJEU rulings on the interpretation of Article 12(2) of the Package Travel Directive 2015

In this article, Corinne Novell and Peter Hale cast their minds back to early 2020 and the outbreak of the pandemic in order to comment on two recent judgments of the Court of Justice of the European Union (‘CJEU’). Both decisions, handed down on the same date and by the same chamber of the CJEU, relate to a reference for a preliminary ruling on the interpretation of Directive (EU) 2015/2302 (“the Package Travel Directive”).

Article 12 of the Package Travel Directive provides as follows:

Termination of the package travel contract and the right of withdrawal before the start of the package

• Member States shall ensure that the traveller may terminate the package travel contract at any time before the start of the package. Where the traveller terminates the package travel contract under this paragraph, the traveller may be required to pay an appropriate and justifiable termination fee to the organiser. The package travel contract may specify reasonable standardised termination fees based on the time of the termination of the contract before the start of the package and the expected cost savings and income from alternative deployment of the travel services. In the absence of standardised termination fees, the amount of the termination fee shall correspond to the price of the package minus the cost savings and income from alternative deployment of the travel services. At the traveller’s request the organiser shall provide a justification for the amount of the termination fees.

• Notwithstanding paragraph 1, the traveller shall have the right to terminate the package travel contract before the start of the package without paying any termination fee in the event of unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and significantly affecting the performance of the package, or which significantly affect the carriage of passengers to the destination. In the event of termination of the package travel contract under this paragraph, the traveller shall be entitled to a full refund of any payments made for the package, but shall not be entitled to additional compensation.

• The organiser may terminate the package travel contract and provide the traveller with a full refund of any payments made for the package, but shall not be liable for additional compensation, if (a) the number of persons enrolled for the package is smaller than the minimum number stated in the contract [subject to notification requirements] or (b) the organiser is prevented from performing the contract because of unavoidable and extraordinary circumstances and notifies the traveller of the termination of the contract without undue delay before the start of the package.

Article 12 is implemented in domestic law in Regulation 12 of the Package Travel and Linked Travel Arrangements Regulations 2018 (“the 2018 Regulations”).

QM v Kiwi Tour GmbH, Case C-584/22 (Judgment dated 29 February 2024)

In January 2020, QM booked a package tour with Kiwi Tours to Japan, due to take place in April 2020. Following a series of measures introduced by Japanese authorities to prevent the spread of COVID-19, QM terminated the package travel contract on 1 March 2020. Kiwi Tours issued a cancellation invoice (including a termination fee) which QM duly paid. On 26 March 2020, Japan adopted an entry ban; QM requested a refund of the termination fee paid, which Kiwi Tours refused.

QM then brought a claim for reimbursement of the termination fee paid before the German Regional Court, who dismissed the claim on the basis that at the point of termination, the prevailing circumstances did not entitle QM to a full refund. QM appealed to the German Federal Court of Justice, who referred the matter to the CJEU for a preliminary ruling.

The issue referred

The CJEU was asked to determine whether Article 12(2) was to be interpreted as meaning that the assessment of the justification of the termination of a package travel contract had to be based solely on unavoidable and extraordinary circumstances which had already occurred at the time of termination, or as meaning that it was also necessary to take into account unavoidable and extraordinary circumstances that actually occurred after the termination but before the planned start of the journey?

The German Federal Court of Justice stated it was inclined to take the view that account should be taken of circumstances arising after the termination because:

1. The distinction between the circumstances in which a termination fee should or should not be payable, at paragraphs 1 and 2 of Article 12(2), were relevant only to determining legal consequences of the termination. Those consequences depend solely on the actual existence of circumstances having significant consequences on performance of the contract.
2. The purpose of the termination fee: namely, to operate as compensation or a substitute for the price of the package, supported this interpretation. Such a right would only be justified as long as the organiser would, but for the termination, have been entitled to payment of the price of travel.
3. Consumer protection considerations favoured taking into account circumstances arising after termination.

The CJEU’s ruling

The CJEU disagreed with the inclinations of the German court, considering that the right to terminate a package travel contract without paying termination fees under Article 12(2) could not depend independently both on the prevailing situation at the date of termination and the situation existing on a date subsequent to termination but before the start of the package. That, they said, could lead to contradictory results. The CJEU held a ‘specific date’ was required for assessing whether the termination occurred in circumstances entitling the consumer to a fee-free termination [37].

The CJEU were clear that that date could not be one which came subsequent to termination, because:

1. There had to be a link between the termination and the extraordinary circumstances to give rise to a right therein.
2.  Article 12(4) imposed an obligation to refund travellers within 14 days at the latest after termination: the organiser should be able to determine the rights arising at the point of termination and make a full refund within the prescribed period if the right to such a refund was justified.
3. The consumer protectionist objective of the Package Travel Directive supported such an interpretation. Consumers ought to know their rights at the point of any termination and, though changes could occur after the termination which improved the traveller’s level of protection, the reverse could equally be true. Travellers who had relied on a reasonable prediction of the probability of such events could therefore be left without the rights they thought they would have at the point of termination.

The CJEU therefore held that Article 12(2) must be interpreted as meaning that, in relation to ‘unavoidable and extraordinary circumstances’, account must only be taken of the situation prevailing on the date on which that traveller terminated their travel contract.

MD v Tez Tour UAB (Fridmis AB intervening), Case C-299/22 (Judgment dated 29 February 2024)

On 10 February 2020, MD entered into a package travel contract with Tez Tour in respect of a holiday to the United Arab Emirates for himself and members of his family from 1 to 8 March 2020. The package consisted of return flights between Vilnius (Lithuania) and Dubai and a 7-night stay in a hotel. On 27 February 2020, MD indicated that he wished to cancel the holiday and use the sums paid to take another trip at a later date once the health risk associated with COVID-19 had decreased. Tez Tour refused this request.

Consequently, MD brought proceedings in Lithuania arguing that he was entitled to full reimbursement of the money paid to Tez Tour, given that he had terminated the package travel contract due to the occurrence, at the place of destination, of unavoidable and extraordinary circumstances which were likely to make it impossible to carry out the holiday safely.

Tez Tour argued that, at the date of termination of the travel contract, the spread of COVID-19 was not such that performance of the package travel contract was impossible.

Lithuanian law defines the concept of ‘force majeure’ as ‘circumstances which were beyond his or her control and which could not have been reasonably foreseen by him or her at the time of the conclusion of the contract, which circumstances or the consequences thereof could not have been prevented’.

The Lithuanian implementation of Article 12(2) of the Package Travel Directive is within Article 6.750 of the Lithuanian Civil Code, which provides:

Right of tourists to terminate and withdraw from a package travel contract

“Tourists have the right to terminate the package travel contract, without paying the termination fee referred to in paragraph 2 of this article, if […]

(3) circumstances of force majeure occur at the place of destination of the organised tourist trip or its immediate vicinity, which may make it impossible to carry out the organised tourist trip or the transportation of passengers to the destination of the trip. In this case, the traveller has the right to claim reimbursement of the payments made for the organised tourist trip, but shall not be entitled to additional compensation.”

Thus, it can easily be seen that the Article 12(2) concept of circumstances ‘significantly affecting’ the performance of the package travel contract, has been rendered in Lithuanian law as circumstances ‘which may make it impossible to carry out’ the package travel contract.

At first instance and on appeal within the Lithuanian courts, MD’s claim was dismissed on the basis that the circumstances relied upon by MD did not meet the definition of force majeure within the meaning of Article 6.750 of the Lithuanian Civil Code, given that certain measures had already been adopted at the time when the package travel contract was made, and that the level of risk associated had not changed between that date and the date when the package travel contract was terminated.

MD appealed to the Supreme Court of Lithuania, which referred to the CJEU a number of issues relevant to the interpretation of Article 12(2) of the Package Travel Directive and in particular the meaning of ‘unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and significantly affecting the performance of the package’.

The issues referred

1. Whether it is necessary for relevant national authorities to have published an official warning or guidance against travelling to the destination country;
2. (i) Whether it is necessary for performance of the package travel contract to be ‘objectively impossible’ or whether difficulty performing the contract safely and efficiently is sufficient, and
   (ii) Whether, in determining whether the contract can be performed at all or sufficiently, account can be taken of subjective factors such as the traveller’s age or state of health;
3. Whether the existence, to a certain (lesser) extent, of the same ‘unavoidable and extraordinary circumstances’ prior to the parties entering into a package travel contract excludes the traveller’s right to terminate the contract without paying a termination fee;
4. Whether the phrase ‘at or in the immediate vicinity of the place of destination’ is to be construed broadly or narrowly.

The CJEU’s rulings

The first question

The CJEU noted that the phrase ‘unavoidable and extraordinary circumstances’ is defined within Article 3(12) and further noted that Recital 31 of the Package Travel Directive refers to various types of situation including warfare, terrorism, the outbreak of serious disease or natural disasters. The CJEU considers that it is the existence of such situations which constitutes ‘unavoidable and extraordinary circumstances’ and it cannot be inferred from the provisions of the Package Travel Directive that an official warning or guidance is required in order to trigger the traveller’s right to terminate.

The CJEU noted that the purpose of the Package Travel Directive (per its Recital 5) is to harmonise travellers’ rights and obligations arising from package travel contracts, but the criteria for the imposition of official warnings or guidance in each country are not uniform. Therefore, to import into Article 12(2) such a requirement would be contrary to the aim of harmonisation. Consequently, the existence of an official warning or guidance is not a pre-condition for the existence of ‘unavoidable and extraordinary circumstances’ within the meaning of Article 12(2). Official warnings and guidance may have evidential value, but that will be a matter for the procedural law of the national court.

The second question

The CJEU considered that it follows from the wording of Article 12(2) ‘significant effects [on] the performance of the package’ etc. that the right to terminate a package travel contract without paying a termination fee is not subject to a condition that performance of the contract is objectively impossible. Rather, the criteria is the broader meaning of the phrase ‘significantly affect’. A parallel can be drawn between the right to terminate pre-departure if the performance of the contract will be ‘significantly affected’ and a right to terminate post-departure if a lack of conformity to the package travel contract ‘substantially affects’ its performance (see Article 13). In the latter scenario, plainly performance of the contract is not wholly impossible, but only substantially or significantly affected, yet the right to terminate exists nonetheless.

In relation to consideration of subjective factors, the CJEU held that, whilst factors personal and specific to the traveller(s) concerned can be taken into account in assessing whether the ‘unavoidable and extraordinary circumstances’ are likely to ‘significantly affect’ the performance of the contract, the assessment of whether such a consequence exists remains an objective question. It would not be sufficient for the traveller concerned to rely on a purely subjective assessment of the risk or purely subjective fears about travelling in the circumstances. At the same time, given that travellers and organisers have independent rights to terminate the package travel contract under Article 12(2) and (3) respectively, the traveller is not expected to rely solely on the organiser’s assessment of the feasibility of performance of the contract. Assessment of the likelihood and significance of any effects of ‘unavoidable and extraordinary circumstances’ on performance, must be made from the perspective of an average traveller who is reasonably well-informed and reasonably observant and circumspect, in accordance with the basis of assessment of similar principles in other areas of EU consumer protection law. Such a traveller would have to make an assessment on the basis of a prediction of what effects on the performance of the contract are likely in the eyes of that traveller.

Accordingly, the CJEU’s response to the second question was that Article 12(2) must be interpreted as covering not only circumstances which make it impossible to perform the package but also circumstances which mean that the package cannot be performed without exposing the travellers to risks to their health and safety, taking into account, where appropriate, personal factors relating to the individual traveller(s) but assessing such effects from an objective perspective.

The third question

There is no specific requirement within the provisions of the Package Travel Directive that the situation relied on as a basis for termination of the contract must have been unforeseeable (and therefore necessarily non-existent) at the time that the package travel contract was concluded. However, the CJEU took the view that the terms ‘unavoidable’ and ‘extraordinary’ suggested that the concept only covered situations which, on the date that the package travel contract was concluded, did not exist and were unforeseeable. Therefore, the CJEU held, circumstances already known to the traveller or foreseeable by him at the time that the package travel contract was concluded cannot be the basis for exercising a right to terminate under Article 12(2).

However, where a known existing or foreseeable situation is evolving significantly, it cannot be ruled out that significant changes to the situation after the contract is concluded could in fact give rise to a new situation, capable of meeting the definition of ‘unavoidable and extraordinary circumstances’ within the meaning of Article 12(2). The national courts must therefore assess, from the perspective of an average traveller who is reasonably well-informed and reasonably observant and circumspect, whether the level of health risk which led to the termination of the package travel contract had changed significantly from that which existed or was foreseeable when the contract was concluded.

The fourth question

The CJEU considered it to be apparent from the wording of the Lithuanian Court’s preliminary reference that it was common ground that COVID-19 had reached the United Arab Emirates by the date of termination. The issue of whether COVID-19 fell within the scope of ‘unavoidable and extraordinary circumstances’ was to be assessed in accordance with the principles laid out in the CJEU’s responses to questions 1 to 3. If the spread of serious disease at the place of destination fell within scope, then the spread of the same disease on a global scale would fall within scope all the more so. Thus, the resolution of the dispute in the main proceedings did not depend on whether the concept of circumstances ‘occurring at the place of destination or its immediate vicinity’ extended to circumstances occurring at a place other than that of the travel destination, such as the place of departure, because it was common ground that the situation was occurring of the place of destination.

However, in line with the procedural principles of the CJEU, the Court therefore reformulated the question which it was asked to determine as follows: whether, in determining whether unavoidable and extraordinary circumstances occurring at the place of destination (or its immediate vicinity) significantly affect the performance of the package, effects occurring at the place of departure and at various places connected with the start and end of the trip in question may also be taken into account.

In response to this question, the CJEU held that, although the ‘unavoidable and extraordinary circumstances’ themselves must arise at the place of destination and the effects of such circumstances will be evident in particular at that place, the provisions of the Package Travel Directive contain no geographical limits on where the effects of such circumstances must occur. The CJEU noted that a package travel contract must specify, pursuant to Article 5(1)(a)(ii) of the Package Travel Directive, the means of transport and the points, dates and times of departure, return and any intermediate stops. It follows that, where the effects of unavoidable and extraordinary circumstances extend beyond the place of destination to reach the place of departure or return or any of the intermediate stops, those effects are likely to affect the performance of the package and as such must be capable of being taken into account for the purposes of Article 12(2). It is therefore possible for measures adopted at the place of departure (such as restrictions placed on travellers returning from the place of destination) to form part of the assessment of the effects of the ‘unavoidable and extraordinary circumstances’ on the performance of the package travel contract.

Conclusions

The CJEU has provided clear guidance on how national courts can assess whether a traveller has a right to terminate a package travel contract due to ‘unavoidable and extraordinary circumstances’. This guidance will be of particular assistance when national courts are asked to determine whether individuals were entitled to cancel holidays due to the outbreak of COVID-19 in early 2020.

The principles can be summarised as follows:

1. The Court must make an assessment of the situation on the date that the traveller sought to terminate the package travel contract. (QM v Kiwi Tour)
2. The assessment can, however, be forward looking, i.e. a prediction, in the eyes of the traveller, as to what effect the ‘unavoidable and extraordinary circumstances’ are likely to have on the performance of the contract in the future. (MD v Tez Tours, second question)
3. The task of the national court is to establish what circumstances had arisen and, from the perspective of an average traveller who is reasonably well-informed and reasonably observant and circumspect, what effect on the performance of the contract those circumstances were likely to have. (MD v Tez Tours, second question)
4. It is not necessary for the circumstances to have the effect of rendering the contract objectively impossible to perform, but it is sufficient to trigger the traveller’s right to terminate the contract that the circumstances will have a significant effect on the performance of the contract. An example of such a ‘significant effect’, particularly relevant in the context of termination due to COVID-19, would be if the performance of the contract would expose the traveller(s) to unacceptable risks to their health and safety. (MD v Tez Tours, second question)
5. In assessing the likely effect on the performance of the contract, the personal and individual characteristics of the traveller(s) can be taken into account, but the subjective assessment of the particular traveller concerned is not relevant. (MD v Tez Tours, second question)
6. The existence (or lack) of official government travel guidance or warnings is not determinative of whether ‘unavoidable and extraordinary circumstances’ exist but can be taken into account and given such evidential weight as appropriate. (MD v Tez Tours, first question)
7. The existence of particular circumstances at the time that the package travel contract was concluded will generally prevent those circumstances from being categorised as ‘unavoidable and extraordinary’ in the necessary sense, unless it can be seen that, between the date that the contract was concluded and the date of termination, those circumstances evolved in such a way that a new and different situation had arisen. (MD v Tez Tours, third question)
8. The ‘unavoidable and extraordinary circumstances’ themselves must occur at the place of destination, but the significant effects of such circumstances may occur elsewhere and in particular measures implemented at the place of departure or return or at intermediate stops as a result of circumstances at the place of destination may be considered likely to have a significant effect on performance of the contract. (MD v Tez Tours, fourth question)

Post-script

These cases relate to the interpretation of the Package Travel Directive and its implementation in German and Lithuanian law.  It should be noted that post-Brexit CJEU decisions do not bind UK courts. However, where domestic courts require assistance with interpreting the 2018 Regulations, these decisions may have some persuasive value, particularly since the relevant part of the 2018 Regulations employs materially identical wording to that of the Package Travel Directive.

It has traditionally been considered that, where there is any lack of clarity in the 2018 Regulations, the CJEU’s interpretation of the Package Travel Directive will be a useful tool for resolving any ambiguity. Whilst that has been true historically and remains true for the time being, cross-border practitioners should be aware that the landscape is changing: CJEU decisions may not remain persuasive forever.