The Court of Justice rules on the Community directive on package holidays and on the liability of the Austrian State for damage caused to individuals through failure to implement the directive properly
In November 1994 Mr Rechberger, a subscriber to the Austrian daily newspaper Neue Kronenzeitung, received, like other subscribers, a letter from the publisher informing him of an offer from the travel organiser Arena-Club-Reisen of a "free" four or seven day trip to one of four European destinations (only airport departure tax had to be paid). The offer was to reward subscribers for their loyalty. Persons accompanying subscribers were to pay a price specified in a brochure and subscribers travelling alone had to pay a single room supplement of ATS 500. All subscribers accepting the offer had to pay a deposit and settle the balance before the departure date.
The offer proved to be far more successful than the organisers had anticipated and this caused logistical and financial difficulties which led the organiser to apply, on 4 July 1995, for bankruptcy proceedings to be initiated. In addition, the advertising campaign organised by Neue Kronenzeitung was held by the Austrian Supreme Court to be incompatible with national competition laws.
Subscribers made holidays bookings between 19 November 1994 and 12 April 1995 and in every case paid the whole of the travel costs in advance. The trips, which were to have taken place between 10 April and 23 July 1995 according to the bookings, were, however, cancelled.
Under a 1990 Community directive on package holidays, every travel organiser must provide "sufficient evidence of security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency" (Article 7). Under the Act of Accession to the European Union, Austria was required to implement the directive by 1 January 1995. In 1994 it adopted a decree which introduced a requirement for travel organisers to obtain insurance cover or provide a bank guarantee. The value of the guarantee required must be at least 5% of a reference turnover. The decree applies to all package holidays booked after 1 January 1995 with a departure date of 1 May 1995 or later.
For three subscribers who booked their holidays in 1994 there was no guarantee since the decree only applied to package holidays booked after 1 January 1995. For another three who booked after 1 January 1995 and were to have taken their holidays after 1 May 1995, their payments were in principle covered by a guarantee issued in accordance with the decree. However, the bank guarantee of ATS 4 000 000 issued by the travel organiser was insufficient to reimburse the travel costs paid, the final level of cover being only 25.38% of the amount paid.
The six subscribers brought an action against the Republic of Austria before the Landesgericht, Linz, to recover the full amount they had paid, arguing that Austria was liable for its failure to implement the directive in good time and in full. Austria disclaimed liability.
The Austrian court referred questions to the Court of Justice on the interpretation of the directive and on the circumstances under which the State would be liable for damage caused to its citizens as a result of a breach of Community law.
The Court of Justice stated that the directive applies to trips which are offered by a daily newspaper as part of an advertising campaign which is unlawful under national competition law as a free gift exclusive to subscribers and for which the principal consumer pays only airport departure tax and a single-room supplement if he travels alone and only departure tax if he is accompanied by one or more others paying the full price. The purpose of the directive, the Court held, is to protect consumers against the risks arising from the insolvency or bankruptcy of package travel organisers. These risks, inherent in contracts between consumers and package travel organisers, arise from the fact that the price of the package is paid in advance and from the spreading of responsibilities between the organiser and the various providers of the services comprising the package. The consumer enjoys rights guaranteeing him the reimbursement of money paid over and his repatriation in the event of the insolvency or bankruptcy of the organiser. The subscribers found themselves exposed to precisely those risks against which the directive is designed to afford protection.
As regards the State's liability to its citizens, the Court stated that the Member States were required to adopt, within the prescribed period, all the measures necessary to guarantee purchasers of package holidays, as from the date fixed for implementation of the directive (in the case of Austria, 1 January 1995), the refund of money paid over and their repatriation in the event of the insolvency or bankruptcy of the organiser. An implementing provision which affords protection only to holidaymakers departing on 1 May 1995 or later is incompatible with the directive and constitutes, in the eyes of the Court, a sufficiently serious breach of Community law. The Court went on to say, however, that the prescribed protection does not extend to travel agreements entered into before the date fixed for implementation of the directive.
In addition, the national legislation limits the amount of the guarantee to be provided by the travel organiser. On this point, the Court observed that the directive imposes an obligation to protect consumers against all the risks mentioned and found that the specific arrangements prescribed by Austria were inadequate.
According to the Court, the directive imposes an obligation to achieve a result, namely that of guaranteeing package holidaymakers a right to reimbursement of money paid over and their repatriation in the event of the bankruptcy of the travel organiser. That being so, a Member State's liability for infringement of the directive cannot be avoided by reason of imprudent conduct on the part of the travel organiser or the occurrence of exceptional or unforeseeable events.
For media use only Ä unofficial document which does not bind the Court of Justice. Available in: German, English and French.
For the full text, please consult our Internet page www.curia.eu.int at approximately 3 p.m. today.
For additional information please contact Dr. Ulrike Städtler, phone: (00 352) 4303 3255 fax: (00 352) 4303 2734