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.