HC Deb 03 March 1992 vol 205 c128W
Mr. Quentin Davies

To ask the Secretary of State for Trade and Industry when he expects to consult interested parties on his proposals for implementing article 7 of the EC package travel directive.

Mr. Leigh

My Department has today issued a consultation letter on proposals to implement article 7 of the directive. This article requires the organiser and/or retailer parties to the contract to provide sufficient evidence of security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency.

In our consultation document issued on 24 July 1991, we proposed the establishment of a licensing authority which would require all operators of packages, other than those already licensed through the air transport organisers licence system, to be licensed and bonded to a prescribed percentage of turnover. The outcome of this consultation has caused the Department to reconsider this proposal.

The Government's objective in implementing the directive has been to do so in a way which would provide full implementation and proper protection for consumers, but would impose the minimum burdens on industry. It is now clear that the numbers of licensable operators would be large, but their average size would be likely to be small. A licensing system would thus be expensive and would conflict with the Government's objective.

We now propose that it will be for organisers to have their own security for refunds in the event of insolvency. Failure to have adequate security will he a criminal offence, punishable by fines and personal liability, both criminal and civil, for any director or manager who has connived at the commission of the offence. Within the bounds of the implementing regulations, it will be for the individual operator to decide what form of security to adopt.

It is envisaged that three broad possibilities will be offered in the regulations: organisers may be bonded, in a sum equal to the maximum amount they hold by way of pre-payments during the period of the bond, to an approved organisation; organisers may arrange insurance against insolvency, again in the sum equal to the maximum amount they hold by way of pre-payments; organisers may place pre-payments in a designated account from which they should only be withdrawn when the service against which the pre-payment has been made has been performed.

In the case of packages abroad, organisers will be required to have security also against the cost of repatriation in the event of no longer being able to meet their obligations to customers.