Financial guarantee (for travel agents)
In an effort to protect travellers, and in order to be able to exercise the profession of travel agent and offer tourist packages, professionals must be registered with a commission under the economic interest grouping Atout France (France’s tourism development agency), and this under the minister responsible for tourism. The registration process makes access to the profession of travel agent conditional on the provision of a financial guarantee. The aim of the European law incorporated into the French Tourism Code is to give travellers a solvent intermediary, the guarantor, able to refund payments or ensure the package is funded, even repatriation, in the event of the partner (i.e. travel agent) defaulting.
The registration process with Atout France, which replaced the travel agent licensing system, must meet, and continue to meet, conditions when registration is renewed every three years. Two conditions are required; those relating to professional aptitude and character have been removed.
The financial guarantee: A legal requirement in for the registration of travel and travel-arrangements operators established in France
Operators must provide proof of civil liability. This covers the pecuniary consequences of professional civil liability, i.e. damage caused to customers, to the service providers used or to third parties. As retail travel agents and those who design packages are responsible, under French law, for the proper performance of the services included in the package, the stakes are high. The compensation due by an operator held liable through their own action (e.g., inaccurate or wrong information) or through the actions of the service providers used (flight cancellation, accident at the place of stay, etc.) will be covered by the insurer.
Furthermore, operators must provide a financial guarantee whose purpose is to protect the traveller against the risk of insolvency. Specifically, the Travel Directive 2015/2302 incorporated into the French Tourism Code requires a guarantee for refunds and repatriation in the event that the services included in a travel package cannot be provided due to insolvency. In concrete terms, if the travel agent’s default results in the cancellation of a trip or the failure to provide a service, the guarantee reimburses the funds received for payments made by travellers. Under certain conditions, reimbursement may be waived in favour of an alternative service (such as postponement, etc.). If the package includes transport, it provides for the repatriation of the traveller and reasonable living expenses related to their re-routing.
This guarantee was implemented during the bankruptcy of the travel company Thomas Cook in 2019. For travellers faced with repatriation or refunds after cancellation due to the Covid-19 pandemic, the issues are complicated because it was not caused by travel agent insolvency.
For European professionals who are not established in France but operate under the freedom to provide services — and who already meet the conditions to be travel and travel-arrangements operators in their country of establishment — the Travel Directive establishes a principle of mutual recognition. It obliges Member States to recognise the insolvency protection that an organiser provides in accordance with the measures of the Member State where it is established. In case of doubt, clarification can be sought from the Member State of the organiser in question.
‘Member States should ensure that travellers purchasing a package are fully protected against the organiser’s insolvency.’
Directive 2015/2302, rec. 39
Establishment and implementation of the financial guarantee
The guarantor is either a credit institution or an insurance company, or — more frequently — a collective guarantee agency with a guarantee fund. The best known in France is the Professional association of tourism solidarity (Association professionnelle de solidarité du tourisme, APST), which is facing unprecedented challenges with the judicial liquidation of the aforementioned Thomas Cook company.
The Travel Directive only requires financial guarantee from the package organiser, whereas French law also requires it from the retailer. This is logical as under national law both are responsible for the proper execution of the package, at the traveller’s discretion. However, non-profit associations and organisations belonging to a federation or union declared as guarantors, such as the French National union of tourism associations (Union nationale des associations de tourisme, UNAT), are exempt from providing a financial guarantee. Members benefit from the guarantee of the institution to which they belong. Travel agents can therefore be association structures, which moreover benefit from overriding conditions compared to commercial travel agents. This raises the issue of unfair competition amongst tourism stakeholders.
The guarantee must be ‘sufficient’ in the sense that it covers all funds received from the end-customer for packages. The amount is a percentage of the agent’s annual business volume with travellers, with a minimum amount in principle of 200,000 euros. It may be re-evaluated during the year if an increase in risk occurs or if the agent changes their activity.
If the guarantee is activated to organise repatriation, the prefect intervenes to handle the situation. If the traveller wishes to be refunded, they must provide written proof of the claim and of the agent’s default, either through bankruptcy filing or notice for the amount unpaid within 45 days. The guarantor must make the payment within three months. However, if the agent is subject to insolvency proceedings, the time frame will inevitably be extended and if the refund amount exceeds the amount of the guarantee, travellers will only recover a portion of their payment.
Bibliography
- Directive 2015/2302 du 25 novembre 2020 relative aux voyages à forfait et aux prestations de voyage liées: articles 17 et 18.
- Code du tourisme: articles L. 211-18 II.
- Lachièze Christophe, 2020, Droit du tourisme, Lexisnexis, 288 p.
- Pellier Jean-Denis, 2020, «La garantie financière du code du tourisme ne bénéficie qu’aux consommateurs finaux», Dalloz actualité, 6 février.