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 [2002] InternationalTravelLaw Journal
WHAT IS A PACKAGE? THE IMPACT OF THE
CLUB TOUR DECISION
David Lowe
Under the European Package Travel Directive
(Council Directive 90/314/EEC of 13 June 1990
on Package Travel, Package Holidays and Package
Tours) the definition of 'package' is critical. The
recent Club Tour decision (Club Tour, T"agens e
Turismo SA vAlberto Garrido(Third Part Club Med
Viagens Lta) C-400/00 ECJ) gives some insight
into how the European Court of Justice
approaches a particular aspect of package - the
requirement for it to be a 'pre-arranged
combination'. With the growth of tailor-made
packages where pre-arrangement may not be
obvious this could not be a more important
question. In this article I will review the meaning
of package in the context of English law, focusing
on the requirement for 'pre-arranged
combination', taking account of the potential
impact of the Club Thur Decision.
Why is the definition of package
important?
If an arrangement is a package under the
Directive then the Directive has the following key
requirements:
The organiser of the package is required to
protect prepayments against the organiser's
insolvency and to ensure the consumer can be
repatriated in the event of the organiser's
insolvency (Article 7 of the Directive). In the
UK regulations this requirement is clarified to
indicate that it requires the organiser to have
in place bonding, insurance or trust
arrangements. The most common approach in
the UK is to use bonding (which also takes
account of the ATOL Regulation
requirements (The Civil Aviation (Air Travel
Organisers' Licensing) Regulations 1995 (as
amended)). This requirement imposes a cost
on the organiser;
* If a brochure is provided then the organiser is
subject to particular requirements to ensure
that the brochure is legible, comprehensible,
accurate and not misleading (Article 3 of the
Directive);
* An organiser will be obliged to provide certain
information (Article 4 of the Directive);
* An organiser will be subject to restrictions on
the extent to which it can vary, cancel or
change the price of the package. Further the
consumer has certain rights to transfer the
booking to another person (Article 4 of the
Directive);
* Liability - the organiser of the package is
responsible for the proper performance of the
contract (i.e. it cannot avoid liability for its
supplier's failures) (Article 5 of the Directive).
The requirement to protect against insolvency and
liability are probably the two most important of
these requirements as these will have the most
significant impact in terms of cost and risk on an
organiser.
Therefore if an organiser of a holiday can
avoid being caught by the Directive then, by
 [2002] InternationalTravel Law Journal
avoiding the potential costs and liability, it will
have a competitive advantage over another
organiser who is complying with the Directive.
Equally, if a consumer can demonstrate that the
organiser is actually selling a package and the
organiser has not complied with the Directive
then the organiser may find it is the subject of
unexpected liabilities.
What is a package
The Directive defines at Article 2 a 'package' as:
"thepre-arrangedcombination of notfewer
than two of thefollowing when sold or offeredfor
sale at an inclusiveprice and when the service
covers aperiodof more than 24 hours or includes
overnightaccommodation.
(a) transport;
(b) accommodation;
(c) other touristservices not ancillar to transport
or accommodation and accountingfor a
significantproportionof apackage.
The separate billing of various components of
the same package shall not absolve the organiser
or retailerfrom the obligations under this
Directive;"
The UK Package Travel Regulations
implementing the Directive in the UK (The
Package Travel, Package Holidays and Package
Tours Regulations 1992 (SI 1992/3288)(as
amended)) use a virtually identical definition
except that the last paragraph of the Directive's
definition is replaced with:
"and
(i) "the submission of separateaccountsfor
dfferent components shall not cause the
arrangementsto be other than apackage;
(ii) the fact that a combination is arrangedat
the request of a consumer and in
accordance with its specific instructions
(whether modified or not) shall not of
itsef cause it to be treatedas other than
pre-arranged;"
There is much discussion about the scope of a
package - for example, what is the meaning of
'ancillary', could school foreign exchanges be
caught by it and so on. However the focus of this
article will be on the requirement for the package
to be a 'pre-arranged combination'.
The growth of the tailor-made package
In general terms the scope of the meaning of
package is relatively clear. The standard bucket
and spade package holiday bought from a tour
operator by reference to their brochure is clearly a
package. Equally a travel agent selling a long haul
flight with no additions to a more adventurous
traveller is obviously not selling a package.
Therefore before the mid 1990's the scope of the
definition of package although generally
discussed was not considered to be of significant
concern.
However in the late 1990's and early 21st
Century there have been significant changes in the
pattern of tourism, particularly within the UK.
Consumers are increasingly buying 'tailor-made
packages' - by this I mean holidays where the
consumer has had much more involvement in the
selection of the individual components of a
holiday so that the resulting holiday is tailored to
the particular wishes of the consumer. This has
arisen partly with the increased sophistication of
consumers who wish to travel in a more
independent fashion. It has been fuelled by the no
 [2002] InternationalTravelLaw Journal
frills airlines revolution which has helped bring
the cost of scheduled short haul air travel down
and the internet which has given broader access
to car hire, accommodation and so on.
Therefore consumers are increasingly booking
the components for their holiday separately. For
example, my summer holiday this year is a
combination I have put together over the internet
of flights with Go to Malaga, car hire from a small
Cornish car hire broker and a villa in Andalucia
booked direct with the owner. I am by no means
unusual.
Where a consumer does purchase the various
holiday elements separately directly with each of
the separate suppliers then no package can arise.
It would probably surprise many consumers that
if in that situation any one of the components of
their holiday goes wrong then they will not be able
to seek redress from a single person and will need
to pursue an often distant foreign supplier. No
doubt tour operators will be increasingly
reminding consumers of the risk of booking
separate components themselves. I for one have
my fingers crossed that nothing goes wrong with
my holiday!
However many consumers are also choosing
to purchase a tailor-made package from a single
contact point. A consumer may put together all of
their holiday components with the guidance of
their local travel agent (a growing area of business
for good travel agents), or from a single internet
site (most of the travel portals allows purchase of
flights, car hire, accommodation and so on).
Indeed the tour operators are responding to these
challenges by increasingly offering their packages
on an unbundled basis allowing a consumer to
pick and choose the individual holiday
components from a brochure to make their
holiday their own.
It is in this arena that there is substantial
discussion about the meaning of 'package'. No
doubt many travel agents perceive that when
assisting a consumer to put together a holiday
then they are not selling a package and will only
have limited responsibility for the package. They
do this because they consider that they are not
selling a 'pre-arranged combination'. After all, at a
time when commissions are being cut, no travel
agent voluntarily wants to increase the costs of
doing business by complying with the Directive
unless they have to. This approach is naturally
being criticised by tour operators who struggle to
compete with those travel agents, as the tour
operator has invested in the necessary bonding
and procedures to deal with liability and therefore
is likely to have a higher potential cost base than a
travel agent.
So if a consumer purchases a tailor-made
package from a single source at a single time is this
a 'pre-arranged combination' and is there a
package or not?
Most of the cases relating to the Directive are
about the extent of liability. The cases rarely deal
with the scope of the Directive and none, so far
as I am aware, directly deal with the issue of 'pre-
arranged'.
In the absence of case law it is useful then to
examine the approaches made by the UK
Regulators and the European Commission.
The approach of the regulators
UKDepartment of Trade andIndustry ("DT")
The DTI is the UK government department that
is responsible for implementation and
enforcement of the Directive. It issued guidance
notes at the time of introduction of the UK
Package Travel Regulations. On the issue of pre-
 [2002] InternationalTravel Law Journal
arrangement the DTI comments that:
'pre-arranged'... must meant that the
combination has to be put together by the
organiserin advance of the conclusion of the
contract ... There is afine line between what is
and what is notpre-arranged.
This is further illuminated by the questions and
answers on the DTI's website (www.dti.gov.uk):
"Q The consumer tells me exacty what he
wants and I book it. Is this apackage?
A - Tofall within the scope of the Regulations
the elements must also be "pre-arranged".If
the elements identified by the consumerare
not more generaly on offer as apossible
package, the are notpre-arranged.For
example, if the consumer specifies his own
flight and where he wants to stay and the
travel agent arrangesthis, the total service is
not apackage, even though the components
are invoiced together."
"Q Igive the consumer a completeyfree choice
from the options in my brochure.From these
options he chooses where he stays and how he
gets there. Is this apackage?
A - In this case apackage is likely to be created.
To be "pre-arranged".a combination has to
beput together by the organiserin advance of
the conclusion of the contract.It does not
however require the combination to be
arrangedbefore the consumer makes an
enquiry. Tailor-madepackages canfall
within the scope of the Regulations where
the consumer relies on the skill and expertise
of the organiserin combining two or more
components to make apackage."
This is a useful analysis and could well be a correct
interpretation of the meaning of 'pre-arranged
combination'. However in reality there is clearly a
significant opportunity for an argument between
a consumer and travel agent on whether or not a
consumer has sought to rely upon the skill and
expertise of a travel agent in combining two or
more components - after all with the internet
what is the point of using a travel agent if they
have not been able to offer such skill.
Trading StandardsInstitute
The Trading Standards Institute (TSI) formerly
the Institute of Trading Standards Administration
(ITSA) is the professional body representing
Trading Standards officers. It comments (see
www.tradingstandards.gov.uk) that:
tailor-made combinations where,for instance,
the customer selects the method of travel and the
hotel, are covered by the Regulations. The
combination although selected toform an
individualpackage,is neverthelesspre-arranged.
It is interesting to see that UK Trading Standards
take a more robust and broader approach than the
DTI.
CivilAviation Authoriy
The CAA has been struggling with the issue of
tailor-made packages for some time. The CAA has
responsibility for enforcing the ATOL
Regulations. The main purpose of the ATOL
Regulations is to protect a consumer who
purchases a flight against a travel agent or tour
operator's insolvency. It pre-dates the Directive.
Under the ATOL Regulations any person making
available flight accommodation generally needs to
hold an ATOL licence (subject to certain
exceptions) - this is relevant to most packages as
they usually include a flight element. To obtain an
ATOL licence security (usually a bond or
guarantee) needs to be provided. The amount of
security will depend on the CANs view of the risk
 [2002] InternationalTravelLaw Journal
of the flight seller's failure, and the extent of that
liability on failure. The bonding requirement for a
travel agent selling flight-only will be less than a
tour operator selling a package as the costs of
sorting out consumers who have purchased a
package from an operator who becomes insolvent
is more substantial.
Therefore the question of whether a travel
agent is selling a package or not is key to the CAA
to determine the extent of the required bond. To
deal with tailor-made packages the CAA resorted
to introducing 'facilities only' bonds as a top up to
a flight-only bond. In the CAA's Guidance Note
17 it notes that:
* A facilities only bond is not intended to allow
the 'unbundling' of packages, and that the
CANs starting assumption will be that a sale of
a flight plus accommodation is a package.
* However if 'the separate items are at no stage
quoted to the customer at a single inclusive
price' then the CAA will allow the use of the
facility only bond.
The CAA has recently recognised that the Facility
Only Bond is a fudge and often avoided by
operators selling split-contracts (i.e. selling flights
separately from accommodation, car hire and so
on). The CAA has recently issued a consultation
paper (see www.caa.co.uk/cpg/atol) suggesting
changes to the ATOL Regulations. In the
consultation paper the CAA notes the scale of the
problem - they have identified at least 630 firms
in the UK selling packages as split contracts, and
point out that the number of passengers on UK
originating holidays by air has risen at almost
double the rate of holidays protected by ATOL.
They have therefore proposed amending the
ATOL Regulations by ensuring that any flight
accommodation sold as part of a package should
ony be sold by ATOL licence holders.
The results of consultation will be interesting
but if these changes are introduced it will make it
less desirable to travel agents to sell packages which
include an air component as split- contracts. The
CAA acknowledges that the proposed changes to
the ATOL Regulations are just a practical
compromise but does suggest that fundamental
changes at the Directive level may be needed,
presumably to alter the definition of package.
The European Commission
In 1999 The European Commission published a
report on the implementation of the Directive
(Report on the Implementation of Directive
90/314/EEC on Package Travel and Holiday
Tours in the Domestic Legislation of EC Member
States - SEC(1999) 1800 Final). In this report the
Commission notes as a key question 'what is
meant by pre-arranged combination?' 'Are tailor-
made holidays not included?'. It notes that the
original proposed draft Directive was limited to
packages that were offered 'by means of
brochures, or other forms of advertising to the
public generally', so as not to include tailor-made
(i.e. not brochured) arrangements. However the
Commission notes that the Economic and Social
Committee and the European Parliament
considered that an excessive restriction on the
scope at the Directive and therefore deleted it.
Therefore the Commission argues that it would be
difficult to argue that tailor-made packages are
excluded and then states that
"the wordpre-arrangedappears to be
artificial,of unclear meaning and in effect could
be eliminated. The consumer's needjorprotection
may, in some circumstances, be the same with
regard to tailor-madeas with regard to other
packages".
 [2002] InternationalTravel Law Journal

It therefore appears that the European Med's failings; if not a package then Club Tour
Commission takes a broad view of the meaning may not have any responsibility.
of package.
The Court's decision
The Club Tour Case
Advocate General Tizzano in his opinion to the
It is difficult to draw from the above what is ECJ found that Club Tour had indeed sold a
meant, if anything, by 'pre-arranged package noting:
combination'. There appears to be little
* The history to the development of Directive
consistency within the UK/EC on its meaning.
(mentioned in the Commissions 1999 report)
However the recent European Court of Justice's
under which the express reference to
decision in the Club Tour case does give some
brochures was deleted;
insight into this important issue. (The full case
report was published in the last InternationalTravel * The Commission report stating that tailor-
Law Journalat [2002] ITLJ 55.) made packages are included in the definition
of package;
The Facts
* Paragraph (j) to the annex of the Directive
Portuguese travel agent Club Tour sold a Club
which anticipates that the consumer may enter
Med holiday in Greece plus flight to Mr Garrido.
into special arrangements;
On arrival at the Club Med Village, Mr Garrido
and his family found it was infested by thousands * The Directive is intended to be legislation for
of wasps. Club Tour and Club Med could not the protection of consumers and therefore
arrange alternative accommodation. Mr Garrido should be interpreted broadly.
refused to pay for the holiday (in Portugal, you
He concluded that 'pre-arranged combination'
generally only pay for your holiday on your
can refer to the moment the contract is concluded
return). Club Tour sued Mr Garrido for payment
between the travel agency and the customer. The
and it went to court. The Portuguese court asked
Advocate General went on to suggest that the
the ECJ:
term 'pre-arranged' is superfluous. Therefore the
* Is the arrangement organised by Club Tours Advocate General felt that a package had been
on the initiative of the consumer a package? formed and sold by Club Tour.

* Does 'pre-arranged' means the position The Advocate General's opinion was affirmed
reached at the moment when a contract is by the ECJ which noted that
entered into between agent and the consumer?
"the term 'pre-arrangedcombination'....
This case appears on its face to go to the heart of necessarily covers cases where the combination of
the issue - Club Tour booked, on the request of touristservices is the result of the wishes
Mr Garrido, two components - the expressed by the consumer up to the moment
accommodation and the flight. If 'pre-arranged' when the parties reach an agreement and conclude
this would be a package and Club Tour would the contract".
have responsibility under the Directive for Club
 [2002] InternationalTravelLaw Journal
Impact of the Decision
The Club Tour decision is potentially far reaching
as it suggests that the words 'pre-arranged' are not
relevant and therefore potentially any
combination of holiday components bought from
a single source at the same time could be a
package. This would affect all those who currently
seek to avoid the Directive by 'contract- splitting'
as it may mean that this route of avoiding the
Directive is ineffective.
However the position is not entirely clear - in
Portugal travel agents act as principals (not agents
as in the UK) and therefore it remains unclear
how the UK courts would approach this issue.
Conclusion
The relevance of the words 'pre-arranged' to the
definition of package is not clear. There are a
variety of opinions within the travel sector and
the regulators, ranging from those who attach
importance to those words, to those who dismiss
them as superfluous. This range of options makes
it difficult to decide whether or not a particular
tailor-made package is a package regulated by the
Directive.
The Club Tour decision suggests that the
European Court of Justice is taking a broad
approach to the meaning of package. It is perhaps
inevitable that given the Directive is consumer
protection legislation that the courts will take a
broad approach. Therefore my view is that any
combination of holiday components which are
purchased at the same time from the same source
risk being found to be a package.
I say 'risk' because not every sale of
components from the same point at the same time
will necessarily form a package. However an
agent/internet site will need to take vigorous
steps to reduce the risk that a package is not
inadvertently created. Examples of those steps
would be to ensure that each component is sold
and invoiced individually, and without reference
to other components, and that the agent's role of
not being an organiser and the consequences of
not creating a package are made very clear to the
consumer. These steps are likely to be difficult to
implement - it may be perhaps only achievable by
an internet site where the process and information
provided can be strictly controlled, as opposed to
a sale in person where it will be more difficult to
segregate and control the sales process.
DavidLowe is an associate with
Wragge & Co, UK solicitors.