All roads lead to Rome

Despite huge growth in the travel and holiday market over the last ten years, it nonetheless remains a fairly niche area in legal terms. There are numerous jurisdictional complexities and practical problems when pursuing claims arising overseas. Clients have become more demanding too, in terms of the level of service and speed of response they expect. Add to the mix the recent consolidation in the travel industry '“ which in turn has led to consolidation in the legal market, particularly on the defendant side as insurers and tour operators have been looking to reduce their panels '“ and you end up with a pretty small, but highly specialised, market.

Cautious optimism

Despite rising unemployment and the strength of the euro against the pound, both of which might suggest a downturn in the holiday market, the outlook of Mark Lee, head of the mainly claimant travel and dispute resolution team at Penningtons, is one of 'cautious optimism'. While he expects a 'slight reduction' in claims this year, he says that 'the impact is likely to be minimal'.

Then again, this is an area with a long lead-in time. 'It is difficult to predict the effect of the downturn on the holiday market,' says Lee. 'We'll have a better idea of the actual impact in the autumn, after the holiday season.'

Michael Gwilliam, a partner in the defendant travel, tourism and leisure team at Vizards Wyeth, is equally optimistic: 'I don't foresee a significant drop in the work coming through our doors. We have actually seen increasing numbers of claims year on year.' He admits it is hard to gauge whether that trend will continue throughout 2009, but maintains the view that the core family holiday is so important to most hard-working families that it will be one of the last things that people are prepared to sacrifice.

Might the credit crunch lead to more travel claims being brought, and being harder fought? Clive Garner, who heads up Irwin Mitchell's claimant-focused international travel litigation group, feels that 'there might be people who may not have pursued a valid claim previously and who may now think more seriously about pursuing that claim, but I think it will be a pretty small number so I don't think it will have a significant effect'.

Rome II

The landscape for travel lawyers is certainly changing when it comes to legislation. A headliner is the conflict between the European Court of Justice decision in FBTO v Odenbreit (case C-463/06) and the newly implemented Rome II Regulation.

The Odenbreit principle allows a claimant to pursue a direct claim against an EC insurer in this jurisdiction for injuries caused by a road traffic accident in an EC member state (provided there is a direct right of action in that country). The question for the courts is whether that direct right of action principle will be extended to non-road traffic accidents.

The problem is, Rome II has gone and scuppered everything because English judges will now ordinarily have to apply the law of the country where the accident occurs when determining liability. Now the implications of Odenbreit will need to be looked at in conjunction with the new regulation. If you now have to apply, say, Spanish law of quantum under Rome II, the level of benefit you would have been awarded prior to Rome II will have evaporated. So Odenbreit may end up being a bit of a white elephant for UK claimants.

To add insult to injury, Rome II is also at odds with the House of Lords decision in Harding v Wealands [2006] UKHL 32 '“ which determined that where the English courts has jurisdiction to hear a claim, quantum will be determined according to English law. In the absence of clarifying case law following Rome II, this is a cause for concern among UK lawyers. Clients now 'are having to be warned that rather than the settled position under Harding, we can't say that any more; we can only say that there is a chance we'll get English quantum, but a very real risk that they will get quantum in accordance with the country where the accident occurred', says Clive Garner.

And, they are likely to get substantially less than the level of compensation they actually need. 'Care here is likely to be more expensive than in any of the European countries, as is loss of earnings and other expenses,' says Garner. A victory, perhaps, for the lobbyists in the insurance industry.

Yet another area of uncertainty relates to the actual date of implementation of Rome II (as discussed in Solicitors Journal 13 January 2009). 'The majority view appears to be that the regulation entered into force on 19 August 2007, although it will apply from 11 January 2009,' says Mark Lee. 'However this is far from certain.' His firm, and others, have taken the precautionary step of issuing proceedings on behalf of some clients prior to 11 January, 'to give them every opportunity to argue that English damages should apply'.

The overall effect of Rome II for claimant practitioners, according to Lee, is that it 'focuses the mind for claimant lawyers as to whether it is in their client's best interests to pursue the claim abroad or in England, bearing in mind that quantification of damages may be the same as in that foreign country'. There are many potential pitfalls, he says, of bringing a case in the UK '“ including the likely problems with enforcement '“ and this makes it 'imperative that all the pros and cons of bringing a claim in this country be considered on a case-by-case basis'.

The uncertainties arising from Rome II and Odenbriet '“ some of which are outside the scope of the article '“ will require further guidance from courts both in the UK and at EU level. 'It is very much 'watch this space',' says Lee. 'Most firms are biding their time and awaiting further guidance from the courts.'

Re-packaging?

It is not just the legislative landscape that is changing. Products themselves in the travel field have undergone dramatic changes in recent years. The two-week summer package holiday '“ once quintessential to the British way of life '“ is now falling out of favour, while tailor-made trips, the search for winter sun and adventure holidays are on the rise.

The effect of this, says Claire Mulligan, head of defendant travel litigation at Plexus Law, is that, whereas her department's work tended to be fairly cyclical in the past, 'now people want winter sun too so we find the stream of work is more constant'. And, she adds, with many more people these days looking to participate in adventure holidays ranging from mountain climbing to white-water rafting, her firm is seeing the number of claims growing and the types of claim changing. 'People are getting more daring '“ they don't want to just lie on a beach for two weeks,' she says.

The regulation of package holdiday is being reviewed at European level, reflecting both the move away from package holidays and the growth of internet bookings. The Package Travel Regulations 1992 set out the major rights of consumers and the obligations of holiday providers for package holiday arrangements. But the benefit of the legislation has been slowly eroded by a number of English court decisions '“ notably CAA v ABTA [2006] EWCA 1356, which limited the scenarios in which a holiday would fulfil the definition of a 'package' and therefore be governed by the regulation (see Solicitors Journal 24 October 2006).

This has resulted in a lack of clarity regarding the question of what is and is not a 'package' '“ and this issue is fundamental to everyone, according to Michael Gwilliam of Vizards Wyeth: 'In the past everybody knew what they were dealing with, and who they could sue and how. The purpose of the package holiday regulations was to give clarity and prevent British consumers injured abroad from having to sue in the overseas jurisdiction.'

The difficulty now, he goes on to say, is that retail landscape has changed dramatically. 'People aren't just buying their two-week holiday from package companies but are entering into all sorts of contractual arrangements for separate purchases of flights and accommodation, and are doing it online, via all sorts of smaller companies that have sprung up in the UK.'

And the problem is that if you don't buy a package, you aren't protected under the regulations. The confusion, says Gwilliam, is on both sides. 'It's not just the customers who aren't aware of what they are buying, but also the agents who in many cases are not precisely aware of what they are selling, and really aren't aware of the importance of getting their contractual arrangements absolutely right before selling to consumers.'

The European Commission says it will conduct an impact assessment in 2009, with a view to proposing new legislation in 2010. Clive Garner thinks this could have a significant effect on both consumers and legal practitioners. However, he says it is 'too early to tell what the impact will be '“ it is still at a very preliminary stage'.

Meanwhile Julian Morris, an associate in the defendant travel and leisure insurance team at Hextalls, is of the opinion that whatever the reforms may entail, 'uncertainties will remain '“ the never-ending question of what is a 'package' will always be present and will always need to be determined on the facts; there will always be a grey area in the middle and I don't think that reform is likely to resolve the grey area. I think 100 per cent clarity is not achievable. It is more a question of how close to 100 per cent you can get'.

Cost capping and contingency fees

A further trend over the last 18 months has been the rise of cost cap applications by defendant firms in response to the increase in multi-claimant actions. New CPR guidance on the subject has been issued, and the courts are now looking wholesale at the cost capping regime.

There is also the ongoing debate about whether to bring in US-style contingency fee agreements. Mark Lee feels that if these are brought into play 'it would almost certainly result in a significant increase in damages so that lawyers can recover their costs'. However, he adds 'there has been enough tweaking of the rules relating to conditional fees in previous years and I think we should leave it as it is, frankly'.

He continues: 'If we end up with wholesale review of the funding arrangements and the introduction of contingency style funding arrangements, damages would increase significantly and defendant insurers would be harping on about us being a 'compensation culture'. As it stands a lot of the satellite litigation has been done and in the interests of stability, and getting on with our work, I would be against it.'

There is also talk of bringing in US-style class actions as a way of dealing more effectively with multi-claimant disputes. Clive Garner says that he is very much in favour of a new regime, as long as an opt-out rule is enacted. Such a regime, he says, would 'provide good access to justice for individuals and sensible mechanisms for disposing of disputes'. However, he feels we are 'still some way away from that'.

Keeping them on their toes

With all the questions surrounding Rome II, package holidays and costs litigation, there is undeniably a pervading sense of uncertainty in the travel and holiday legal market. But it appears to be keeping both claimant and defendant firms occupied, and in the current downturn that is surely no bad thing.