On March 3, 2021, the European Court of Auditors (ECA) announced that it was launching “an audit to assess whether the European Commission has been safeguarding effectively the rights of citizens who travelled by plane or booked flights during the coronavirus crisis.” According to the ECA’s audit preview, the review will assess the resilience of the current legal framework to address the challenges posed by COVID-19, including (among other topics):
- “whether passenger rights were taken into account when granting state aid to the travel and transport industry”; and
- whether the Commission “adequately monitored the application and enforcement of air passenger rights during the COVID-19 crisis” and took “the necessary action to safeguard air passenger rights,” especially regarding airlines’ decisions to “push” customers “to accept vouchers, instead of receiving a cash refund” for cancelled flights.
The ECA is the chief external auditor for EU institutions — it is not a market regulator with the authority to bring enforcement actions against private companies — but its review may still have important implications for passenger airlines serving EU customers. For example, the ECA’s review may:
- trigger “downstream” inquiries from the entities it oversees (including the EU Commission and government agencies in EU member states), since those bodies may need to collect information from private-sector recipients of COVID-related aid in order to respond to the ECA’s requests;
- result in “follow-on” investigations by other oversight authorities, including those with the authority to investigate and penalize private companies that failed to comply with the terms of government relief measures and / or consumer protection rules;
- lead to potentially significant recommendations for changes in EU law and policy relating to air passenger rights — the ECA has stated that it intends to “follow-up [on] the recommendations made in” its 2018 report on EU passenger rights, including its proposal that the EU Commission take steps to enhance national authorities’ abilities to enforce passenger rights.
Alongside the ECA’s audit review, the European Commission and Consumer Protection Cooperation network of Member State authorities (CPC) have themselves launched a survey investigation into airlines’ current cancellation practices. Companies that are contacted as part of this process may therefore wish to approach the survey in accordance with points considered above, where applicable.
Travel-sector companies may wish to consider the steps listed below to prepare for the potential effects of these reviews. The list of businesses that may be affected includes air carriers serving EU passengers, service providers who assisted them in administering refund or voucher programs (e.g., booking agents or payments firms), and tour operators and travel agents.
- ensuring that employees who may receive inquiries from the authorities know that any responses should be reviewed and approved by the company’s in-house legal team and/or outside counsel;
- reviewing the terms of their participation in any national COVID-19 relief programs to assess the scope of any audit / inspection rights that national authorities may be able to exercise in a “downstream” or “follow-on” request;
- reviewing the records of their engagement with relevant national authorities or Directorates-General of the EU Commission (especially DG MOVE, DG JUST, and DG COMP, who are specifically named in the ECA’s audit preview) regarding voucher programs specifically and air passenger rights in general;
- investigating any incidents of noncompliance with applicable consumer protection regulations and / or the terms of COVID-19 relief programs, so that the company is prepared to respond to any “follow-on” investigations; and
- considering whether to engage proactively with local, national, or EU authorities and / or industry groups to evaluate any policy proposals included in the ECA’s final report and/or the outcome of the European Commission’s investigation.