Legal classification: No repayment in the event of the tour operator’s insolvency
The insolvency of a tour operator presents a significant challenge for affected travelers, since amounts already paid for package tours are often at stake. In the context of travel contract law, the central question is whether customers can reclaim their payments if the operator becomes insolvent before the trip takes place. On March 10, 2005 (Case No.: X ZR 193/99), the Federal Court of Justice (BGH) made a landmark decision on this issue, which significantly defines the rights of travelers in the event of the operator’s insolvency.
Background: Package travel law and insolvency risk
German package travel law is designed to provide comprehensive protection for travelers. According to §§ 651a et seq. of the BGB, the tour operator – in contrast to the travel agent – assumes a range of contractual obligations. However, if the contracting partner becomes insolvent, existing security obligations and liability issues come to the fore.
It should be noted that up until the entry into force of the EU Package Travel Directive 2018/2015/EU and its implementation into German law, in particular through the so-called security certificate (§ 651r BGB), the statutory requirements for legacy contracts could be less extensive. The BGH’s decision at the time related to a situation in which insolvency already existed prior to the trip and no security certificate had yet been provided.
The Federal Court of Justice’s decision on payment claims in the event of insolvency
Guiding principles and legal evaluation
In the present case, the Federal Court of Justice found that a traveler who had already paid the full or partial travel price to the organizing provider, in the event of insolvency prior to the start of the trip, generally cannot assert a right to repayment against the operator. The traveler’s claim becomes an insolvency claim, which is satisfied according to the insolvency quota—if any quota can be paid at all.
The BGH clarified that after insolvency arises, the customer’s original claim for contractual performance of the travel services is extinguished due to impossibility (§ 275 BGB old version, later § 275 BGB new version). At the same time, the paying customer does not have any priority right of repayment for amounts already paid outside the standard insolvency proceedings.
Impacts on consumer protection
The decision has recalibrated the legal need for protection between tour operators and travelers. It played a key role in prompting the legislature to establish clearer regulations in the interest of consumer protection: Since July 2018, it has been compulsory for tour operators to provide the customer with a security certificate upon conclusion of the contract, which secures the right to a refund of the travel price in the event of insolvency. Contracts before this cut-off date, however, were not subject to this regulation.
Differentiation between tour operators and agents
Another essential aspect of the case law concerns the distinction between tour operators and agents. While operators are subject to obligations from the package contract and corresponding security requirements, an agent is generally not liable for the performance of the travel services or for the operator’s financial default. However, special obligations may arise for agents if they themselves receive payments and do not promptly forward them to the operator.
Practical consequences for travelers and businesses
Insolvency risk remains with the customer – protection mechanisms after the ruling
Following the BGH’s decision at the time, travelers had to live with insufficient insolvency protection if an effective security certificate did not exist. The proceedings highlighted that contractually agreed payment modalities and their practical implementation—such as payment shortly after concluding the contract—presented a considerable risk for individual customers.
The legislature responded to this protection gap and introduced binding security obligations for tour operators. Companies acting as operators must now comply with statutory requirements and appoint a payment guarantor to ensure customers are refunded the travel price in the event of insolvency.
Limits to the enforceability of repayment claims
Judicially enforceable repayment claims today generally only exist if the customer was actually provided with a valid security certificate and the statutory requirements for handling the travel contract were met. In practice, where no security is in place, participation in the insolvency process is often the only option. This usually means losing a significant portion of the amount already paid, as insolvency quotas tend to be very low.
Developments in travel contract law and complementary protective measures
In light of this decision and more recent legal regulations, consumers are better protected, provided current package travel contracts have been concluded. Nevertheless, gray areas remain, such as with direct bookings of individual services or with contracts from foreign providers that may not meet the protection standards of German law.
Furthermore, the business risks for tour operators associated with compliance with the new requirements have increased—particularly regarding the obligation to provide proper security and timely information to customers.
Conclusion
The decision of the Federal Court of Justice from 10.03.2005 made a significant contribution to the development of travel law and to the later creation of improved consumer protection regulations in package travel law. It makes clear that without effective security in the event of a tour operator’s insolvency, customers may face substantial financial risks. These risks have now been addressed through ongoing legislative adjustment but remain relevant in scenarios not covered by this protection.
For all legal matters and open questions related to travel law, especially regarding security mechanisms and insolvency risks when booking travel services, the lawyers at MTR Legal Rechtsanwälte are happy to provide advisory support.
