A leading travel industry lawyer has suggested the Civil Aviation Authority is exceeding its powers in asking Atol holders to set aside payments to guard against possible failure.
Peter Stewart, partner at law firm Field Fisher Waterhouse, said: "The CAA seems to be trying to impose trust accounts [on Atol holders] and trying to require companies to set a cash sum to one side in the event of financial failure."
The CAA now requires all Atol-accredited bodies to introduce trust accounts and has requested some companies set aside cash sums. Stewart suggested this may be an "abuse" of the industry regulator's powers.
He told an Abta travel law seminar in London: "It's an interesting question as to whether the CAA is entitled to require this or to require trust accounts to operate.
"The CAA has a duty to consult [the industry] and has never consulted on either. It has consulted on a host of topics, but not on these."
Stewart said: "To require a company to operate a trust account has a material impact on the company, so I am surprised it has not consulted."
He asked: "Is this a breach of the CAA's duty to act fairly? Is the requirement beyond the powers of the CAA?
"No powers have been granted to the CAA to require trust accounts or to determine what payments a company must make. It may be an academic point. But the CAA's powers should not be abused."
At the same time, Stewart suggested UK travel companies "are being discriminated against" under the EU Services Directive by the CAA's financial protection requirements because EU airlines based outside the UK remain beyond the regulations.
He said: "UK companies are subject to [the regulations], but companies competing against them are not.
"Every travel company which is not an airline is being discriminated against. The question is could there be a challenge?"
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