Examination of Witnesses (Questions 129-139)
Professor Geraint Howells and Dr Christian Twigg-Flesner
25 OCTOBER 2007
Q129Chairman: Welcome to the Committee, Professor
Howells and Dr Twigg-Flesner. We are very grateful to you for
taking the time to come and speak to us about the Commission's
proposal on the Timeshare Directive and the way it is going to
affect other products as well. So far, we have heard from representatives
of timeshare consumers and the timeshare industry, as well as
from the Office of Fair Trading and the relevant minister—who
was with us last week, in fact. We do find some of the aspects
of the proposed new directive quite complicated and we are looking
forward to hearing your legal views to assist us with our own
understanding. I have just a few housekeeping points: we are scheduled
for an hour, so we should stop at 11 o'clock, and the session
is open to the public and will be recorded for possible broadcasting
or webcasting. A verbatim transcript will be taken of the evidence
that you have given us and it will be put into public record in
printed form attached to our report and on the Parliamentary website.
A few days after this meeting, you will receive a copy of this
transcript. If you feel you need to correct it, please do so as
rapidly as possible. If we get to the stage where we feel or,
alternatively, you feel there are other things you would have
wished to say, we are always very happy to receive supplementary
evidence—we find that very helpful, in fact. Could you start
for the record by giving us your names and your official titles,
please? Then, if you wish to make an opening statement we would
be very happy to listen to that, otherwise we will move directly
to questions. Welcome once again to our Committee.
Professor Howells: Thank you for inviting
us here today. My name is Geraint Howells. I am Professor of Law
at Lancaster University. I am also a barrister in Gough Square
Chambers in London, but the views I express are my personal views.
Dr Twigg-Flesner: My name is Dr Christian
Twigg-Flesner and I am a senior lecturer in law at the University
of Hull. I am also very grateful to have been given the opportunity
to speak to you this morning. Thank you.
Q130Chairman: Do you wish to make an opening
statement, or shall we go straight into the questions?
Professor Howells: I think the questions
are very helpful.
Q131 Chairman: Let us do that, then.
As we know, there is this review of the Consumer Acquis going
on. Your evidence seems to suggest that this particular proposal
has come at a rather unfortunate time. Could you elaborate on
the scope of the review of the Acquis and its likely timing and
can you expand on the relationship between the Timeshare Directive
and work on the draft Common Frame of Reference on European Contract
Law? In other words, there is one small thing and two big things,
how do they interrelate?
Professor Howells: It can be rather confusing.
I think we should start off by clarifying that, when we say it
is an unfortunate time, we do not mean that this activity should
not be taking place at this time, just that it should be borne
in the context of the general review. That review may take several
years to come to fruition. Of course one would not want real concerns
to be delayed in being addressed just because of the legal niceties
and technicalities, when people might suffer in the meantime;
we just wanted to say that the broader context needs to be borne
into account and that broader context is quite complicated. There
is a project, which has been an academic project driven by the
Commission, to produce something called the Common Frame of Reference;
the CFR, as it is commonly known now. Quite what that will become
is still to be seen in the future. At the very least, one expects
it will be a "tool kit", by which one means it will
be a point of reference for the drafting of European and hopefully
national legislations, so that the terminology and structure of
the various laws can be brought into greater harmony and consistency.
Under the contract, the academics in that group, of which Dr Twigg-Flesner
and myself are members, have to submit a draft of that by the
end of this year to the Commission. I think it is anticipated
that there will be further work after that and that a revised
draft or an extended draft will be submitted in 2008, with the
Commission looking to give its consideration to it during 2009.
At least that is my understanding of the timetable.
Dr Twigg-Flesner: That is correct, yes.
Professor Howells: That CFR is a broad
project, not restricted to consumer contracts. There has been
some movement within the Commission because the driving force
behind that project is DG-SANCO, the Consumer Protection Directorate,
to say that the work of that CFR should be focused more in on
consumer contracts of more relevance to the Directorate-General
spearheading that proposal, and so there has been a political
reorientation within the Commission to focus it back on the consumer
context. At the same time, the Commission has issued a Green Paper
reviewing the Consumer Acquis. Of course, it is envisaged that
review of the Consumer Acquis will be based on the CFR principles,
but, as the CFR principles are not yet in place and only in draft
form, there is a difficult point of timing between those two proposals.
That general review of the Consumer Acquis, which one suspects
will lead to some form of horizontal directive in the consumer
contracts area, has to be put in place with vertical legislation.
I think the Commission is not envisaging that this will be an
omnibus consumer code, that there will be a broad consumer contracts
directive, and vertical legislation like the Timeshare Directive
will stay in place, but certain issues, like, for example, the
modalities of withdrawal, will be regulated in a common way across
the whole plethora of consumer contracts in a horizontal directive
and then the specifics of the vertical legislation will add on
to that. Just to add to the picture a little bit further, there
is also something called the Consumer Compendium. That is another
project—and Dr Christian Twigg-Flesner was more directly
involved in that than myself: I was merely an adviser—which
is trying to map exactly what has been done in the area of the
eight directives which are under review in the Green Paper. We
may refer you at various times to that compendium. So you have
the CFR, the Green Paper—the possible horizontal directive,
and the compendium, which are the three European pieces of the
jigsaw into which this proposal has to fit.
Q132 Chairman: Let me see if I can clarify
that a bit from my own point of view. Does that mean that there
may come a time when, after the Timeshare Directive having been
dealt with in this current effort other codes or more general
assemblages of consumer law are put together and, as a result,
it might be necessary to go back to the Timeshare Directive to
make sure that the two things correlate?
Professor Howells: Yes.
Dr Twigg-Flesner: That is a very real
risk. If you look at the Green Paper itself, that raises issues
of what are commonly called horizontal application—so the
regulation of a generic right of withdrawal, the regulation of
generic pre-contractual information obligations—and quite
what shape these will take will not be clear until later on next
year, when the Commission intends, I understand, to propose a
formal revision of the legislation. There will be a new directive
dealing with aspects of withdrawal, consumer sales, potentially,
revision of contract terms, and all these broad horizontal issues
that have been regulated already at the European level. This directive,
of course, has been a classic example of a combination of pre-contractual
information obligations, on the one hand, and a right of withdrawal.
If that is going to be regulated in this horizontal directive,
or horizontal regulation, as it might even be—it does not
have to be a directive, of course—there is a strong likelihood
that whatever is decided may in fact be superseded by a different
proposal coming through next year and there might be a need to
either amend the directive or simply abandon some of the provisions
in this directive in favour of the more horizontal approach.
Q133 Chairman: Our impression from the
Minister the other day was that he did not agree with that approach
at all. He felt there were specific characteristics of the timeshare
market; in particular, the fact that the potential purchaser is
approached when he or she is not at home but, on the contrary,
in some other legal jurisdiction and therefore more exposed, as
it were, to malpractice, than if you were to go down to your local
car agent and buy a car or even, for example, buy a house, where
you are doing it within a body of law which you understand. Do
you feel that that argument makes sense?
Dr Twigg-Flesner: It does make sense.
I understand the rationale for granting the right of withdrawal
in the first place, but the same rationale applies in other contexts.
For example, in the general distance selling context, in the doorstep
selling context, there are also rationales for giving the right
of withdrawal in those circumstances.
Q134 Chairman: That is true.
Dr Twigg-Flesner: We have the same for
the more specialised contracts; for example, life insurance. There
is a right of withdrawal for that which can range between seven
and 30 days depending on which each Member State decides. If there
is a proposal to harmonise this entire withdrawal system for all
EU areas, then of course this will be affected in much the same
way. Whether it should be is a different question, of course.
Professor Howells: There may be justifications
for the specific approach to the timeshare problem, but is there,
for example, the justification for having a different definition
of "a day" for example, in each of these directives.
There are certain common things which can be harmonised and sensibly
harmonised. Equally, one of the things which disturbs me about
one of the points of review in the general review of consumer
law is the idea that seems to be coming forward that there must
be a standardised way of giving notice of the right of withdrawal.
If there is a European way in which you have to notify the right
of withdrawal and that is specified in a horizontal directive—which
I would not agree with—would there be any reason for not
specifying that same notice requirement in timeshare as opposed
to distance selling or whatever? So there are certain issues which,
once you have decided the policy, can then be implemented in a
harmonised way across the range of directives.
Q135 Chairman: You have made a very useful
point. I am not sure how the Committee will deal with it in its
report, but I think it is something we ought to take note of.
Thank you very much for that.
Dr Twigg-Flesner: May I add one point?
Q136 Chairman: Yes, of course.
Dr Twigg-Flesner: On this a question
of defining days and what are working days and what are calendar
days, back in the mists of time the European Union, or the European
Economic Community, as it was then, adopted a regulation which
is of general application—in 1971, I believe—that
tries to resolve this issue but what has since happened is that
people have forgotten about its existence, even if it remains
in force, and there is legislation in place which deviates from
that regulation. So we have very odd circumstances, where, in
the current timeshare directive, as it is in force, the time period
is regulated differently from what has been the generic approach
under this regulation of 1971. I think there needs to be greater
coherence in adopting what is already there and not trying to
do something else.
Chairman: I do not think we can afford
the time now, and I know it is in your written evidence. Thank
you very much for that. I am going to ask Lady Gale to ask the
next question.
Q137 Baroness Gale: There is quite a
lot of debate going on as to how long this cooling off period
should be. I think the Minister last week felt it should be 14
days and we have had the consumer groups saying 28 days. From
reading your evidence, perhaps your mind is still open as to what
it should be. I would like to ask if you could elaborate on that
view and whether the nature of timeshare is different from other
contracts. Do you have a view on the ideal length of period? Could
you offer your view on whether any further clarification is needed
on the cooling-off period to be measured in calendar days and
working days. I can see the difficulties, if you like, Europe-wide,
because there are the bank holidays and differences in what is
a working week and so on which are different in different countries.
Professor Howells: Somebody once told
me that a working day was a day on which the Post Office was open,
but I do not think that really helps you very much! My view is
that there is a sort of consensus coming around that 14 days as
a general cooling-off period is a sensible compromise between
lots of different positions. Across the whole range of withdrawal
periods, that seems to be my impression. But there may be specific
instances relating to timeshare. I noted when the original proposal
was made, the Commission, I think I am right in saying, had proposed
that there should be a 28-day cooling-off period when the timeshare
was sold in another country than the consumer's own state. You
might think there is some sense in that because if one flies off
to the sun for a 14-day holiday, gets accosted by a timeshare
salesman on your first night there, makes a decision rapidly to
buy it or within the first few days, then by the time you have
got back home you have a rather short time to react. We all know
the feeling of getting home, with the post on the front doormat,
and the way it takes you time to get back into work. It may be
quite hard before you sit down and reflect on the decision and
take the steps to do it. There may well be an argument for that
and one has to ask whether there will be any greater loss of certainty
for the industry. Will those extra 14 days really be an impediment
to an industry moving forward with their marketing strategy and
their policies and their certainty? Will there be any great increase
in the number of people using the cancellation item? Will that
be a good or a bad thing? The industry obviously think it will
be a bad thing but consumers might say it as a good thing if more
people use the right to cancel. I think it is a difficult issue.
My feeling is that it will politically quite hard to move beyond
14 days, but there may be arguments for that.
Dr Twigg-Flesner: It really depends on
whether the reason for the withdrawal right, the cancellation
right, is the pressure selling element—the consumer is pushed
into a room and gets this PR presentation and has to sign on the
dotted line to escape—or whether it is more a case of giving
the consumer chance to think it through. If it is based on just
the pressure element, then 14 days might be okay, because even
during those 14 days whilst you are on holiday you might realise
that really did not want to do this and you can withdraw. But
if you want to go away and go back home and seek legal advice,
for example, on the implications of having signed up to the timeshare
contract, 14 days, as Professor Howells says, might not be long
enough because you will still be on holiday when this period expires.
I think it must be the latter that is the real rationale: giving
people just the chance to think it through properly and to seek
advice. In that case, a longer period might well be appropriate.
In the Green Paper, there was the issue mooted of having two separate
cooling off periods: one standardised period of 14 days and then
a derogation for specific situations where a longer period might
be justified. It is interesting to see that in this proposal,
obviously the Commission has already settled on the 14 days.
Q138 Baroness Gale: The evidence we have
had from some groups is that if somebody is going to withdraw
they do it in the first few days so there is no need to have a
longer period. I do not know if there is strong evidence on that.
Dr Twigg-Flesner: There is a general
lack of research on how consumers behave and that is one of the
main problems we have. We do not know what consumers do; whether
they understand what it means to have a right of withdrawal; why
they exercise it, if they do; and why most of them do not exercise
it.
Professor Howells: If you look at consumer
psychology, most people like to think they have made good decisions,
so most people when they have bought a timeshare like to go home
and convince themselves and their friends that they are going
to have great holidays in the future. It is very rare for consumers
to take that step and withdraw. There needs to be something seriously
worrying and of concern to them. Maybe their financial situation,
if they get home and see they have lost their job or whatever,
would make them take that step. Most people like to think they
have made sensible, informed consumer decisions. As I understand
it that is the evidence there is.
Chairman: The psychology of it. Would
anybody else like to come in on this, otherwise will move on to
Lady Howarth's question?
Q139 Baroness Howarth of Breckland: I
think we are back where we started in this complicated set of
different procedures that are going on at the moment. Here is
another one: the Unfair Commercial Practices Directive and the
review of the Consumer Acquis. I love that word "Acquis"—I
do wish we could use English, but there you are. You mentioned
this in section 13 of your written evidence. We have understood
that this might address some of the issues that we have been discussing.
Could you say how great you think the role of this directive is
going to be, particularly in the holiday club sector, because
this is one that really does worry us at the moment. To what extent
does the Unfair Commercial Practices Directive reduce the need
for a Timeshare Directive? Again, it is in the package of all
you were talking about at the beginning, which would reflect very
much on what we would want to recommend in that package.
Dr Twigg-Flesner: I will perhaps explain
first of all how the Unfair Commercial Practices Directive—the
UPCD, as it is affectionately known by those in the know—relates
to the Acquis review and also consumer law more generally. The
Unfair Commercial Practices Directive is essentially focusing
on market behaviour/business behaviour: how contracts are marketed
to consumers; how businesses behave after contracts are negotiated,
when there might be after-sales issues to be resolved and so on.
It does not grant individual consumers specific rights. It is
more a regulatory tool that allows us to police the market, to
ensure that traders behave appropriately, that they do not engage
in misleading behaviour, aggressive behaviour, and so on. It can
be used in that sense to deal with rogue traders or traders who
are known to the enforcement agencies for continuously being accused
of not acting fairly and responsibly towards consumers. But if
there has been an infringement of the legislation implementing
the UCPD, which I think will be enacted later on this year in
the United Kingdom, there will be no individual consumer claims
based on that; it will simply be enforced through injunctions,
and potentially the criminal law, but nothing that will grant
consumers specific claims for damages and so on. The Law Commission
may investigate the possibility for this—indeed, I am not
sure whether that issue has been parked altogether now. The Timeshare
Directive, on the other hand, deals with individual consumers
and gives individual consumers the right, on the one hand, to
get all the information they need to make an informed decision
in that particular case, but also, if they do want to change their
mind, then to withdraw from the contract. The two fit together
in the sense that you have general policing of the market by the
UCPD and then individual consumers, who do not benefit from the
UCPD as such, able to rely on the withdrawal rights to get out
of the contract if they so wish. If there are particular concerns
about the way certain timeshare operators behave, then the Timeshare
Directive will allow individual consumers to some extent to get
out of the bargains they have entered into by withdrawing from
the contract—if they are sufficiently aware of the right
of withdrawal and so on, because they need to know to be able
to exercise their right of withdrawal. If there are numerous concerns
and the enforcement agencies are made aware of those, they can
rely on the UCPD, for example, to challenge these companies and
try to get them to change their ways or, indeed, to withdraw from
the market altogether. In combination with the Injunctions Directive
and the Consumer Enforcement Co-operation Regulation that can
be done on a cross-border basis, pan-European basis even.
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