Wednesday, 22 January 2020

Volkswagen hit by a multi-million fine from the Polish consumer protection authority

Last September we informed our readers about an interesting report from BEUC summarizing the developments in law enforcement following the Dieselgate scandal. Last week a fine of over PLN 120 million (approx. EUR 28 million), imposed on Volkswagen Group Polska by the President of the Office of Competition and Consumer Protection in Poland (UOKiK), was added to this list. The violations established by the decision (the operative part is available in Polish here) are anchored in the Polish provisions implementing Directive 2005/29/EC on unfair commercial practices (UCPD), specifically Art. 4(1), Art. 5(1), Art. 5(3)(2) of the Act on counteracting unfair market practices (Ustawa o przeciwdziałaniu nieuczciwym praktykom rynkowym). These correspond, respectively, with: the general clause on unfair commercial practices, the specific provision on misleading actions, specification on misleading actions related to the main characteristics of the product.

According to the press release, the President of the UOKiK contested following behaviours of the trader: disseminating false information in advertising materials which suggested that Volkswagen, Seat, Skoda and Audi cars were environmentally-friendly and met the requirements for nitrogen oxide emissions; providing incorrect nitrogen oxides emission parameters in EC certificates of conformity; issuing guidelines for sellers of these cars which suggested that consumers' complaints should not be taken into account. 

Besides imposing a fine, the President of the UOKiK also obliged the trader to send a letter to the affected consumers and publish the content of the decision on its website. VW can appeal the decision to the Court of Competition and Consumer Protection (SOKiK) in Warsaw.

Tuesday, 21 January 2020

Ex officio unfairness assessment limited to contractual clauses connected to the dispute – Opinion of AG Tanchev in Case C‑511/17 Unicredit Bank Hungary


On the 19th of December 2019, AG Tanchev delivered an Opinion on Case C-511/17 (found here), which deals with the scope of the obligation to assess the unfairness of contractual terms ex officio, under Directive 93/13/EEC (Unfair Terms Directive). As AG Tanchev starts by noting, this case is related to other cases on the Hungarian framework on consumer credit agreements denominated in a foreign currency (for example, Sziber C‑483/16, OTP Bank and OTP Faktoring C‑51/17 and Dunai C‑118/17).

The ex officio obligation in question is well established in the CJEU’s case law. This obligation is aimed at ensuring an effective protection of the consumer under the Unfair Terms Directive and it intends to restore the balance between the consumer and the professional party (see, for example, OTP Bank and OTP Faktoring C‑51/17 and Pannon GSM C243/08). As the AG acknowledges, the interpretative framework of the obligation to assess unfairness of contractual terms ex officio affects the civil procedure principle that the subject matter of an action is delimited by the parties and the court can go no further than that subject matter (ne ultra petita). In fact, the existence of this obligation means that under national procedural law the court must go beyond the object of the dispute as originally defined by the parties (para 44).

The main question raised in this case was, as summarized by the AG, whether a national court is required under Articles 6(1) and 7(1) of Directive 93/13 to examine ex officio the unfairness of all of the terms of the contract even if they are not necessary to decide on the parties’ claims in the dispute. In other words, the question underlying this case is whether that obligation should be unlimited and, if not, what the limits of that obligation are. Must all contractual terms be examined for unfairness based on the courts’ own motion?

To clarify, there are three different dimensions to this issue. First, whether national courts must only assess the unfairness of the terms invoked by the consumer or also the unfairness of other terms that the consumer did not invoke (ex officio). Second, whether the courts must take the whole contract into account when assessing the unfairness of the terms invoked. Third, whether there is an ex officio obligation regarding investigative measures, if the court does not have all the necessary elements to assess the unfairness of a term.

All the parties’ observations – as well as the AG’s – agreed that an unlimited obligation to assess the unfairness of contractual terms ex officio would largely (and unnecessarily) hinder fundamental principles of national procedural law. Illustratively, UniCredit Bank Hungary defended a triple criterion to limit the ex officio obligation: a national court must examine unfair terms ex officio only if i) the court has ‘the necessary legal and factual elements’ for that examination, ii) if the term concerned is relevant to the decision to be given and iii) if the term has a material and logical relationship with the case. In its statement, Hungary followed the same lines of reasoning, arguing that the court must examine ex officio ‘terms whose unfairness can be clearly established, as a matter of fact, on the basis of the available evidence’.

Following the same logic, the AG concludes that Articles 6(1) and 7(1) of the Unfair Terms Directive require national courts to assess ex officio the unfairness of contractual terms which are related to the object of the dispute and have a link with the legal or factual elements in the case file. This opinion suggests, therefore, a double criterion to limit the ex officio obligation to assess unfair terms: a relation between the clause and the object of the dispute and a link with existing legal or factual elements in the case. In other words, the courts’ obligation to assess ex officio the unfairness of contract terms does not extend to all contract terms, but only those with a link to the case in question. Consequently, AG Tanchev’s opinion is that national courts do not have to examine ex officio all the other contractual terms for unfairness, but merely to take all the other terms into account when examining the unfairness of a specific term, according to Article 4(1) of the Unfair Terms Directive.

This interpretation also means that it is not enough that the contractual term is relevant to the object of the dispute, but it is also necessary that the court possesses some legal and factual elements to determine the unfairness of the term. AG Tanchev also states that Articles 6(1) and 7(1) of Directive 93/13 allow national courts to ‘take ex officio investigative measures to complete the case file’ (e.g. asking for clarification or documentary evidence from the parties) in order to obtain the necessary legal and factual elements to carry out an ex officio examination of unfairness (para 55). The AG’s opinion follows the CJEU decision in VB Pénzügyi Lízing (C‑137/08). According to the AG, it appears that if the national courts do not have the necessary legal or factual elements, they are not obliged to assess the unfairness of the term, although they are able (but not obliged) to request those elements from the parties.

While this interpretation seems reasonable and it strikes a balance between fundamental principles of civil procedure law and EU consumer protection, this last argument regarding ex officio investigative measures is slightly more confusing than the previous ones. In fact, as the AG acknowledges, the CJEU has previously highlighted the need for ‘sufficient evidence’ in order to assess the unfairness of the contractual terms (para 62). The AG addresses this aspect by stating that ‘this may be viewed as lending support for the position that the national court has at its disposal sufficient legal and factual elements for the ex officio examination if necessary by being able to take ex officio investigative measures to that effect’. More clarification on this aspect in the final CJEU decision would be desirable.

Sunday, 19 January 2020

Ex officio control in European order-for-payment procedure

A case we have not reported yet on this blog but is certainly of interest in the light of several other cases on (national) expedited debt collection procedures - such as SalvoniProfi Credit and Addiko Bank - is Bondora (Joined Cases C-453/18 and C-494/18), a Spanish preliminary reference on ex officio control of unfair terms in the context of a European order-for-payment procedure. In short, the CJEU held that national courts can request from the creditor additional information relating to the terms of the agreement on which the claim is based. For a more extensive discussion of the case, we refer to this blog on ConflictofLaws.net.

Friday, 10 January 2020

No inertia selling in non-individually requested energy contracts - EVN Bulgaria Toplofikatsia and Toplofikatsia Sofia (joined cases C‑708/17 and C‑725/17)

Facts

Joined Cases C‑708/17 and C‑725/17 (delivered on the 5th of December 2019 and found here) deal with owners of apartments in a building in co-ownership. In both cases, there is a contract for the supply of thermal energy concluded between the majority of the owners of the building and an energy supplier (EVN Bulgaria Toplofikatsia and Toplofikatsia Sofia, respectively). Also in both cases, the energy companies sent to the individual co-owners (Ms Dimitrova and Mr Dimitrov, respectively) a bill for energy consumption costs. The co-owners in question alleged that there is no contractual obligation between them and the respective energy companies since they did not individually request the supply of thermal energy, according to the prohibition of inertia selling of Directive 2011/83/EU and of Directive 2005/29/EC. Moreover, Ms Dimitrova and Mr Dimitrov argued that the consumption reflected on the bills did not reflect their actual energy consumption, which would breach Article 13(2) of Directive 2006/32.

Legal issues

There are two relevant issues from a EU consumer contract law perspective: first, whether there is inertia selling in the case of lack of individual request of energy supply; second, whether the co-owners of a building are consumers. Moreover, from a EU consumer energy law perspective, the case determines whether the bills for the consumption of thermal energy can be calculated in proportion to the heated volume of each owner’s apartment. This case is also interesting because it addresses the relationship between EU consumer law and national contract law.

CJEU’s decision

The CJEU started by determining the applicability of the Consumer Rights Directive. In this case, there is a contract concluded between the thermal energy providers and, according to Bulgarian law, the owners of a building in co-ownership. The question was whether the owners of the building can be considered consumers. Following AG Saugmandsgaard Øe’s opinion, the CJEU answered this question in a brief and evident manner: as long as the owners are not involved in commercial or professional activities, they are consumers within the meaning of Article 2(1) of the Consumer Rights Directive.

Then, the CJEU dealt with inertia selling. Inertia selling has been defined in the CJEU’s case law as a ‘conduct whereby the trader demands payment from a consumer for a product or service which has been provided to that consumer without the consumer soliciting it’ (Wind Tre and Vodafone Italia, C‑54/17 and C‑55/17). Inertia selling is considered an unfair commercial practice under Article 5 and under point 29 of Annex I of the Unfair Commercial Practices Directive. In addition, inertia selling is prohibited by Article 27 of the Consumer Rights Directive. The notion of inertia selling revolves around the concept of solicitation as the act of asking for a service or a good to be provided to the consumer. Therefore, to discuss whether this is a case of inertia selling, the CJEU had to discuss the notion of consent. In fact, the question is whether Mr and Mrs Dimitrova consented to the contract, considering that they did not individually agree to it, but that the majority of co-owners as a group decided it. In other words, when can we consider that a consumer ‘solicited’ a service?

The CJEU highlighted that aspects regarding consent and the formation of the contract are determined by national law, as is acknowledged by Recital 14 and Article 3(5) of the Consumer Rights Directive. Bulgarian energy law provides that the energy installations in a building in co-ownership follow from the written consent of (at least) two-thirds of the owners of the building. Therefore, the energy service appears to also have been solicited by the co-owners in question, since the rules on contractual consent are defined by national legislation. Article 27 of the Consumer Rights Directive states that ‘the absence of a response from the consumer following such an unsolicited supply or provision shall not constitute consent’. Taking Bulgarian law into account, the CJEU determined there was no unsolicited supply of thermal energy in the terms of Article 27 of the Consumer Rights Directive. It is noteworthy that, as the Court implied, the consent necessary to have a ‘solicited’ energy supply can be found in the co-owners’ agreement to be subject ‘to all (…) the decisions adopted by the general meeting of the owners of property in that building’. As a consequence, the CJEU concluded that the Consumer Rights Directive and the Unfair Commercial Practices Directive do not preclude a national law that requires co-owners to pay for energy bills regarding a contract that they did not individually request (and did not use). The take-home message is that the mere lack of individual consent for the supply of a service does not automatically mean that there will be inertia selling under EU consumer law.


Finally, the defendants claimed that to calculate the bills for consumption of thermal energy proportionally to the heated volume of the apartment instead of based on actual consumption goes against Directive 2006/32 and Directive 2012/27. However, both the AG and the CJEU concluded that a law that allows for such a method of bill calculation does not violate EU law, considering that the above-mentioned Directives give the Member States a wide discretion in what concerns the calculation method for billing for thermal energy consumption in buildings in co-ownership.

Friday, 3 January 2020

Symposium 'Consumer and Data Privacy: the digital revolution of legal, social and economic interaction'

Happy 2020 to all our readers! After (I hope) a relaxing Christmas break for most of us, it is time to look forward to consumer events/news/developments that are awaiting us in the coming weeks/months. To start with, you may be interested in a symposium, which takes place that on January 24th at Maastricht University, on the topic of 'Consumer and Data Privacy: the digital revolution of legal, social and economic interaction'. Three keynote speeches have been scheduled by: prof. Sally Wyatt (Maastricht University), prof. Roger Brownsword (Bournemouth University and King's College London) and prof. Hans-W. Micklitz (EUI). The registration is open until January 17th and there is still a possibility to submit your research posters.

Friday, 20 December 2019

Airbnb scores a clear victory before the Court of Justice

Earlier today the Court of Justice delivered a judgment in case C-390/18 Airbnb Irelend. The ruling largely follows the earlier opinion of Advocate General Szpunar, on which we reported in a previous post. Similarly to the widely discussed judgment in Uber Spain and Uber France, the commented case concerned the applicability of E-Commerce Directive to services provided by operators of the so-called collaborative platforms. In the judgment issued today the Court drew upon the criteria developed in Uber, yet the factual context in the case at hand ultimately led it to a very different conclusion. Most importantly, following the judgment, services such as those provided by Airbnb do fall within the scope of Directive 2000/31/EC on electronic commerce. Consequently, free movement of such services from other Member States can only be restricted under national law if substantive and procedural conditions laid down in that Directive are fulfilled. While the judgment, of course, comes in the context of preliminary ruling procedure, the interpretation provided by the Court is clearly favourable to the platform provider. 

Facts of the case 

The case focused on the activities of Airbnb Ireland, a company established in Dublin under Irish law, offering an electronic platform which allows hosts with accommodation to rent and prospective guests to establish contact with one another. The company also offers host and guests a number of additional services, such as a format for setting out the content of an offer, photography services, civil liability insurance, a guarantee against damages, an optional tool for estimating the rental price and a reputational feedback system. The monetization occurs primarily via commission, collected from guests by Airbnb Payments UK Ltd along with other charges.

The business model of Airbnb has met with criticism of the incumbent players in the travel sector. In the present context, the Association for professional tourism and accommodation in France (AHTOP) argued that activities of Airbnb violated the applicable national rules regulating certain transactions concerning real property and financial goodwill (Hoguet Law). Pursuant to this law, mediation and management of buildings and businesses could only be undertaken after having obtained a professional licence. Airbnb did not have the relevant license, but contested the AHTOP’s claims, arguing that the Hoguet Law was in any case not enforceable against it, as it did not comply with requirements set out in Article 3(4) of the E-Commerce Directive. 

Judgment of the Court 

Qualification of services provided by Airbnb 

The judgment issued today appears to be a big win for Airbnb. Most importantly, according to the Court, its business model is to be distinguished from activities of Uber, which were qualified not as information society services, but rather as services in the field of transport. Importantly, in reaching that conclusion the Court did not distance itself from the Uber judgments. On the contrary, the test to be undertaken in order to establish whether an intermediation service, which prima facie qualifies as an information society service, forms an integral part of an overall service whose main component is a service of a different kind (transport service, accommodation service), has also been applied in the present case. In this regard, particular attention is to be paid to the ‘market maker’ and ‘decisive influence’ criteria. According to the Court, neither of these criteria has been fulfilled with respect to Airbnb.

In Airbnb Ireland, the Court found that the essential feature of the analysed platform was the creation of a list of offers for the benefit of hosts and guests. Services of this kind, provided by the operator, were not considered indispensable to the provision of accommodation services. The Court further found that Airbnb did not exercise decisive influence over the conditions under which accommodation services were provided, in particular it did not determine (directly or indirectly) the rental price charged. Also the provision of ancillary services did not call into question the separate nature of the intermediation service provided by that company and therefore its classification as an ‘information society service’. Consequently, services provided by Airbnb assessed in the present judgment qualified as ‘information society services’ and could benefit from the liberalisation framework laid down in the E-Commerce Directive. 

Unenforceability of free movement restrictions 

In the second part of the judgment the Court analysed whether an individual, such as Airbnb, may oppose the application to him or her of measures of a Member State restricting the freedom to provide an information society service which that individual provides from another Member State, where those measures do not satisfy all the conditions laid down in Article 3(4) of Directive 2000/31. Also in this regard, the Court responded in the affirmative, finding that free movement restrictions which, among others, have not been duty notified to the Commission are to be considered unenforceable against the provider in question. A similar conclusion had previously been reached by the Court with respect to the notification of technical rules under Directive 2015/1535. This line of case law is now explicitly extended to the E-Commerce Directive.

The conclusion reached by the Court in the commented part of the judgment was supported by a number of arguments. Firstly, the notification requirement set out in Article 3(4)(b) of Directive 2000/31 was considered to be sufficiently clear, precise and unconditional to confer on it direct effect and, therefore, it may be invoked by individuals before the national courts. What is more, despite certain differences between Directives 2015/1535 and 2000/31, in both cases the notification obligation was characterised not as a mere requirement to provide information, but rather an essential procedural requirement, which in turn justified the unenforceability of non-notified measures restricting the freedom to provide an information society service against individuals. Importantly, the fact that contested national law predated the entry into force of Directive 2000/31 had no bearing on this assessment. 

Concluding thought 

The commented judgment is another major building block to the EU legal framework in the so-called collaborative economy. The Court attempts to draw a line between particular business models of platform operators, following the previously developed ‘market maker’ and ‘decisive influence’ criteria. In the case at hand the effects of that reasoning have been clearly favourable to the platform provider. Accordingly, Member States’ freedom to regulate services of this kind, provided from other Member States, is limited by substantive and procedural conditions laid down in Article 3(4) of the E-Commerce Directive. This, however, does not mean that no independent national regulation of services like the ones provided by Airbnb is possible. One can well imagine national rules, which fulfil both sets of criteria, including the substantive ones related to consumer protection. Whether or not Member States will further attempt to regulate services provided by collaborative platforms – or particular components thereof, like rating or insurance – is still an open question. Further regulatory tendencies in that direction may ultimately strengthen a case for a targeted harmonisation at the EU level.

* The author carries out a research project on consumer protection in the collaborative economy, financed by the National Science Centre in Poland on the basis of decision no. DEC-2015/19/N/HS5/01557.

Tuesday, 26 November 2019

Cofidis II: on ex officio and limitation periods - Opinion AG Kokott

Seventeen years ago, the CJEU gave judgment in Cofidis, one of the first and well-known cases on the ex officio application of EU consumer law. In short, the CJEU held that a limitation period of 2 years under French law, which prevented the court from examining (at its own motion or at the request of the consumer) the unfair nature of terms in a credit contract, was contrary to the principle of effectiveness. According to the CJEU, traders would merely have to way until the expiry of the time-limit before seeking enforcement of the (unfair) terms they would continue to use in consumer contracts.

Unsplash.com
AG Kokott recently delivered an Opinion in Cofidis II, a French case as well, on a very similar issue. In an action for the enforcement of a credit contract against two consumers, Cofidis had argued that the court could not address of its own motion a possible infringement of the requirements of the Consumer Credit Directive, because it had been raised by the court more than 5 years after the conclusion of the contract and thus, was time-barred. Kokott's Opinion also covers another case, from the Czech Republic, on the question whether the court could be prevented from imposing a 'penalty' - nullity of the credit contract - only if the consumer brought an objection within 3 years. Both cases therefore give rise to the question to what extent national courts must establish and penalise the trader's failure to comply with its obligations under the Consumer Credit Directive ex officio, irrespective of national rules on limitation periods. 

Kokott's Opinion is interesting for three reasons. Firstly, she discusses the rationale of ex officio. Secondly, she looks at the (a)symmetry between consumers and traders in their possibilities to bring an action on the basis of long-term contracts, which impacts the (in)compatibility of limitation periods with the principle of effectiveness. And thirdly, she argues that a 'penalty' can be imposed ex officio as a means of defence in an action brought against consumers, which would still be within the subject-matter of the dispute - as long as the right to be heard is observed. 

Rationale of ex officio

Kokott starts by referring to the difference between Radlinger and Bankia, also noticed and analysed by Candida Leone in a recent paper on the New Deal for Consumers. Bankia shows that not every obligation arising from EU directives in the field of consumer protection must be examined by national courts ex officio. While the Unfair Contract Terms Directive stipulates the legal consequence of the use of unfair terms - i.e., they are not binding - the Unfair Commercial Practices Directive leaves it to the Member States to establish the necessary means to combat such practices (point 38). The CJEU's case law on the UCTD cannot be automatically extended to the Brussels I regulation either; see Salvoni

Kokott then continues with listing relevant factors that determine the need for ex officio examination. Firstly, both Czech and French law attach legal consequences to infringement of (the provisions transposing) the Consumer Credit Directive for the benefit of consumers (point 46). This suggests it does not matter that the Directive leaves it to the Member States to lay down penalties (points 44-45). Secondly, it follows from Radlinger that compliance with the Directive must be examined ex officio where necessary (point 48). In this respect, Kokott draws attention to the weak position of consumers in terms of knowledge and bargaining power, and the risk that they will not invoke protective norms due to a lack of awareness. Furthermore, the Directive aims to make creditors accountable and to prevent them from granting loans to consumers who are not creditworthy (point 51). In addition, "a systematic judicial review of compliance (...) contributes to ensuring a level playing field" (point 52; emphasis added). 

Asymmetry between consumers and traders

Limitation periods as such are not necessarily incompatible with the principle of effectiveness. However, this is different where they lead to an asymmetry of the possibilities to bring an action, i.e. the trader/creditor can assert its payment claims for longer than the consumer-debtor can assert the invalidity of the contract (point 63). Again, like in the first Cofidis case, the trader may circumvent consumer protection by simply waiting for the time-limit to expire before bringing an action. Credit contracts for consumers typically entail long-term obligations, so limitation periods that begin to run when a contract is entered into are questionable (point 65) - especially when there is generally only cause to carry out an examination of compliance with the Directive in the event of default, likely after expiry of the limitation period of 3 or 5 years. Therefore, consumers are at risk of losing their rights without ever having been aware of them.

In Kokott's view, legal certainty does not require limitation periods that begin to run when a contract is entered into. The creditor itself has caused the risk that consumers claim their rights over relatively long periods of time by breaching its obligations under EU law (point 68). 

Penalties 

Lastly, Kokott considers the 'penalty' for the creditor's breach of its obligations, which must be effective, proportionate and dissuasive (point 74). Kokott distinguishes supervisory penalties from 'sanctions' as an effective means to enforce the Directive's requirements, which also serves to protect the individual (point 82). Individual consumers are not specifically aided by general supervisory measures, but they are by e.g. the creditor's loss of entitlement to interest; see Home Credit Slovakia and LCL Le Crédit Lyonnais

Kokott submits that, whereas national courts cannot apply of their own motion a penalty which amounts to a counterclaim, it can impose such a penalty ex officio "if this merely averts a form of order sought by the applicant" (points 83-84). This does not run counter to 'the principle of party disposition'. We might add that ex officio examination of an infringement clearly falls within the subject-matter of the proceedings if the action is based on (enforcement of) the contract. The step to ex officio imposition of a 'penalty' is not so big, in the light of the Directive's aim to protect consumers. Of course, the right to be heard as guaranteed by Article 47 EUCFR must be observed in this context. 

Thursday, 14 November 2019

How to claim from air carriers when flight included in a package travel contract - AG Saugmandsgaard Øe in Primera Air Scandinavia (C-215/18)

Last Thursday AG Saugmandsgaard Øe issued an opinion in the Primera Air Scandinavia case (C-215/18 - English text is not available), interpreting provisions of Regulation No 261/2004 on air passenger rights and of Regulation No 44/2001, that is Brussels I, on jurisdiction. The passenger, domiciled in Prague (Czech Republic), was flying with Primera Air Scandinavia airlines between Prague and Keflavik (Iceland). She purchased the tickets for this flight at a Czech travel agency. Unfortunately, the flight was delayed for more than 4 hours, thus she has claimed compensation on the basis of Article 7 Regulation 261/2004 (as it was interpreted in the Sturgeon case, i.e. as applicable to long delays, too). The airline refused to pay the compensation claiming extraordinary circumstances. The passenger decided to go to court with her claim, but the Czech courts had doubts as to their jurisdiction due to the uncertainty as to which, if any, provisions of Brussels I Regulation could apply in this case.

The issues in this case pertained to:
1. whether the passenger had a contractual relationship with the air carrier in the meaning of Art. 5(1) Brussels I Regulation, as her flight was part of a package travel contract concluded with a travel agency;
2. whether the legal relationship between the passenger and the air carrier was a B2C relationship;
3. whether the air carrier had a locus standi as a defendant in a case raised on the basis of Regulation No 261/2004, even if the passenger concluded a package travel contract falling under the scope of Directive 90/314?

Legal relationship between passenger and air carrier
As Art. 5(1) Brussels I Regulation introduced special jurisdiction rules for disputes based on contractual claims, the Court was asked to elaborate on whether there was a contractual relationship between the passenger and the air carrier. After all, the passenger concluded a contract with the travel agency instead, for a package travel contract encompassing the contested flight. AG Saugmandsgaard Øe recalls that in the judgment in joined cases flightright (C-274/16, C-447/16 and C-448/16) the Court has already decided that claims from Regulation No 261/2004 may be raised as contractual claims against an operating air carrier, even if the passenger purchased the flight ticket from another air carrier (para. 30). The core of Art. 5(1) Brussels I Regulation is seen applying special jurisdiction rules when there was a case of a voluntary acceptance of a legal obligation of one party towards another party (rather than recognition of their role as contractual parties) (para. 31). AG Saugmandsgaard Øe decides that in the given case the same reasoning should apply (para. 34-35), as the operating air carrier voluntarily decided to perform the obligations towards the passenger that under the concluded package travel contract belonged to the travel agency (and their agents). As the air carrier chose to perform the flight between Czech Republic and Iceland, they should have been aware that they will be performing services in these two countries, and thus could face legal claims in courts of one of them (para. 37).

Is this a consumer relationship?
Art. 16 Brussels I Regulation provides for further special jurisdiction rules for B2C contracts. In order for these rules to apply, requirements from Art. 15(1) Brussels I Regulation need to be fulfilled, that is: a consumer status of one party; conclusion of a B2C contract; the B2C contract needs to qualify as a contract defined in this provision (para. 42). Transportation contracts are generally excluded from the scope of this provision, except for package travel contracts (Art. 15(3) Brussels I Regulation). Here, AG Saugmandsgaard Øe sees the difference in case the passenger makes a claim against the travel agency (Art. 16 Brussels I Regulation applies) or the operating air carrier (it does not apply) (para. 45 and ). The literal interpretation of this provision draws attention to the fact that here the role of a defendant as a contractual party is vital to determine the applicability of special jurisdiction rules (para. 48). Only by contracting with consumers, the air carrier could predict in which country he could be sued by their passengers if things went wrong and legal certainty and predictability would be guaranteed (para. 57). Therefore, Art. 16 Brussels I Regulation should be strictly interpreted here.

Can the operating air carrier be sued when a passenger purchased a package travel?
In the recent Aegean Airlines (C-163/18) case the Court decided that the passenger could not claim reimbursement of a flight ticket from the operating air carrier for a cancelled flight, when the flight and the whole package travel contract was cancelled as a result of the travel organiser's insolvency. This is because it is the Package Travel Directive that provides insolvency protection as well as because Art. 8(2) Regulation 261/2004 clearly excludes a possibility of passengers to make such a claim (para. 68). This exclusion is not provided in Art. 6 and 7 Regulation 261/2004 which regulate compensation for a delayed flight. Thus a passenger travelling on a basis of a package travel contract could claim fixed compensation amount for a delayed flight from an operating air carrier pursuant to Regulation No 261/2004 and individualised compensation on the basis of PTD from a package travel organiser (para. 70).

Wednesday, 13 November 2019

CJEU in Kanyeba: "contract of transport" and the scope of Directive 93/13

Dear readers,

last week the Court of Justice rendered a decision of some consequence in the field of unfair terms - which was to an extent unexpected in light of the somewhat less conclusive AG Opinion published before the summer.

In Kanyeba, the CJEU had to decide on the applicability of Directive 93/13 to the legal relationship between a passenger who had boarded a train without paying a ticket and the railway operator: was this a matter of contract law or, given the fact that the consumer was seemingly not intending to pay the price, a matter or administrative regulations? Under Belgian law, authoritative court decisions had clarified that unfair terms control should apply in either scenario. The referring court, however, seemed to disagree: whether the Directive applies, it reasoned, is a matter of EU law and should thus be clarified by the Court of Justice.


The Court's answer suggests that the Directive does, in principle, apply. This descends from the fact that, according to the Court, Regulation No 1371/2007, which defines certain essential rights of passengers of train transport services, must be interpreted to mean that a contract to transport under the Regulation (and hence, it seems, for purposes of consumer protection) is concluded as soon as a passenger boards a train with the intention to travel - irrespective of whether they have a ticket or whether they intend to purchase one. This conclusion, according to the CJEU, is warranted both by the wording and context of article 3(8) of the Regulation and by the consumer protection goals. The latter would be undermined, the court says, if consumers were exposed to losing all protection as soon as they boarded a train with no ticket. 

The finding may not mean much in the case at stake as the Court observes that the terms and conditions featuring the terms under consideration in Kanyeba - some very steep penalties for failing to buy a ticket in time or pay an extra charge - may quite possibly be exempted from unfair terms control under article 1 of the UCTD, which safeguards national statutory or regulatory provisions if they are applicable irrespective of the parties' will. 

Of probably broader interest - if in itself not incredibly surprising - is the answer given in this case to a further question raised by the referring court: if the penalties were to be found unfair, would the court be allowed to "replace" them by means of general tort law?

The Court's answer comes in two instalments, which I think must be separately considered: 
1) in para 74 the Court reiterates that the Directive precludes "that a national court replace that term, in accordance with the principles of its contract law, with a supplementary provision of national law"; however, a little above the Court reasons that
2) the question whether circumstances such as those at issue in the main proceedings are, moreover, capable of falling within the ambit of the law governing non-contractual liability does not come within the scope of Directive 93/13, but of national law.

The Directive, the Court says, does not seek to harmonise non-contractual liability. Hence, we seem to understand, it does not pre-empt claims in torts by the seller concerning the same circumstances which the penalty clause would have applied to. 

This conclusion makes very good sense and could help clarify some questions that scholars in various Member States have been grappling with in the past few years. In particular, I think it is safe to read two implications into this decision: 
a) a national court cannot decide, so to say ex officio, to grant damages on the basis of general rules to a party who was seeking to enforce an unfair term;
b) however, the Directive does not preclude awarding of damages when the claimant makes a relevant submission and fulfils all the conditions for granting such a claim as established by national legislation. 

While the comparative lawyer in me would have loved it for the Court to engage in a more general analysis on the notion of contract under the UCTD, I think this is a very balanced decision which deals well with a number of relevant issues without excessively muddling the waters or hiding away. 

Tuesday, 12 November 2019

Long live the E-Commerce Directive? First discussions on the Digital Services Act

Last week we informed about the Council's adoption of the first part of the New Deal for Consumers – directive on better enforcement and modernisation of EU consumer protection rules. With the next European Commission soon beginning its mandate, public attention is gradually shifting to the possible new initiatives affecting consumers in the digital market. Political guidelines of the (then-candidate) Ursula von der Leyen, shed light on two major areas: online platforms and artificial intelligence.

In both fields the initiatives are likely to build upon prior developments in the outgoing Commission. To recall, earlier this year the High-Level Expert Group on AI appointed presented Ethics Guidelines for Trustworthy Artificial Intelligence. The guidelines consider many issues of relevance to consumers such as human agency, safety, privacy, transparency, fairness and accountability. So far, however, it remains rather unclear how the guidelines will inform further actions at the EU level. 

By contrast, we are gradually hearing more and more about possible initiatives on online platforms. In this regard, the Commission has so far followed a “problem-specific approach” as illustrated by the targeted amendments to the consumer acquis, audio-visual media law or copyright law, the adoption of P2B regulation as well as multiple soft law measures on tackling illegal content. The E-Commerce Directive has technically remained unaffected, even though the tendency towards more responsibility of platform operators has been quite clear. According to the more recent reports, the Commission under President von der Leyen is expected to step up these efforts under the banner of “Digital Services Act”. The discussion about its shape are also at an early stage, yet it is not excluded that the new approach will turn out to be still more of essentially the same. According to the recent presentation from the Commission to the Council experts, current discussions appear to be centred on strengthening the cooperation between national regulatory authorities and potentially common rules on tackling different types of illegal content (such as hate speech) at the EU level. Consultations are expected to be launched at the beginning of 2020, potentially leading to more concrete proposals by the end of that year. Stay tuned!