Happy New Year 2012!

We wanted to wish all our readers all the BEST in 2012!

Merry Christmas!

merry christmas pics on Sodahead

We wanted to wish all our readers Merry Christmas 2011!

ECJ in Centre hospitalier universitaire de Besançon: Product Liability

Earlier I discussed on this blog the AG’s Opinion in case Centre hospitalier universitaire de Besançon (C-495/10). The case deals with a thirteen-year-old boy suffering burns from a defective electric blanket in a hospital in France. French law has a strict liability rule for public health providers for damages caused by defective devices and products. According to the hospital this rule breaches the full harmonisation character of the Product Liability Directive.

The Product Liability Directive, although it is not stated explicitly in the Directive itself, is an instrument of full harmonization (ECJ Case C-52/00 Commission v France). However, the Directive does not exhaustively harmonise the entire sphere of liability for liability for defective products. This means that matters not covered specifically by the Directive can still be covered by national law.

The ECJ therefore rules that the Product Liability Directive does not prevent national laws holding service providers strictly liable. The liability of service providers is not covered by the Directive, so that it does not fall under the harmonised scope of the Directive. As long as the liability of the service provider does not change the liability of those covered by the Directive. By deciding so, the ECJ follows Advocate General Mengozzi’s Opinion.

For the judgment, click here.

ADR and ODR explained

Recently, we posted about the intended changes in the European regulations on alternative dispute resolution as well as out-of-court dispute resolution (A step away from out-of-court dispute resolution for European consumers). As you may imagine this change has been widely debated in various news. If you are interested in reading more about it, I recommend you the following:

Darin Thompson's blog entry "Online Dispute Resolution Expansion in the EU" within SCL - The IT Law Community

Rafal Morek's blog entry "ADR and ODR for EU consumers: Proposals for new Directive and Regulation" on Kluwer Mediation Blog

Some stats on the use of the Internet in 2011

For some of our readers it might be interesting to read new statistical data that was published on the Internet use in households and by individuals in 2011 within Eurostat. The main finding is that in 2011:

• 71% of European citizens used the Internet on average at least once a week
• 91% of younger persons (aged 16-24)
• 40% of older population (aged 55-74)
• 56% used the Internet everyday or almost every day
• 24% of European citizens (aged 16-74) have never used the Internet
• Romania (54%)
• Bulgaria (46%)
• Greece (45%)
• Cyprus (41%)
• Portugal (41%)
• 73% households had access to the Internet (68% via broadband connection)

How Europeans use the Internet? They:

• search for information about goods and services (80%)
• read news (56%) 
• search travel related information (54%)
• search educational information (40%)
• participate in social networks (53%)
• consult wikis (54%)
• buy products or services online (58%)
• submit completed web forms to public authorities (28%)

For no man is an island

Last Friday, the conference 'Towards a European Legal Culture' took place at Trinity College in Oxford. The organisers, Kai Purnhagen (Ludwig-Maximilians-University Munich) and Geneviève Helleringer (University of Oxford), presented a diverse yet well-coordinated programme based on seven sub-themes that highlighted different aspects of European Legal Culture:
- background
- method
- science and education
- the State
- regulation
- law
- the individual

Since it would be almost impossible to summarise the many views and insights on European legal culture that came to the fore in the presentations and discussions, let me just mention some of the most significant, striking, innovative or inspiring thoughts that are of relevance for European (consumer) contract law...
...on systematisation - it may doubted whether this should be considered as an element of European legal culture, in particular given the unsystematic nature of EU (private) law itself, and it would be more helpful to aim at understanding the development of the EU in light of a study of the coming into being of (representative) nation-States in Europe;
...on dogmatism - cultural pluralism itself might be considered to form part of European legal culture and citizens should have the possibility to choose among different (legal) communities, within the boundaries set by the national or European legislature;
...on economics - insights into, for instance, the correlation between what the judge had for breakfast and the judge's rulings can teach us more about the actual effects of legal rules and, therefore, law & economics should be part of the legal curriculum;
...on forms of State - the idea of the 'Market State', based on opportunity, efficiency and consumer choice, can explain developments in several substantive areas of EU law;
...on community-building - considering that historically the nationalisation of laws and legal cultures has served mainly constructivist purposes (e.g. the codification of private law in continental European countries) today's renewed interest in the subject of European legal culture gives the impression of a novel attempt of community-building in a post-national constellation;
...on principles - it might be argued that legal principles form an expression of European legal culture, which may be found in the first place in the national legal orders (diversity), while then having to be evaluated on the level of the EU (unity?);
...on fundamental rights (my topic for the day) - the values reflected in fundamental rights in the EU may form building blocks for a European private law culture, if they are adequately integrated into legislation and adjudication on matters of private law.

Finally, of course, the current economic crisis did not go unmentioned during the various discussions and from that perspective it may be asked whether the debate on European culture is not of a Utopian nature. Then again, maybe we could strive for a more realistic Utopia, as suggested by Habermas? But that is something for further discussion in the next conference, I guess.

Disobedient Member States

One of the problems that European Commission has to constantly deal with is the late transposition of directives by the Member States. Since the directives do not have direct effect, that means that until the moment they are implemented by the Member States into their own national laws, citizens of the Member States may not benefit from the protection that the European law might have given them in these directives. Therefore, if the directive isn't timely implemented the intended protection of consumers, or harmonizing effect on the internal market that the directive aimed to achieve isn't reached. In order to 'encourage' the Member States to properly and timely implement the directives, the European Commission monitors the transposition process and sanctions those Member States that are too late.

One of the rules that the EU consumers were supposed to benefit as of the end of May 2011 were the new telecommunication rules, according to which e.g. consumers could change telecom operators within one day without changing their phone number as well as get more protection of their privacy and their data online (see: Consumer-friendly mobile phone contracts or Delete cookies?). However, as many as 16 Member States failed to fully implement these provisions up to this day (over 6 months beyond the implementation deadline). The European Commission addressed these Member States and asked for explanation as well as action. The next step would be putting financial penalties on those Member States who do not properly implement the Directive in the coming months. (see: Digital Agenda: Commission presses 16 Member States to implement new EU telecoms rules)

Another consequence of improper transposition may encumber consumers who choose to travel within EU by air. Part of the airline ticket price that passengers pay is the cost of airport charges (i.e. what airlines have to pay to the airports for using airport runaways as well as cost of using airport terminal infrastructure by passengers). Even if most of these airport charges has to be paid directly by the airlines, it ultimately is being borne by the passengers since airlines include these costs in the price of the airline tickets. According to the airport charges directive, which was supposed to be transposed by March 2011, Member States have to make sure that these charges are being set in accordance with principles of transparency, non-discrimination, etc. However, until this day this Directive has not been properly transposed by some Member States (incl. Germany, Austria and Italy with quite important for EU air traffic airports). The lack of transposition of this directive may mean for the consumers that they are paying currently more than what they should for air travel when they are using EU airports. Again, the European Commission addressed these Member States and asked for explanation and action. (see: Air transport: Commission requests Austria, Germany, Italy and Luxembourg to comply with rules on airport charges)

Consumers, Privacy and Data Protection - 5th International Conference

On 25-27 January 2012 in Brussels there will be a 5th International Conference on Computers, Privacy and Data Protection organized, with the theme: "European Data Protection: Coming of Age". Since we talked quite a bit about the new data protection and privacy rules in Europe I thought it might be interesting for our readers to know about this conference.

A step away from out-of-court dispute resolution for European consumers

Also on the 29th November (that was one busy day), the European Commission proposed two new legislative products on alternative dispute resolution, according to the schedule for 2011 that was announced at the beginning of this year (see previous post "Who needs courts?..."). These two proposals are to enable European consumers to solve their problems with traders without going to court, regardless of the kind of product or service that the contractual dispute is about and regardless whether they bought it in their home country or in another Member State (cross-border transactions). It has been estimated that if a universal, of good quality alternative dispute resolution (ADR) system (which means that dispute is solved by a neutral party, e.g. arbitrator, mediator or ombudsman) is introduced across the EU it could save consumers ca 22,5 billion EUR a year. European Commission focuses also on protection of consumers shopping online, planning to create an EU-wide single online platform, which will allow to solve contractual disputes online within 30 days.

Among the newly adopted proposals there is the Directive on consumer Alternative Dispute Resolution (ADR) and the Regulation on consumer Online Dispute Resolution (ODR). The Directive aims at creating out-of-court entities that would solve any contractual disputes in B2C relations. These ADR entities would have to be well-qualified, transparent, impartial, effective and fair. It would be an obligation of the trader to inform the consumer about the ADR entity which could deal with a potential contractual dispute. ADR entities are to resolve the disputes within 90 days. The Regulation, on the other hand, would focus on enabling resolving online disputes between consumers and traders located in different Member States and would create an online platform (ODR). The system is to send consumers' complaints automatically to the competent national ADR entity and it's supposed to resolve the dispute within 30 days.

Q&A on the proposals may be found here.

Unfair commercial practice ≠ unfair contract term ≠ void contract - AG's opinion in case C-453/10 Pereničová and Perenič

29 November 2011: AG's opinion in case C-453/10 Pereničová and Perenič

As you might have heard this was a busy week for me, therefore I'm a bit behind with news regarding European consumer law. I'll try to catch up with most of it this weekend, though. Firstly, on the day of my PhD defense the Advocate General Trstenjak gave an opinion in the case C-453/10 concerning interpretation of provisions of two consumer directives: Directive 93/13 on unfair contract terms and Directive 2005/29 on unfair commercial practices.

The opinion is not available in English yet, but let me translate for you the most important findings thereof. It concerned a following factual situation. A Slovakian company SOS (which is not a bank) grants consumer credits on the basis of standard contract terms. A married couple Perenič took out a credit of 4979 EUR which was to be paid back in 32 monthly rates of ca 199 EUR. The 33rd monthly rate, the last one, was supposed to be equal to the loaned amount, i.e. 4979 EUR. As a result the married couple was to return 11.352 EUR. The company indicated a yearly interest rate of 48,63%, however, due to court's calculations the yearly interest rate in practice was equal to 58,76%. When they were calculating the interest rate the company didn't take into account an additional payment for granting the credit which was 83 EUR. The concluded credit agreement has a few provisions that may be deemed to be unfair towards the consumers. The married couple was in delay with payments of one of the instalments, and the company demanded payment of penalty (209 EUR) from them. The consumers then started proceedings to avoid the consumer credit contract.

The national court was questioning whether the consumer credit agreement contained unfair contract terms and what influence that would have on the binding force of the contract. The questions raised were as follows:

1. Does the aim of consumer protection of unfair contract terms directive require that the contract is declared void upon stating that it contains unfair contract terms in case such a solution would be more beneficial to a consumer?

2. Is the fact that the service provider indicates a lower than factual yearly interest rate to the consumer an unfair commercial practice based on the provisions of the unfair commercial practices directive? If it is an unfair commercial practice does it influence the binding force of the consumer contract (taking into account interests of the consumer) and the unfairness test conducted on the basis of unfair contract terms directive?

The Advocat General Trstenjak considering the first question, reminded that art. 6 of the Directive on unfair contract terms states that an unfair contract term is 'not binding' on the consumer. She reminds that this means that the provision doesn't lose its binding force for the service provider (it's voidable, and not void) (Par. 49). Furthermore, the Directive states that 

"the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms"

This seems to suggest that an unfairness of a contract term results only in its voidability, and the rest of the contract remains in force as long as the disproportion encumbering the consumer was removed. It has been previously argued by AG Tizzano in case Ynos (C-302/04) that this interpretation is in favour of consumers since it prevents the consumer to be bound by an unfavourable contractual term, but it doesn't protect the service provider, for whom removal of one or more contractual provisions might be disadvantageous and might raise his interest in avoidance of the whole contract. Other interpretation (automatic voidness of the whole contract) would weaken consumer protection. (Par. 50) Therefore, the Member States are not bound to proclaim the whole contract void in case of recognizing an unfair contract term within it. (Par. 51) The whole contract should be, however, declared void if it cannot exist without the avoided contract term. (Par. 52) The test whether the contract could exist without the unfair contract term could be conducted based on subjective (taking into account consumer's interests in avoiding the whole contract) or objective criteria (whether the contract is objectively still able to be performed). (Par. 54) The AG Trstenjak states that it's the objective criteria that should be applied by court. (Par. 56, 68) She bases her conclusion on the linguistic interpretation of the contract (Par. 58), since the formulation of Art. 6 suggests that avoidance of the whole contract should be exceptional. This conclusion is also supported by Art. 22 of the Directive which again seems to refer to the objective crtieria (Par. 59). Additionally, the aim of the Directive is to restore the balance between the contractual parties by removing from the contract unfair contract terms and not to avoid contracts that contain unfair contract terms. (Par. 63) According to AG Trstenjak taking into account only consumer's interests in deciding whether the whole contract should be avoided would lead to granting the consumer with a more beneficial position than the one that equal parties usually have on the market. That was not the aim of the Directive. There is no reason to release the consumer from all his contractual obligations, that he took upon himself voluntarily and while being well-informed thereabout. (Par. 65) However, pursuant to Art. 8 of the Directive, Member States may provide for more consumer protection in their national laws (minimum harmonisation). This means that Member States may also decide to proclaim the whole contract void in case it contains an unfair contract term and avoidance of the whole contract is more beneficial for consumers. (Par. 71-72) 

Summing up, Member States don't have to declare the whole contract void in case it contains an unfair contract term and avoidance of the whole contract would be more beneficial to consumers, but they are free to do so.

Answering the second question, AG Trstenjak first mentions that professionally offering consumer credits is a 'commercial practice' regulated by the Directive on unfair commercial practices, since it relates to a sale of goods and services, i.e. financial services (art. 2 (d) Directive). (Par. 80) However, as AG states further Directive 2005/29 does not have any consequences as far as the binding of a contract term (and the contract itself) that might be seen as an unfair commercial practice is concerned. This might be evaluated only on the basis of Directive 93/13. (Par. 83-84) Therefore, the AG concludes that, in general, provisions of the Directive 2005/29 might not be used in the national proceedings at hand. (Par. 86) However, the AG then mentions that even if the provisions of the Directive 2005/29 may not have specific legal consequences in a given situation, they should be taken into account in interpretation of other legal acts protecting consumers, since they are interrelated, and Directive 2005/29 is in a certain way a general regulation in comparison with Directive 93/13. (Par. 88-89) Taken this into account AG Trstenjak assesses whether the fact that the service provider gave a lower estimate of a yearly interest rate than the real one to the consumer should be seen as an unfair commercial practice. The AG considers it to be a misleading commercial practice, since it influences consumer's decision to conclude a contract by giving him false information regarding an essential contractual element. (Par. 96) The average consumer is perceived as collecting offers of many potential credit providers and as making a decision on with whom to conclude a credit agreement based on comparison of their offers, including costs involved therewith. (Par. 99) The yearly interest rate should be seen as part of the contract's price. (Par. 97) As a result, the real amount of the yearly interest rate should be seen as an essential information when concluding a credit contract without which a consumer would usually not be able to take a reasonable transactional decision. Misleading him as to this information has to act as to his detriment. (Par. 101) Therefore, it should be considered to be an unfair commercial practice. (Par. 103) It doesn't matter either whether the service provider acted with due professional diligence when calculating the yearly interest rate. (Par. 106) The fact that misleading information given in the contract constitutes an unfair commercial practice doesn't automatically lead to a conclusion that such a contractual provision is an unfair contract term. To the contrary, the general unfairness test still needs to be conducted. (Par. 121, 125-126) However, the fact that there has been an unfair commercial practice recognized may be taken into account when assessing unfairness, based on art. 4 of the Directive 93/13 according to which all circumstances attending the conclusion of the contract are to be taken into account. (Par. 123-125)

Summing up, indicating in a consumer credit contract a yearly interest rate that is lower than the factual one constitutes an unfair commercial practice. It doesn't automatically mean that such a provision in the contract should be considered unfair, but this assessment should be taken into account by the national court when it conducts the unfairness test (as a circumstance attending the conclusion of the contract).