Ex officio unfairness vs audi alteram partem - CJEU in Banif Plus Bank (C-472/11)

28 February: CJEU judgment in case Banif Plus Bank (C-472/11)

In the given case the CJEU was asked to further interpret articles 6 and 7 of the Unfair Terms Directive by a Hungarian court. 

The dispute between the parties arose upon a conclusion of a credit agreement by Mr Csipai with Banif Plus Bank in 2006, which was to expire on 15 June 2012. One of the standard contract terms stated that in case the contract was terminated earlier due to consumer's breach of contractual obligations, the bank was allowed to claim not only the sum total of all outstanding installments, but also default interest, costs. The installments payable included not only the capital amount but also interest on the transaction and an insurance fee. When the consumer stopped paying his installments in February 2008, the bank terminated the contract and demanded payment of all sums mentioned in the contract. The Hungarian court who presided over the case informed the parties that he thought that the contractual provision was unfair and he asked the parties to comment on the matter. Not surprisingly, the consumer submitted that the bank's claims are excessive and that he only recognizes the claim with regards to the capital sum.

The Hungarian court asked the CJEU whether a national court which finds of its own motion that there is an unfair term in a contract could inform the parties about the grounds for invalidity of the term and to ask them to submit a statement in that regard. (Par. 17) The CJEU replies that for the effective protection of consumers against an unfair contract term the national court has to evaluate the unfairness of its own motion and does not need to wait for the consumer to ask for declaration of invalidity of that term. (Par. 28) However, to properly implement the EU law, the national court needs to make sure that the other party to the contract is given a proper possibility to defend itself (respecting the general principle of audi alteram partem), especially since the court resolves the dispute "on a ground that is has identified of its own motion". (Par. 29) This: "(...) also implies a right for the parties to be apprised of pleas in law raised by the court of its own motion, on which it intends to base its decision, and to discuss them". (Par. 30) This all means that if the court finds of its own motion a contract term unfair, he needs to inform both parties of its assessment and ask them to submit their opinion on the subject, allowing each of them also an "opportunity to challenge the vies of the other party". (Par. 31) This would also allow the consumer to express his free and informed consent to the contested term, if upon being informed of a possibility of its invalidity he decided to not have it disregarded. (Par. 35) Additionally, the CJEU decided that the "national court must, in order to determine whether the contractual term on which the claim brought before it is based may be unfair, take account of all of the other terms of the contract". (Par. 41)

Compensation for delayed connecting flights - CJEU Folkerts (C-11/11)

26 February 2013: CJEU judgment in the case Folkerts (C-11/11)

The past few judgments of the CJEU made it pretty clear that passengers of flights that get delayed by more than 3 hours may claim compensation from the airlines on the basis of Regulation No 261/2004 (Sturgeon and Others, Nelson and Others). New issues keep on arising though, with airlines trying to creatively protect themselves from having to pay out any money. The recent issue was what happens when a flight is delayed by less than 3 hours, however, a passenger misses his connection due to that delay (which of course left according to the schedule), and ultimately arrives at his final destination with a delay of more than 3 hours.

This has happened to Mrs Folkerts who was traveling from Bremen to Asunción - with connecting flights in Paris and São Paulo. The flight from Bremen was delayed by ca 2,5 hours, which meant Mrs Folkerts missed her connecting flight in Paris. As a result she arrived at her final destination only 11 hours after the originally scheduled arrival time.The airline (Air France) refused to pay her compensation for a delayed flight, claiming that the flight from Bremen to Paris was delayed for less than 3 hours and the following flights were not delayed at all. 

The CJEU again underlined that a flight's delay causes passengers to suffer irreversible loss of time and inconvenience comparable to when a flight is cancelled (Par. 32). This inconvenience materialises only on arrival at the final destination, and, therefore, the delay should be calculated in relation to the scheduled arrival time at the destination. (Par. 33) The Regulation defines 'final destination' in Art. 2(h) as:

"destination on the ticket presented at the check-in counter or, in the case of directly connecting flights, the destination of the last flight"

This all means that when airlines have to calculate whether to pay out compensation of Art. 7 of the Regulation to the consumers they should only look at the delay beyond the scheduled time of arrival at the final destination - the destination of the last flight taken by the passenger. (Par. 35) The airlines will not be obliged to pay this compensation if the delay was caused by extraordinary circumstances. (Par. 43)

In case of unfairness - CJEU judgment in Case C-472/11 Banif v Csipai

What procedure should national judges follow when assessing the fairness of contract terms under the Unfair Terms Directive? In today's judgment in the Hungarian case Banif Plus Bank v Csipai, the Court of Justice of the EU holds the following:

'1. Articles 6(1) and 7(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as meaning that the national court which has found of its own motion that a contractual term is unfair is not obliged, in order to be able to draw the consequences arising from that finding, to wait for the consumer, who has been informed of his rights, to submit a statement requesting that that term be declared invalid. However, the principle of audi alteram partem, as a general rule, requires the national court which has found of its own motion that a contractual term is unfair to inform the parties to the dispute of that fact and to invite each of them to set out its views on that matter, with the opportunity to challenge the views of the other party, in accordance with the formal requirements laid down in that regard by the national rules of procedure. 

2. The national court must, in order to determine whether the contractual term on which the claim brought before it is based may be unfair, take account of all of the other terms of the contract.'

Product Safety in 2013

Last week, the Commission launched the Product Safety and Market Regulation Package 2013.

The package's main content is represented by two proposed regulations, one concerning standards and the other addressing enforcement issues.

While the new Consumer Product Safety Regulation should mainly update (or enable actors to update) existing standards, the most important change to the existing regulatory framework should be an enhanced emphasis on product identification and traceability.

More "revolutionary" are the changes which would be brought about by the new Market Surveillance Regulation, which aims to create a one-tier system for major surveillance actions in the whole domain of non-food products (abolishing the current distinction between consumer and non-consumer goods). The new Regulation would therefore both unify procedural rules and stimulate the exchange of information among national authorities.

These actions should together contribute to mantaining and forstering a high level of product safety while simplifying the regulatory and procedural enviroment.

Whether the various stakeholders will agree with the Commission on this point, remains to be seen. In the meantime, more information can be found here, here and of course here.

Honk-honk

Another draft law that the European Parliament voted on last week concerned sound level of motor vehicles. The standard for cars would be lowered from 74db to 68db in the next 6-8 years (with some margin of error for more powerful vehicles, incl 81db for lorries). Additionally, the new cars should be labelled on their noise performance so that consumers were informed what type of vehicle they are purchasing (just like currently they can see the fuel efficiency or CO2 emissions' labels on cars). An idea was also brought up in the discussions on this new law that e-cars should have a sound added to it - so that pedestrians are in no danger of being silently run over. (Parliament backs law to tone down harmful traffic noise)

Generic medicines

The European Parliament voted last week on a draft new law relating to the transparency of measures regulating the prices of medicinal products for human use and their inclusion in the scope of public health insurance system (see here for the resolution). The new law intends to introduce fair practices across the EU applying to purchasing 'generic' medicines (which should be available two years after the original branded medicine), making sure that their prices are transparently set (which should lower them) and that reimbursement through insurance systems would be easy and quick to claim. For example, a 60-day time limit to decide on the pricing and reimbursement is to be introduced. Such a time-limit would prohibit companies marketing the originally branded medicines to delay the introduction on the market of the generic medicines.

Level-playing field

Today the Vice-President of the European Commission, Viviane Reding, is meeting with the chairmen of the European Telecommunications Network Operators' Association (ETNO), Luigi Gambardella, to discuss the forthcoming changes to the EU Data Protection rules. (Major Telecoms Operators Support Push for Level-Playing Field) This meeting is quite important, since in previous years whenever the European Commission proposed a new law concerning privacy or data protection issues, the lobbyists representing the telecommunication sector managed to heavily influence further works on these draft laws (e.g., by insisting on changing opt-in system with regards to acceptance of cookies to opt-out system). At the moment, it seems that the main concern of the telecommunication sector is making sure that the new rules would apply equally to companies from outside of and from the EU, as long as they operate on the EU market.

Institutional design, markets and consumers - CJEU judgment in Case C-68/12 Slovenská sporitel’ňa

To what extent can EU competition law contribute to the protection of consumer interests? Today's judgment in the Slovenská sporiteľňa case shows that the Court of Justice of the EU takes a cautious approach towards the possible extension of competition law measures beyond market-related concerns. The Court holds that:

'Article 101 TFEU [which establishes the nullity of agreements violating EU competition law; CM] must be interpreted as meaning that the fact that an undertaking that is adversely affected by an agreement whose object is the restriction of competition was allegedly operating illegally on the relevant market at the time when the agreement was concluded is of no relevance to the question whether the agreement constitutes an infringement of that provision. (...)'

This ruling is based on the consideration that:

'18 Article 101 TFEU is intended to protect not only the interests of competitors or consumers but also the structure of the market and thus competition as such (Joined Cases C‑501/06 P, C‑513/06 P, C‑515/06 P and C‑519/06 P GlaxoSmithKline Services and Others v Commission and Others [2009] ECR I‑9291, paragraph 63).
19 In that regard, it is apparent from the order for reference that the agreement entered into by the banks concerned specifically had as its object the restriction of competition and that none of the banks had challenged the legality of Akcenta’s business before they were investigated in the case giving rise to the main proceedings. The alleged illegality of Akcenta’s situation is therefore irrelevant for the purpose of determining whether the conditions for an infringement of the competition rules are met.'

The CJEU emphasises that 'it is for public authorities and not private undertakings or associations of undertakings to ensure compliance with statutory requirements' (para. 20). In this context, questions of institutional design arise: What institutions are in the best position to effectively enforce competition and consumer law? For further observations regarding some recent developments in this area, I refer to our colleagues on the ACELG blog - 'Integrate or separate: institutional design for the enforcement of competition law and consumer law'.

Chemicals' safety

A new Eurobarometer was published which examined Europeans' perception of chemicals and attitudes to safety. The survey followed the fifth anniversary of the entry into force of REACH and its results showed indeed that Europeans feel more secure in using chemicals as well as they believe more that the EU protects them properly. The most interesting findings (to me) were:

• the majority of people think that there are chemicals in articles of daily use, however, only 56% express certainty on this issue;
• with regards to checking ingredients of the products consumers purchase, 81% would look into ingredients of food they buy, but only 23% would check electronics;
• over 52% consumers Europeans disagree that new chemical substances can help in contributing to better environment;
• 46% of Europeans is cautious in purchasing new products containing new chemical substances - they would wait a long time to see whether the product proved to be working and safe before buying it;
• only 2% would buy a new product immediately;
• 49% of respondents believed that EU manufactured products containing chemical substances were safer than those imported from outside the EU.

For other issues, see the Flash Eurobarometer 361.

Connect with respect

Yesterday was the 10th Safer Internet Day 2013 and the European Commission presented results of joint commitment of various companies who have been working together for the past few years on safeguarding internet for children's use (currently, the average age for fist going online in Europe is seven). This year these companies decided to set an even higher benchmark for the industry, proposing to set parental and control classification tools on all devices (incl. game consoles, smartphones, etc). (Safer Internet Day 2013: "Connect with Respect")

Cross-border insurance contracts

Another interesting post from the European Commission last week revealed that it will be calling on experts to examine obstacles in the cross-border trade in insurance products. These barriers are often caused by different national laws governing insurance contracts and the European Commission plans to determine how big the differences between national contract laws are and whether they hinder cross-border use of insurance for European businesses and/or consumers. It is likely that the consultation would focus only on certain types of insurance, e.g., motor and travel insurance, life insurance. The schedule predicts that the results of this consultation would be known at the end of 2013 and further action plan could be drafted then. For call for applications see here. (open till 21 February 2013)

"(...) just 0.6% of all motor insurance premiums and 2.8% of property insurance premiums are offered to customers across EU borders (...)” said Vice-President Viviane Reding (Commission to examine legal obstacles to cross-border trade in insurance)

European Railways on the right track?

Last week the European Commission announced a new package of provisions that would regulate some of the consumers' traveling issues (Fourth Railway Package). The measures intend to improve the quality and give more choice in railway service in the EU. While the market for traveling by train shrinks yearly, the EU intends to try to stimulate it more, by promoting competition and inviting new entities to it. The railway transport is environmentally friendly and helps with traffic issues, which are one of the reasons why consumers are seen as needing to be encourage to participate in it. (European Railways at a junction; or Challenges Ahead) 

Consumer health update

The French medicines agency (ANSM) announced this week that in the next three months it intends to suspend the marketing authorisation for Diane 35 and its generics for acne treatment in France. This is a commonly used medicine across Europe, used not only to treat acne but also as an oral contraception for women and for treatment of other skin conditions. The ANSM considers the risk of thromboembolism that this medicine increases (which has been known for many years now) to be too high in comparison with its moderate success in treating acne. Pursuant to EU law, the ANSM will notify the European Medicines Agency about its plans and appealed for a EU-wide review of this medicine, which may lead to a harmonized action with respect to its marketing across the EU Member States. In the meantime, women who are taking this medicine are advised NOT to stop. (EMA update on Diane 35 and generics used in the treatment of acne) Of course, that does not mean that if anyone feels uncomfortable with it (though, as I have mentioned, the risks were known for quite awhile now), they may ask their doctors if there are any alternative treatments available.

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EU Commission in the meantime calls for EU-wide ban on amphetamine-like drug '4-MA', which is a synthetic substance inducing similar physical effects to amphetamines.The Commission appeals to MS to prevent free access across the EU to this drug, since it has been associated with 21 deaths in 4 EU Member States in 2010-2012. So far, it has been made illegal in 10 EU countries. The EU action aims at prohibiting both manufacturing and marketing of this drug, subject to criminal sanctions. (Commission calls for EU-wide ban on amphetamine-like drug '4-MA')

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World Health Organisation (WHO) released today a new report on long-term exposure to air pollution which apparently can trigger: atherosclerosis, adverse birth outcomes, childhood respiratory diseases. It may also adversely influence neurodevelopment, cognitive function, diabetes, cardiovascular and respiratory systems. (Newly found health effects of air pollution call for stronger EU air policies) Current EU statistics show that over 80% of EU citizens are exposed to air pollution levels above the 2005 WHO Air Quality Guidelines (AQGs), which has been seen as depriving on average each citizen of 8,6 months of life. The new report recommends that EU modifies its law, since already the current limit of permitted air pollution in the EU's Ambient Air Quality Directive is twice as high as the AQG recommendation. The WHO plans on adjusting the AQGs levels, making them even more strict. We'll see what actions will be undertaken by the European Commission. For now, 2013 has been declared as the Year of Air for EU policies. (apparently it's not the first year of air... - see: here)

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The European Commission also sent this week a statement of objections to the pharmaceutical companies Johnson & Johnson (specifically, its Dutch subsidiary: Janssen-Cilag) and Novartis (and its subsidiary Sandoz). It suspects that these companies concluded a so called 'co-promotion agreement' on a strong pain-killer (fentanyl, which is stronger than morphine), as a result of which the market entry of a cheaper generic medicine was delayed in the Netherlands. This, of course, would breach EU antitrust rules. Dutch consumers, as a result of this agreement, could have been left with no option but to purchase the higher priced fentanyl which goes against the EU policy to provide affordable healthcare to EU citizens. The companies may now respond to the objections raised by the Commission. If the infringement of antitrust rules is confirmed, they will be fined. (see more here) To find out more about other enforcement actions in pharmaceutical sector following recent sector inquiry, see here.

European Retail Action Plan

Yesterday the European Commission adopted a European Retail Action Plan and a Green Paper launching consultation on unfair trading practices in the B2B food and non-food supply chain. These initiatives list as one of their priorities the need to empower consumers through better information, as well as to improve accessibility to retail services. Clearly, further actions of the EU institutions in this field will heavily influence European consumers. 

The idea is that the European Commission will set up a permanent Group on Retail Competitiveness that will be charged with further development of "specific objectives for the areas identified, monitor progress achieved, issue recommendations to ensure full implementation of the actions included in this Plan and, where necessary, will advise the Commission on additional new actions that could be proposed". (Commission adopts a European Retail Action Plan and consults on unfair trading practices) The next three months are also devoted to receiving and analysing responses to the public consultation on unfair trading practices in the B2B sector (open until 30 April 2013).