Friday, 2 October 2015

Enforcement by notary with no unfair terms control is ok, says ECJ

Yesterday, the Court of Justice delivered its judgment in another Hungarian unfair terms case, Erste Bank Hungary v Attila Sugár (C-32/14). 
In this case, the problem raised before the referring national court concerned an enforcement clause connected to a recognition of debt to be actioned by a notary. This allowed the creditor, a bank, to potentially obtain extra-judicial enforcement. The debtor, a consumer, claimed that the original loan agreement contained unfair terms and the notary should therefore refuse enforcement. When the notary declined to comply with the consumer's requests, the case was brought before a local court. 

The question before the Court of justice was, in essence, whether the Hungarian law establishing the possibility of "notarial enforcement" of a credit was in compliance with article 7 of the Unfair Terms Directive. The problematic feature of this procedure is that the notary has no competence to ascertain whether the agreement on which the credit is based contains unfair terms.   

The result, which will bring little satisfaction to consumer advocates, is that the Court found the Hungarian legislation, at least at face value, to be compatible with the Directive's requirement. This is not particularly surprising, considered that already in Kusionova the Court had argued that extra-judicial procedures are not necessarily problematic. Much rather, it must be reasonably possible for the consumer to find effective relief somewhere in the system. 

In the case at stake, it seemed that it would be possible for the consumer to oppose the enforcement before a court and that the latter court would be able to grant appropriate protection- including unfair terms scrutiny and interim relief. The court repeats, to this respect, its previous statement that the "effective protection" requirement cannot be stretched to make up fully for the consumer's "total inertia".  

The ECJ did acknowledge (para 54) that the involvement of a notary might present additional hurdles for the consumer: 
taking account of the particular confidence that, as a general rule, consumers place in notaries, in their capacity as impartial advisors, and the fact that documents drafted by them are not vitiated by illegality, there is a substantial risk that consumers will be less vigilant when those documents are drafted regarding the existence of unfair terms and the consequences of a simplified notarial enforcement procedure, such as that at issue in the main proceedings. Furthermore, where such a procedure has been initiated by the seller or supplier, the consumer may not have, without the intervention of a notary, all the relevant information enabling him to defend himself before the national courts in the context of that procedure.
According to the Court, however, the fact that the Hungaria law on notaries requires them to perform a preventive control on the acts they draft, and to assist both parties impartially, appear to be in principle "such as to contribute to compliance" with the Directive (para 58). 

Although the Court states that it is for national courts to verify that the position of notaries actually is such to contribute to preventing the use of unfair terms, there is no such nuance in the conclusions. To the contrary, the ruling expressly mentions that notaries can affix the enforcement clause "when no review... has been performed at any stage". Although the substance of the decision might be reasonable- after all, it is not the Court's task to cast doubts on the whole idea of extra-judicial enforcement- the ECJ reasoning, and the way it is not mirrored in the conclusions, seem wanting. Better luck next time? 
 
    

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