Changes allowed, within limits - CJEU judgment in case C-326/14 Verein für Konsumenteninformation v A1 Telekom

Yesterday, the Court of Justice of the EU handed down its judgment in the Austrian case of Verein für Konsumenteninformation v A1 Telekom Austria AG. The case concerns an action brought by the Austrian consumer association (VK) regarding standard terms used by A1 Telekom. VK submitted that these terms were not in line with EU consumer law, insofar as they stipulated that A1 Telekom's customers were not allowed to withdraw from their contracts in case charges were modified in accordance with an annual consumer price index made by the Austrian Institute for Statistics. 

As we reported earlier, Advocate General Cruz Villalón concluded that this type of price adjustment clause did not necessarily imply a modification of contractual conditions under the EU's Universal Service Directive, ‘in so far as the statement of the consideration payable by the subscriber as the ‘index-linked price’ is sufficiently foreseeable, transparent and legally certain to support the conclusion that there has been no change in the subscriber’s contractual position’. According to the Advocate General, the national court would have to assess whether these conditions were met.

The CJEU follows AG Cruz's Opinion and holds that:

'Article 20(2) of Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive), as amended by Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009, must be interpreted as meaning that a change in charges for the provision of electronic communications networks or services, resulting from the operation of a price adjustment clause contained in the standard terms and conditions applied by an undertaking providing such services, the term providing that such a change applies in accordance with changes in an objective consumer price index compiled by a public institution, does not constitute a ‘modification to the contractual conditions’ within the meaning of that provision, which grants the subscriber the right to withdraw from the contract without penalty.'

The Netherlands helping other Europeans out with its collective action tool

In the context of consumer claims being lined up against VW, the Dutch WCAM - Collective Settlement Act - is attracting the attention of consumer lawyers Europe-wide. With the help of this instrument a consumer representative can negotiate an out-of court settlement with a company regarding widespread damage. Afterwards this settlement can be declared binding by the court.

Group litigation is a scarce phenomenon in Europe. Therefore, not only Austria but also Germany are discussing to litigate with the help of the WCAM in the Netherlands. Such a stretch is legally possible. Already in a previous case the WCAM has served without many Dutch citizens actually being affected by the harmful behaviour: see for details the Converium litigation in Dutch and English.

It remains to be seen if these moves give sufficient incentives to other European governments to reform the national systems for collective redress.

AG Sharpston in Radlinger v Finway: EU law requires ex officio control of respect of information requirements

Today, an interesting opinion has been released enriching the CJEU literature on unfair terms and credit contracts. In this case, the referring court had asked several questions concerning Czech procedural rules on insolvency proceedings as well as some questions concerning the interpretation of Directive 93/13 and Directive 2008/48 on consumer credit agreements.

The "procedural" questions more strictly related to directive 93/13 are answered in a way that corresponds to previous decisions by the ECJ. We will skip discussing them. The questions concerning the assessment of penalty clauses are very techincal, so it seems better to wait for the CJEU to answer them (in other words, it is not clear whether the AG actually answered the questions asked by the referring court). 

An interesting novelty attached to this case, however, concerns information duties. According to the Advocate General, courts must be able to assess ex officio whether the information requirements set out by the Consumer credit directive have been fulfilled. 

The advocate general invokes the well-known reglections which have led to the imposition of ex officio with regard to "certain provisions of EU consumer protection legislation" (para 52), since (as stated in Faber)

"there is a real risk that the consumer, particularly because of a lack of awareness, will not rely on the legal rule that is intended to protect him". 

The finding that the supplier has failed to meet its information duties might have important consequences for the consumer, for instance it might entail the application of a different interest rate- that is, if the national legislation provides for adequate remedies. When these remedies are not provided, however, a similar obligation seems to burden courts without helping consumers much. What do you think? 

Execution proceedings enriched with an unfairness test: AG Szpunar in Finanmadrid (C-49/14)

11 November 2015: AG Szpunar's opinion in case Finanmadrid (C-49/14)

Yesterday, in another Spanish case on unfair contract terms, where a consumer defaulted on his credit payments (this time for a motor vehicle instead of a house), AG Szpunar issued an opinion following the so far set line of judgements. 

In this case the order for payment was issued by secretario judicial (court's secretary), who (at the time) was not obliged pursuant to Spanish law to ex officio test for unfairness of a penalty clause in a credit contract. Since the consumer did not raise the issue of unfairness, only when the order for payment became final, in the execution proceedings, the court raised a question whether they should not be able to test for unfairness of the contractual provision, on which the order for payment is based. Pursuant to Spanish law this was not possible.

AG Szpunar, unsurprisingly, concludes that if Spanish law did not oblige the court's secretary to assess unfairness of his own motion, then such an obligation should bind judges in the execution proceedings (par. 98). Still, he considers that conducting of the unfairness test in the execution proceedings is undesirable, e.g. because these proceedings usually do not include investigation of facts, there is a possibility that the previous decision already became final (par. 54-58). However, if this test has not been conducted at an earlier stage of the judicial process, this may be the only solution left to Spanish courts to comply with the principle of effectiveness in applying consumer protection against unfair contract terms (par. 60). The preferred solution would be, however, to oblige the secretario judicial  (as an employee of the justice system) to conduct ex officio control of unfair contract terms - which is what the recent Spanish law reform aimed at (par. 50-51).

One other interesting point: AG Szpunar refers to the relationship between art. 47 of the Charter and the principle of effectiveness. Currently, there is a lot uncertainty as this relationship and whether art. 47 of the Charter is supposed to complete the requirements following from the principle of effectiveness or whether maybe it will replace them and create a new test for effective judicial protection/remedy (par. 85). While AG Szpunar considers that art. 47 of the Charter requires effective remedies to be granted also through national procedural rules, he concludes that Spanish law in this case could not be seen as infringing art. 47 and that the level of protection granted in the UCTD reaches further than the level of protection of art. 47 (par. 89-90). This is an interesting point of view that the CJEU will most likely not delve into (since the question may be answered without any reference being made to the Charter), so it's good to take a note to AG Szpunar's arguments for anyone interested in the issue of a relationship between the Charter and EU private law.

Teaching Consumer Law 2016

The next Teaching Consumer Law conference takes place in Santa Fe, 20-21 May 2016 and is focused on "Teaching Consumer Law in Our Popular Culture and Social Media". Please see the save the date poster below.

VW scandal spurs development of collective claims in Germany

A number of group actions against VW have been instituted in many countries over the past weeks and months. In Germany, however, according to current law a consumer has to sue individually. Heiko Maas, Federal Minister of Justice and Consumer Protection, has been seeking to change the German legal landscape in this regard. In the context of the VW scandal he re-emphasized that legislative changes in Germany will be put on the table. A draft bill can be expected for the beginning of 2016. Rather than similar to US American collective actions, the German action will be designed in the form of a model case proceeding (Musterfeststellungsklage). This way identical or similar law suits can be bundled in a streamlined process. Once the questions at stake have been decided upon in a model order (Musterentscheid), the order binds the other courts before which individual cases were stayed. The findings of test case proceedings thus have a binding effect on the other claims, but the individual cases are kept separate.

No to national restrictions on EU-approved GMOs

Last week, on October 28, the European Parliament voted against a new draft law that would allow Member States to restrict or prohibit the sale and use of EU-approved GMO food or feed on its territory. The background of this decision is that once a GMO product has been approved by the EU, then it should be freely accessible and freely marketable across the EU. If Member States would get to decide on additional restrictions in trade in their own countries, this would not only hinder cross-border trade in the EU in these products, but also complicate and, in practice, reinstate border controls. Interestingly, the European Commission may not withdraw the proposal but instead direct it to the EU ministers' review next (Parliament rejects national GMO bans proposal).