Thursday, 21 April 2016

Dutch Supreme Court on effective remedies for consumers

A recent development in the area of European consumer law we have not yet reported on this blog is a recent judgment of the Supreme Court of the Netherlands (available here in Dutch; Lindorff/X or telefoonabonnement-arrest II) in a case about a contract for a mobile phone subscription including a 'free' phone. The Supreme Court held that the national court must examine of its own motion if the price of the phone has been stipulated separately and if not, annul the contract. This may have far-reaching consequences for providers of mobile services offering subscriptions and phones for an 'all-in' price, to be paid (monthly) by the consumer.

According to the Supreme Court, the national court has to apply of its own motion national provisions implementing the Consumer Credit Directive (87/102/EEC). At issue was a contract between a consumer and a large Dutch telecommunications company for a mobile phone subscription and a 'free' phone, for a monthly 'all-in' price. In the Supreme Court's view, this is a purchase-in-instalments ("koop op afbetaling") and a credit contract in the sense of the Consumer Credit Directive. The Dutch provisions on purchase-in-instalments are not of European origin, but the Supreme Court puts them on an equal footing for the sake of 'manageability'. The national court must take, if necessary of its own motion, adequate measures to ensure the effective legal protection of consumers. Sanctions for the infringement of consumer rights under the Directive must be effective, proportionate and dissuasive. This means, among other things, that if the price of the mobile phone is not stipulated separately, the contract can be annulled. The Supreme Court considers that such a stipulation will generally indicate the essence of the performance, so that it is excluded from the scope of the Unfair Contract Terms Directive (93/13/EEC). 

In this case, the Supreme Court seems to go beyond the consistent interpretation of national law by 'gap-filling': the remedy was not specified in the Dutch Civil Code, but follows from the general principle of effectiveness and the right to effective judicial protection in EU law. Although the Supreme Court does not explicitly refer to Article 38 or Article 47 of the EU Charter of Fundamental Rights, it does mention relevant case law of the CJEU (inter alia, Pohotovost' and Duarte Hueros, reported by us here and here).

The Supreme Court addresses the consequences of an annulment of the contract at length: the consumer may return the phone, without having to pay any costs for using the phone or decrease in value. Damages would only be due if the consumer does not behave as a 'careful debtor' or fails to return the phone. The mobile service provider has to pay back the part of the price (and costs) the consumer has already paid for the phone. The mobile service provider cannot institute a counterclaim on the basis of unjust enrichment, says the Supreme Court, as this would be contrary to the effective protection of consumers. One could wonder whether effective protection really means that no compensation is due, since consumer protection is about eliminating disadvantages between consumers and traders rather than putting consumers in the best position.

The case has not only drawn the attention of legal academics, but also of claims organisations. A class action is being prepared against at least 8 Dutch mobile service providers (see here and here). For our Dutch readers, a more extensive description of the Supreme Court's findings can be found here.