Monday, 1 August 2016

CJEU in C-191/15: the law applicable to an action for an injunction and to the material assessment of contract terms is determined by different legal bases

Last Tuesday the Court of Justice also had its say on an extensive number of legal issues lying at the interface of consumer law, private international law and data protection. The judgment in case C-191/15 Verein für Konsumenteninformation v. Amazon EU shed some light on the following aspects:
  • the law applicable to an action for an injunction concerning the use of unfair terms in consumer contracts;
  • the law applicable to the assessment of a particular contractual term;
  • unfairness of a choice of law clause provided for in general terms and conditions;
  • the law governing the processing of personal data in the e-commerce context. 

Circumstances of the case

The dispute arouse around several contractual clauses imposed unilaterally by Amazon EU in contracts concluded via its website. An Austrian consumer organization, Verein für Konsumenteninformation (VKI), questioned the compliance of these clauses with the Austrian laws on unfair terms and brought an action for an injunction before a national court to prohibit their use. The courts, however, faced procedural difficulties in establishing the law applicable to the case. These were linked to the fact that the defendant only had its registered office in one Member State (here: Luxembourg), but concluded contracts with consumers from multiple countries (including Austria) – a situation not uncommon in the digital market. Furthermore, it was not clear whether the fact that an action for an injunction concerned the use of unfair terms in a contract could lead to a conclusion that the case itself referred to contractual obligations. This raised the fundamental question of whether the applicable law should be established according to Regulation 593/2008 on the law applicable to contractual obligations (Rome I) or Regulation 864/2007 concerning non-contractual obligations (Rome II).

Judgment of the Court

Law applicable to an action for an injunction may differ from the law applicable as the law of the contract

In its judgment the Court decided to separate a collective action for an injunction to prohibit the use of an allegedly unfair term from the assessment of the term itself, and concluded that in the former case the Rome II regulation should apply, while in the latter Rome I was decisive.

This finding is supported by the need to maintain systemic coherence – not only between the legal acts governing the applicable law (Rome I and Rome II regulations) and jurisdiction (Brussels I regulation, Brussels convention), but also between collective and individual actions.

It follows that, for both collective and individual actions for injunctions, the applicable law should in principle be established on the basis of Rome II, while the examination of the underlying contractual terms should be carried out according to the law designated as applicable based on Rome I.

While the interpretation of CJEU may indeed lead to a situation where the law applicable to an action for an injunction would be different from the law applicable to the contract itself, the analysed judgment highlighted two important safeguards in this respect.

First of all, the Court noted that the law applicable to non-contractual obligations, which arise from the use of unfair terms, should be established on the basis of Article 6(1) Rome II. According to this provision applicable law is the law of the country where competitive relations or the collective interests of consumers are, or are likely to be affected. The Court noted that – in the case of injunctions for the protection of consumers’ interests brought by consumer organisations – this would, in principle, be the law of consumers whose interests are represented by the claimant. This at least partially aligns with the law established for consumer contracts according to Article 6 Rome I regulation (i.e. regarding the protection granted by mandatory provisions of the law of consumer's country).

The Court also expressed criticism as to the possibility of bypassing the rule of Article 6(1) through a reference to Article 4(3) Rome II. The trader would therefore have a hard time trying to demonstrate “a manifestly closer connection” to the law of his country. What is more, the Court explicitly noted that a choice of law clause included in general terms and conditions did not have any effect in that regard.

In its judgment the CJEU also briefly addressed two other questions, relating to the issues indicated at the beginning of this post.

A choice of law clause that is not sufficiently detailed may be considered unfair

On the first point, the Court held  importantly  that a choice of law clause included in general terms and conditions can be considered unfair if it leads the consumer into error by giving him the impression that only the law of that Member State applies to the contract. From this it follows that the trader should inform the consumer – in plain and intelligible language – about the implications of Article 6(2) Rome I, i.e. the fact that the consumer cannot be deprived of the protection afforded to him by mandatory provisions of the law of his habitual residence.

Criteria for establishing the law governing the treatment of personal data: having an establishment in a Member State and processing data in the context of this establishment’s activities

The last question was raised - and answered - somewhat on the sidenote, but in fact touched upon an issue of great relevance from the data protection point of view, i.e. whether an online trader that concludes contracts with consumers resident in several Member States needs to comply with the data protection rules of all Member States to which its commercial activities are directed, or only the one in which its establishment is situated. Unfortunately, the CJEU did not go into much detail in its reply, but mainly recalled its previous case law on this matter, and repeated the criteria that need to be taken into account by national courts. It should be noted, though, that the Court shared the view of the Advocate-General and pointed out that “while the fact that the undertaking responsible for the data processing does not have a branch or subsidiary in a Member State does not preclude it from having an establishment there within the meaning of Article 4(1)(a) of Directive 95/46, such an establishment cannot exist merely because the undertaking’s website is accessible there”. Explicit reaffirmation of the recent judgment in Weltimmo case provides further clarity on the question of which national law applies to particular data processing operations. Finally, it seems that the CJEU's interpretation will remain valid under the General Data Protection Regulation, which includes a very similar wording (the data protection angle of the case is also specifically followed elsewhere).

Concluding remark

The judgment in case C-191/15 is certainly welcome as it gives more clarity on several important issues relating to three different areas of law, which have a direct impact on the e-commerce market. At the same time, it is only one step towards clarifying the application of Rome I and Rome II regulations to activities undertaken by the participants of the digital market. In the light of the continuous development of this sector and its regulatory environment (e.g. the recently proposed regulation on geo-blocking) further guidance might soon be needed.