Thursday, 30 November 2017

Between equivalence and effectiveness: Opinion of AG Sharpston on unfair terms control in default proceedings

Today, Advocate General Sharpston delivered her Opinion in a Belgian case (C-147/16Karel de Grote Hogeschool v Susan Kuijpers) on the scope of Directive 93/13 as well as the powers and obligations of national courts under that Directive. The case concerns the 'Europeanization' of (national) civil procedure and the 'proceduralization' of unfair terms control. More particularly, it concerns the role of the civil court in default proceedings, i.e. when the defendant does not appear.

Judicial districts in Belgium
A claim was brought by an educational establishment against a student who had borrowed the amount of money she needed to pay her registration fee, but subsequently defaulted on her repayments. The student did not take any (active) part in the proceedings the school initiated to recover the outstanding debt. In Belgium, when a judgment in default is given, civil courts are only required to apply national rules of public policy (Article 806 of the Judicial Code, amended in 2015). This caused uncertainty within the judiciary as regards the rules on unfair contract terms [*]. Could and should a court examine of its own motion (ex officio) whether the contract at hand falls within the scope of the Directive as implemented in Belgian law, and if so, whether its terms are unfair?

AG Sharpston first reiterates that the procedural autonomy of the EU Member States is limited by the principles of equivalence and effectiveness. She then refers to Asturcom (C-40/08) to point out that the principle of effectiveness "cannot be stretched so far as to mean that a national court is required to make up fully for the total inertia on the part of the consumer" (para 28). However, the principle of equivalence entails that inasmuch as the court is required to assess whether a term conflicts with domestic rules of public policy, it must do the same with the rules under Directive 93/13. Thus, those rules should be treated as rules of public policy.

In a forthcoming article [cited below], the Belgian scholar Janek Nowak explains the two approaches very clearly. The difficulty with the effectiveness approach is, in short, that Belgian civil courts would have to disregard Article 806 insofar as it limits them in their tasks. The equivalence approach is less 'disruptive': it reconciles EU law requirements with national civil procedure, while it also avoids the issue of the (lack of) horizontal direct effect of directives. AG Sharpston shares the Belgian Government's view that Article 806 provides room for a broad interpretation of the national court's powers and obligations in light of Directive 93/13. Yet she also refers to the effective legal protection guaranteed by the Directive which must be ensured "whatever the rules of domestic law":  the Directive must be applied "irrespective of the status afforded to the national rules" implementing it in the national legal order and irrespective "of the parties' procedural actions or submissions" (para 33). The only exception is that national courts do not have to - and cannot - intervene where none of the parties has brought proceedings. In all other cases, they must exercise ex officio control.

The second part of the Opinion addresses the meaning of 'seller or supplier'. AG Sharpston advocates a broad interpretation (see para 67). She focuses on "the capacity of the contracting parties" (para 66). In this respect, there is a link between the first and the second part: the substantive imbalance between the parties (in terms of both bargaining power and level of knowledge) is accentuated by a procedural inequality. A consumer is, in the words of AG Sharpston, "likely to find himself on the receiving end" of the proceedings, which "will affect his legal situation, whether he participates in the proceedings or not" (para 32). This would justify an active role of national (civil) courts as decentralized EU-judges, even though such a role might 'clash' with their position in the domestic (procedural) framework. Especially in default proceedings with consumers as defendants, national courts struggle with the practical problem of having to deal with a great number of cases, insufficient factual information and the need to take the interests of the claimant into account (as follows from the CJEU's case law on the right to a fair hearing as safeguarded by Article 47 of the EU Charter of Fundamental Rights). The stream of preliminary references on procedural questions is not likely to stop anytime soon.

[*] J.T. Nowak, 'On the impact of EU law on national civil procedure. Some considerations and recent examples from Belgium', draft paper (to be published) presented on 25 November 2016 during the 21st annual conference of the Ius Commune Research School.