Last Thursday, AG Hogan delivered his opinion in case C-34/18, Lovasné Tóth v Erste Bank Hungary Zrt. It does happen, every now and then, that one reads an AG opinion so remarkable that it is difficult to decide what to comment with. In this case, let me begin this post by expressing the wish that this opinion be quickly discarded and possibly forgotten. Nothing had let me prefigure, on a quiet March morning, that I would be witnessing a single-handed attempt, by a recently appointed AG, to undo much of the CJEU's adjudication on unfair contract terms over the past ten years. Yet, this seems to be pretty much what AG Hogan set out to do in his Lovasne Toth opinion. Let us see how.
3) Transparency continued, hollowing out substantive transparency
While the AG only expressly asks the CJEU to reconsider its judgement in VKI, the Opinion can be seen as implicitly taking a stance against a much larger bunch of CJEU transparency cases. This is particularly obvious where the AG turns its criticism to a specific passage in VKI, according to which
1) Good faith
The court has, indeed without much support in the original intentions of the drafters, developed a test that distinguishes the "significant imbalance" and "good faith" prongs within the Directive's Article 3 - by trying to also increasingly specify the contents of both prongs. AG Hogan, however, does not agree with considering good faith as a separate requirement. And perhaps rightly so, especially if one understands good faith as the AG does - as some form of lack of malice rather than the duty to take the other party's interest into account. When the AG says that "significant imbalance" to the detriment of the consumer is the sole requirement, with no need to establish "that the clause was inserted as a result of the absence of good faith", he takes us back 20 years to the discussions in national laws surrounding the introduction of the directive. Is this necessary?
The feeling of being transported back to a couple of decades ago, however, runs highest in the following parts of the opinion, which delve on...
2) Transparency, back to contra proferentem
According to AG Hogan, the appropriate place for transparency is Article 5 of the directive, setting out an interpretation rule according to which unclear terms must be interpreted to the consumer's advantage. Remember VKI, where the ECJ said that lack of transparency was also capable of resulting in unfairness when it led to the consumer being misled as to their rights?
The court has, indeed without much support in the original intentions of the drafters, developed a test that distinguishes the "significant imbalance" and "good faith" prongs within the Directive's Article 3 - by trying to also increasingly specify the contents of both prongs. AG Hogan, however, does not agree with considering good faith as a separate requirement. And perhaps rightly so, especially if one understands good faith as the AG does - as some form of lack of malice rather than the duty to take the other party's interest into account. When the AG says that "significant imbalance" to the detriment of the consumer is the sole requirement, with no need to establish "that the clause was inserted as a result of the absence of good faith", he takes us back 20 years to the discussions in national laws surrounding the introduction of the directive. Is this necessary?
The feeling of being transported back to a couple of decades ago, however, runs highest in the following parts of the opinion, which delve on...
2) Transparency, back to contra proferentem
According to AG Hogan, the appropriate place for transparency is Article 5 of the directive, setting out an interpretation rule according to which unclear terms must be interpreted to the consumer's advantage. Remember VKI, where the ECJ said that lack of transparency was also capable of resulting in unfairness when it led to the consumer being misled as to their rights?
According to the AG, VKI "has perhaps somewhat overstated the scope of the transparency requirement" and "the court should revert to its previous approach" (para 89).
With an interesting formalistic turn, the AG explains that, since the Directive's Article 3 talks about "rights and duties arising from the contract", only "the legal effect produced by a term" matters to unfairness (para 85).
3) Transparency continued, hollowing out substantive transparency
While the AG only expressly asks the CJEU to reconsider its judgement in VKI, the Opinion can be seen as implicitly taking a stance against a much larger bunch of CJEU transparency cases. This is particularly obvious where the AG turns its criticism to a specific passage in VKI, according to which
"where the effects of a term are specified by mandatory statutory provisions, it is essential that the seller or supplier informs the consumer of those provisions" (VKI, para 69)
The requirement, if generalised, seems indeed to raise considerable - and likely undesirable - practical consequences: should all terms be specified by explaining their legal implications by reference to the background legal rules? The AG is not entirely wrong by claiming that, if taken literally, the requirement may well amount to consumers being faced with "a seminar in basic contract law given by unqualified personnel" (para 99).
Interpreting the requirement cum grano salis seems, hence, a worthy enterprise. Removing it altogether, on the other hand, sounds like a call for the restauration of an order in which the Directive essentially lays inapplicable. This sound resonates louder due to the AG's insistence on separating information duties from transparency, and thus drawing a rigid separation between, in his own analysis, the Unfair Commercial Practices Directive (see for instance para 90 and 109) and unfair terms assessment.
Given the CJEU's insistence on substantive transparency in a long line of cases starting with RWE and, so far, culminating in Andriciuc (through Kasler and others), the AG's emphasis on the fact that the unfairness assessment should concentrate on "the wording" (para 93) of a contentious clause is way more than a rebuke of VKI. It rather promises to undermine much of the most significant developments in European consumer law adjudication in the past several years. The fact that the AG, in passing (at para 92), acknowledges that terms "should clearly articulate the legal effects" [my emphasis] arising from their insertion does not provide any meaningful reassurance in light of the wholesale down-grading of transparency that the opinion as a whole pursues.
This is obvious if one considers what a clear articulation of the legal effects of a term requires: where, like in the case at stake in Lovasne, a certain term may look like it prevents the consumer from objecting to enforcement, while this is not the case, explaining the legal consequences of the terms under mandatory law merely requires adding a line stating: please note that this does not affect your otherwise existing rights to object to the contract's enforcement. Yet, the obligation to include such language, or to provide a similar reassurance in person, is precisely what the AG seeks to exclude from the scope of the Directive - thus de facto hollowing out any meaning transparency could have besides some mild cautioning against purposefully confusing language (lest it be, let's not forget, at most interpreted against the drafter).
To conclude, I would like to wish AG Hogan a great time at the Court of Justice - but also to express my hope that he drops the project of taking EU consumer law forward to the past with a resolution that sounds more ideological than the institutional position of the AG would recommend.
Interpreting the requirement cum grano salis seems, hence, a worthy enterprise. Removing it altogether, on the other hand, sounds like a call for the restauration of an order in which the Directive essentially lays inapplicable. This sound resonates louder due to the AG's insistence on separating information duties from transparency, and thus drawing a rigid separation between, in his own analysis, the Unfair Commercial Practices Directive (see for instance para 90 and 109) and unfair terms assessment.
Given the CJEU's insistence on substantive transparency in a long line of cases starting with RWE and, so far, culminating in Andriciuc (through Kasler and others), the AG's emphasis on the fact that the unfairness assessment should concentrate on "the wording" (para 93) of a contentious clause is way more than a rebuke of VKI. It rather promises to undermine much of the most significant developments in European consumer law adjudication in the past several years. The fact that the AG, in passing (at para 92), acknowledges that terms "should clearly articulate the legal effects" [my emphasis] arising from their insertion does not provide any meaningful reassurance in light of the wholesale down-grading of transparency that the opinion as a whole pursues.
This is obvious if one considers what a clear articulation of the legal effects of a term requires: where, like in the case at stake in Lovasne, a certain term may look like it prevents the consumer from objecting to enforcement, while this is not the case, explaining the legal consequences of the terms under mandatory law merely requires adding a line stating: please note that this does not affect your otherwise existing rights to object to the contract's enforcement. Yet, the obligation to include such language, or to provide a similar reassurance in person, is precisely what the AG seeks to exclude from the scope of the Directive - thus de facto hollowing out any meaning transparency could have besides some mild cautioning against purposefully confusing language (lest it be, let's not forget, at most interpreted against the drafter).
To conclude, I would like to wish AG Hogan a great time at the Court of Justice - but also to express my hope that he drops the project of taking EU consumer law forward to the past with a resolution that sounds more ideological than the institutional position of the AG would recommend.
