Yesterday the CJEU delivered its judgement in C-694/17 Pillar Securitisation Sàrl v Hildur Arnadottir that is yet another judgement interpreting the notion of a consumer. This time it came under scrutiny under the Convention on jurisdiction and the recognition and enforcement of foreign judgments in civil and commercial matters (known as the Lugano II Convention) and Directive 2008/48/EC on Consumer Credit.
In March 2005, the defendant, who is a resident of Iceland, obtained a loan for more than 1 000 000 EUR from Kaupthing Bank Luxembourg (KBL) to buy shares in the Icelandic company Bakkavör Group hf of which she was an employee. The loan was supposed to be repaid in a single transfer by 1 March 2010. Guarantee was provided by the company itself, of which the defendant was one of the directors, who signed the guarantee. Subsequently, KBL was divided into two entities. One of those entities, Pillar Securitisation, claimed repayment of the loan, and when the defendant was unable to meet this request, Pillar Securitisation brought an action before the Luxembourg courts pursuant to a term of the loan agreement that conferred jurisdiction to those courts.
The first and second instance Luxembourg courts declared lack of jurisdiction on the ground that the defendant should be regarded as a ‘consumer’ within the meaning of Article 15 of the Lugano II Convention, and that the jurisdiction clause should be removed from the contract pursuant to Article 17 of the Convention. The claimant finally turned to the Court of Cassation claiming that the lower courts erred in finding that the claimant acted for non-commercial purposes; that the courts misinterpreted Article 15 of the Lugano II Convention in finding that a loan for more than EUR 1 000 000 could have been taken out by a ‘consumer’ within the meaning of Article 15, and that in order to determine whether the loan agreement was a consumer loan, it must be determined whether that agreement is a ‘consumer credit agreement’ within the meaning of Directive 2008/48. The court stayed the process and referred the following question to the CJEU for preliminary ruling:
Should Article 15 of the Lugano II Convention be interpreted as meaning that, for the purposes of ascertaining whether a credit agreement is concluded by a ‘consumer’ within the meaning of Article 15 be determined whether the agreement falls within the scope of Directive 2008/48 in the sense that the total cost of credit in question does not exceed the ceiling set out in Article 2(2)(c) and whether it is relevant, that the national law transposing Directive 2008/48/EC does not provide for a higher ceiling.
Similar to Regulation 1215/2012 (Brussels Regulation), Article 15 of the Lugano II Convention provides an exemption in favor of consumer contracts, conferring jurisdiction on courts where consumers are domiciled. Thus, following the exemption, in the case at hand these would be the Icelandic courts.
In determining whether the claimant was a consumer the CJEU did not consider the purpose of the loan. Starting from the premise that the loan was taken by the claimant for her non-professional purposes (para. 24), the CJEU proceeded with discussing the relevance of the monetary limit of the transaction, and more broadly, the relevance of Directive 2008/48/EC in determining the character of the contract in question.
The CJEU concluded that the monetary limit of 75 000 EUR that defines credit agreements for consumers within the meaning of Directive 2008/48/EC is not relevant in the present case and neither is the fact that there is no higher limit provided in the applicable national law (para. 48). The CJEU relied on the different purpose of the two instruments. While Directive 2008/48/EC aims to harmonize the substantive law on consumer credit to protect consumers and to facilitate the functioning of the internal market (para. 41), the Lugano II Convention only aims to settle the procedural matter of court jurisdiction in all consumer contracts. According to the CJEU, it would be unattainable to limit the scope of the Convention to only certain consumer credit contacts, especially that the text of the Convention does not impose any monetary limits on any contracts, including consumer credit.
In this judgment the CJEU followed its established approach and observed the various EU legal instrument distinct from each other (see our earlier post here), primarily referring to their purpose. In the present case, it also resulted in accepting the broad notion of a consumer. While I would not argue with the arguments raised by the Advocate General and the CJEU on the unfair nature of having a distinctive approach to credit agreements of different value that may ultimately exclude very small loans from the scope of the Convention causing detriment to those vulnerable consumers that are most in need of this sort of protection; I am puzzled with the result of this judgment and find it unfortunately that the CJEU did not have a chance to tackle the question of whether the purpose of the loan was professional or non-professional. I would think that the amount of the loan and the fact that claimant was one of the directors of the company cast a shadow of doubt at their status as a consumer. Would you agree?