Dear readers, yesterday the Court of Justice (third chamber) published its decision in Lovasné Toth, a Hungarian case concerning the potential unfairness of contractual mechanisms facilitating debt recovery on the side of banks.
The referring court doubted the compatibility with the Directive - and with Hungarian law - of a clause allowing the lending bank to ask a notary, who had also underwritten the contract containing the clause itself, to certify the consumer's non-performance and turn the agreement into an executive title on the basis of the bank's own records.
In the proceedings before the CJEU, it appeared that there was some disagreement, in Hungary, whether such term did or did not have as a result an inversion of the burden of proof, to the consumer's detriment, in comparison with the otherwise applicable rules. The Kuria, ie the highest court, deemed the term to merely repeat Hungarian law. Some lower courts, however, disagreed.
Terms inverting the burden of proof to the consumer's disadvantage are blacklisted in Hungary and they are included in the Directive's annex at point q, concerning terms having the object or effect of:
excluding or hindering the consumer's right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract.
Hence, if the terms in question did invert the burden of proof, they were illegal under Hungarian law, but Hungarian courts were divided on the issue. Was there possibly a different way of considering the terms unfair? This question must have been in the mind of the referring court when they formulated their preliminary ruling request - resulting in four possibly quite confusing questions.
The first question sought to ascertain whether the Directive's annex on its own was tantamount to a total prohibition of terms reverting the burden of proof upon consumers. The CJEU's answer to this question is quite straightforward - no it does not. Member States legislators can include such terms in a so-called "black list" of forbidden terms, but otherwise the annex is always subject to the interpretation of national courts, who must consider the list in connection with the general criteria of article 3.
The second question tried to push the interpretation of the annex: if the list envisages terms that have the object or effect of hindering the consumer's access to justice, what about terms that legally do not do so while in practice making the consumer believe that their redress options are limited? To this question the court of justice answers in the negative, affirming that only an actual legal impediment is covered by the provision. On the other hand, should a notary stipulation such as the one in consideration make it possible for the creditor, under the applicable law, to have a final incontestable claim to the outstanding amounts - then the stipulation would be covered by the annex and very possibly be unfair.
The third preliminary question is the one that gets the potentially most controversial answer: if a clause if grammatically clear but its effects can only be understood by interpreting a controversial provision of the applicable law, should the professional provide the consumer with additional information in order to comply with the duty to use clear and comprehensible terms? This question arises in connection with a number of cases in which the court had said that clear and comprehensible means that the consumer must be able to understand what the consequences of a certain term are for their economic (Invitel) or legal (VKI v Amazon) position. Where provisions of national law actually directly impacted the meaning of a certain term, the cases suggested, not recalling them in the contract amounted to intransparent drafting. The Court explains that none of its previous decisions are directly relevant to this case. In the present case, according to the court, it would go beyond what can reasonably expected of the professional to require them to reconstruct the general rules of civil procedures and the allocation of the burden of proof - and related jurisprudence - in order to clarify the meaning of a term. (see para 69)
The problem with this answer, it seems to me, is the utter lack of reasoning leading to the statement - making the outcome very difficult to turn in guidance or a semblance of a legal rule. We now know that this would be unreasonable - but what would be reasonable? The previous case law could be made sense of by inferring a principle that, wherever possible, the consumer should be able to infer what a certain term meant for their interests. Do we need to take this as a case which still falls under this rule of thumb, but represents a situation where achieving clarity was not reasonably possible? Or should we take the court literally and interpret the decisions in Invitel, Andriciuc and Amazon to be entirely separate and each limited to a specific type of term and rule?
The first interpretation makes more sense as a matter or legal logic, but the second is easier to square with the extremely casuistic language used by the Court throughout paras 61-68. I would still like to suggest that the quite sensible interpretation of transparency which transpired from the court's previous case-law should be maintained, and the case-by-case language put down to bad arguing on the side of a Court that had to make do of the absence of a sensible AG opinion (the very intense plead by AG Hogan may well have influenced the results in this case, but is not once quoted in the decision).
The fourth and last preliminary question concerned again the content of the annex: the referring court wanted to know whether item m), concerning terms giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract,, could also be interpreted to cover terms enabling the seller to unilaterally appreciate the appropriateness of the consumer's performance. According to the Court, it doesn't. It seems quite reasonable to claim, as the court does (at para 74), that the consumer's performance is clearly not what the provision is aimed at. A different interpretation, albeit possibly very welcome in terms of consumer protection, would have required a significant manipulation of the text's plain meaning and intentions.
To conclude, reading the decision feels a bit like one of those football matches where both teams have another game in a couple of days and little stakes in the night's result. A few nice passes, some questionable moves and in the end it's a draw and it's time to go to bed. Let's see whether there will be more games to come.
