How concerned are Europeans about their privacy?

Under the European Commission’s request, the European Union Agency for Fundamental Rights recently prepared a report about the Europeans’ perspective on their online privacy and personal data (here). This report is based on a survey where 35 000 Europeans were asked about their views on privacy and about their awareness of the GDPR. The survey is from pre-pandemic times (January-October 2019), but its conclusions are highly relevant in a time where several European countries consider using technology to track the spread of COVID-19. For example, the Netherlands will soon launch an app that will keep track of who the app holder was in contact with, so as to quickly notify them in case of a possible contact with a COVID-19 infected person (see more about this here).

The report showed some interesting results, particularly a difference between the level of trust in private and public bodies. While 23% of respondents claimed that they do not want to share any personal data with public bodies, 41% do not want to share personal data with private companies. The results also show that the willingness to share personal data depends on the specific data to be shared: for example, while 63% of willing-to-share respondents would share their home address with public bodies, a mere 7% would share their political views.

The report also touched upon another well-known issue: people do not read terms and conditions before agreeing to them. Surprisingly, in this study, 22% of respondents claim to always read terms and conditions (approx. one in five) and 44% claim to read them sometimes. This means that in total 66% of respondents read at least sometimes the terms and conditions of the products or services they acquire. While still far from ideal, these numbers are higher than those reported in other similar studies (see, for example, the study by the Behavioural Insights Team on which we reported here). More worrying is the percentage of respondents who read the terms and conditions but do not understand them (27%). There are, however, relevant differences between Member States: for example, while in Belgium 47% of respondents do not read terms and conditions, in Estonia that number drops to 22%.

Finally, there is a high number of respondents who are aware of both the GDPR and of their national data protection supervisory authority (around 70%). 60% of respondents are aware that they are legally entitled to access their personal data held by public administrations (although this number decreases to 51% regarding private companies). Moreover, most respondents stated that they are aware of privacy settings on their smartphones (72%), although the results are not as positive regarding the privacy settings of specific apps (31%).

Interest rate modifications are not separate contracts - CJEU in C-639/18 Sparkasse

On the 18th of June 2020 the CJEU delivered its judgement in C-639/18 KH v Sparkasse Südholstein on the interpretation of Art. 2(a) of Directive 2002/65/EC on Distance Marketing of Financial Services. Unfortunately, the CJEU did not follow AG Sharpston's consumer friendly opinion (on which we reported here).

The facts

To remind us of the facts, KH concluded three contracts with her regional Sparkasse. These contracts were with a fixed interest rate for a fixed period of time after which they would switch to a variable rate in the absence of an agreement between the parties on a new fixed rate (for a newly fixed period). The original contracts were concluded at a branch, but the renegotiated agreement on the interest rates were concluded at a distance, thus KH claimed that Directive 2002/65/EC was applicable giving her a right of withdrawal, which KH intended to use.

The legal question

The legal questions thus arose, whether the newly reached agreements on interest rates were separate contracts (to which the Directive would apply), or as the bank claimed, just 'operations' or amendments of the initial contracts (to which the Directive would not apply). Hence, KH's right of withdrawal depended on the interpretation of Art. 2(a) of Directive, i.e. whether the transactions setting out the new interest rates where covered with the concept of a 'contract concerning financial services' and a contract 'concluded under an organized distance sale or service-provision scheme'.

The ruling

In interpreting the phrase 'contracts concerning financial services' the CJEU concluded that the present agreements on the alteration of the interest rates are not separate contracts, they are not 'contracts concerning financial services' within the meaning of the Art. 2(a) of the Directive because they do no more than to alter the originally agreed rate of interest without changing the duration or the amount of the loan.

In its analysis, the CJEU referred to Art. 2(b) of the Directive that defined the concept of 'financial service' as including, among others, contracts of credit. In determining more closely the essence of a credit contract, the CJEU referred to its previous case-law (C-249/16) that clarified that the characteristic obligation of the contract is the granting of the sum lent, whereas the borrowers obligation to repay the sum borrowed is 'merely a consequence of the performance of the the service by the lender'.

In discussing the argument that the newly agreed interest rates are just operations of the initial credit contract, the CJEU disagreed. Having regard to the examples given in Recital 17 (such as opening a bank account as an initial service agreement and withdrawing money from the account as its operation), an amendment that sets a new rate of interest as a result of a renegotiation of a clause in the initial contract (which provides for a variable, 'back-up' rate of interest) is neither an 'operation' of the initial agreement nor an addition to the elements of the initial agreement. 

The CJEU concluded that in order for a contract to qualify for a 'contract concerning financial services' under Art. 2(a) of the Directive it must be for a supply of 'such service' and this condition is not fulfilled here. These were only amendments of the rate of interest payable for the service that was previously agreed.

Finally, although the CJEU noted that one of the objectives of the Directive is to ensure a high level of consumer protection, in order to enhance consumer confidence in distance selling of financial services that would facilitate the free movement of financial services, according to the CJEU, 'such an objective does not necessarily require' that an agreement setting out the new interest rate is  considered as a new contract for financial services.

Given the above conclusion, the CJEU considered unnecessary to answer the other question asking for the interpretation of the meaning of a contract concluded 'under an organized distance sale or service-provision scheme run by the supplier.'

Our evaluation

This judgment deals with an important question in (long term) financial services contracts such as credit, insurance, investment and pensions, where the initial agreement is subject to later changes by way of amendments, ruling that the status of these later agreements are not separate contracts. 

This important and potentially far reaching conclusion (given that the Directive applies to all financial services) is not well supported with analysis. The key line of thinking in this judgement seems to be that the 'contract concerning financial services' must provide for a service, must be for a supply of a financial service, and anything short of this, would not be considered a separate contract. While this argument may have merits, there is very little engagement with what is meant by a 'service.'

One the other hand, one would have expected that there will be a much better analysis of the contractual aspect of the transaction, the meaning of the contract and its formation especially that this was the focus of AG Sharpston's opinion. Apart from the reference to one previous case-law there is no engagement with the meaning of contract and its essential elements. Examples of European solutions would have been useful and they might have lead to a different conclusion. For instance, Section 6:383 of the Hungarian Civil Code defines loan contract by reference to the obligations of the parties under which the creditor is obliged to provide the agreed sum of money, and the debtor is obliged to repay this sum with interest. Interest thus appears as named essential element of the contract and clearly one could argue that changing an essential element of the contract can only be done by way of a new contract?

Finally, there is no mention of power imbalances and the consumers' weaker position in negotiating with the bank, even in this case, where the consumer is likely to engage with the process (by contemplating options and accepting one option offered by the bank). It would have been useful to take into account the way in which these contracts (and their amendments) are concluded in practice.

In addition, the line of reasoning is also weakened by the CJEU's intention to give special status to these amendments (as they are nether separate contracts nor are they the operations of the initial service agreement) without clarifying the details of this special status and what it entails in terms of the rights and obligation of the parties.

Finally, it remains unclear why amendments to (long term) financial contracts are unimportant for the facilitation of a high level of consumer protection and the internal market in financial services. I would argue the contrary, it is indeed important to consider amendments as separate contracts to enhance consumer confidence in concluding (long term) financial contracts and to provide consumers with the protection guaranteed by the Directive, including the important right of withdrawal.

More consumer justice? EU-wide collective redress agreed on

One of the commonly recognised gaps in EU consumer protection was the lack of harmonised collective redress options for consumers. Only some Member States have introduced their own collective actions and the procedures differed, sometimes significantly, between countries. On June 22, the European Parliament and the Council have reached a long-awaited deal on the proposed Directive on representative actions for the protection of the collective interests of consumers (see our post on the draft proposal of April 2018 here), which also will repeal the Injunctions Directive.

The European Parliament notified in a press release (New rules allow EU consumers to defend their right collectively) on what was agreed with the Council:

• min of 1 representative action procedure for injunction and redress measures available per Member State (allowing both domestic and cross-border actions)
• qualified entities who will be entitled to launch actions for injunction and redress on behalf of groups of consumers are to be supported (also financially)
• qualified entities for cross-border actions will need to prove independent and non-profit character as well as 12 months of activity in protecting consumers' interests prior to their appointment as qualified entities; Member States may choose different criteria for qualifying entities for domestic actions
• 'loser pays principle' applies
• national law may allow courts or administrative authorities to dismiss manifestly unfounded cases at initial stages
• Commission is to assess whether to establish a European Ombudsman for collective redress (cross-border actions)
• aside general consumer law claims, the actions could be brought specifically in the following areas: data protection, financial services, travel and tourism, energy, telecommunications, environment and health, passenger rights

For those looking for the final text of the Directive - this deal still needs to be officially accepted by the Parliament and the Council (the procedure file is available here). When it actually is published and enters into force, Member States will have 2 years to transpose the measures. This part of the New Deal has by no means been an easy fix, but great progress has been made.

UPDATE: text available now here.

Deja vu: Creative interpretation of Regulation 261/2004 - CJEU in Transportes Aéreos Portugueses (C-74/19)

As we have previously reported (Violent passengers...), the CJEU was asked to consider the impact that an aggressive behaviour of one passenger might have on the performance of the obligations by the air carrier, when it results in a disruption of the flight. Unsurprisingly, the CJEU agreed today in the Transportes Aéreos Portugueses (C-74/19) case with the AG Pikamäe's opinion that such behaviour may entitle the air carrier to claim the occurrence of an extraordinary circumstance pursuant to Regulation 261/2004. 

The CJEU emphasised that international air carriage law intends to ensure safety of air travel and that unruly behaviour of passengers may endanger such safety (paras 39-40). Further, dealing with such unruly behaviour cannot be perceived as inherent in the normal exercise of the activity of operating air carriers (para. 41) and it is not under their control, as it is neither foreseeable nor likely to be feasible to be dealt with within limited means that the air crew has on board (para. 43). This means that both conditions for qualifying the unruly behaviour of passengers as an extraordinary circumstance have been fulfilled. This may be different only, following again on AG Pikamäe's opinion, where the air carrier had an opportunity to control this behaviour, either by anticipating it (spotting it before the flight and denying boarding to the passenger) or by not contributing to it (paras 45-47).

Moreover, if the unruly behaviour of the passenger on one flight affects passengers on subsequent flights (e.g. where the first flight was delayed in reaching its destination due to the need to disembark the aggressive passenger at a different airport and, therefore, its subsequent departure did not follow the intended schedule) and there is a direct causal link between these events, then the air carrier may invoke the extraordinary circumstance, which occurred during the first flight, as a reason not to have an obligation to compensate passengers on subsequent flights (paras 53-54).

Up to this point, the judgment was nothing if not expected. The answer to the third question posed to the CJEU is, however, surprising.

Ground-breaking interpretation of Article 5(3) Regulation 261/2004?

Article 5(3) Regulation 261/2004 allows operating air carriers to avoid the payment of the compensation under Article 7 Regulation 261/2004 to passengers of delayed or cancelled flights if there were extraordinary circumstances and the air carrier could not have avoided them even if it took 'all reasonable measures' to do so. Or at least this is how this provision has so far been interpreted. The CJEU has now decided that Article 5(3) Regulation actually states that the air carrier is only released of its compensation obligation if there were extraordinary circumstances that led to the delay or cancellation of the flight and the air carrier could not have avoided that delay or cancellation. The CJEU decided that this was indeed the meaning of the provision without either mentioning the different language versions of the Regulation (at least its Polish, German and Dutch texts clearly indicate the link between the need to take all reasonable measures to avoid extraordinary circumstances (plural) not the cancellation itself (singular)) or its legislative history. What is then the justification for this revolutionary interpretation of the provision? Just the need to ensure a high level of passenger protection (para. 58).

When we read para 57 of the judgment it still reiterates the previously expressed in case law sentiment that the air carrier is not required to take 'reasonable measures' that would not be 'appropriate to the situation'. Instead, the air carrier should use all its resources (staff, finances) without having to make 'intolerable sacrifices'. This was previously related to the air carriers need to avoid occurrance of extraordinary circumstances (see e.g. Eglitis and Ratnieks, para. 27 or Pešková and Peška paras 27-30), which could have also encompassed the need to minimise the risk of the delay, the damage to passengers (e.g. by putting some flexibility in their air schedule between departure/arrival times of aircrafts, which could have allowed for some delays due to extraordinary circumstances occurring). Now, in the following paragraph - 58 - the CJEU draws a link between the air carrier taking all these reasonable measures and providing consumers with rights under Article 8 of the Regulation (right to choose between reimbursement and re-routing), specifically the right to re-routing in a way that would prevent the delay or cancellation. Specifically, the CJEU concludes that if the air carrier does not offer to passengers a re-routing option, which is 'reasonable, satisfactory and timely', which would get passengers to their final destination without a delay, even if it involved seeking for alternative flights from other air carriers, then the air carrier failed in its obligation to take all reasonable measures to avoid a delay or cancellation of the flight, pursuant to Article 5(3) Regulation. And the latter means that the air carrier needs to pay compensation under Article 7 Regulation to these passengers (para. 61). 

Aside the lack of justification for the above-mentioned interpretative technique of Article 5(3), we could also question the use of Article 8 here, as the right to choose between reimbursement and re-routing arises when the passenger's flight has been delayed or cancelled, whilst the CJEU uses it here to argue for the need to avoid delay or cancellation.

I think we can safely anticipate the airlines questioning the reasoning of the CJEU in this judgment, as it is not less controversial than the Sturgeon case. The only saving grace for them is that they could still try to argue that e.g. trying to arrange alternative flights on other airlines for passengers of a delayed flight would ask of them 'intolerable sacrifices'. But this sounds like a heavy burden of proof to meet.

CMA pushes for refunds of cancelled holiday bookings

We have previously reported on the EU Commission's recommendation regarding cancelled flights (asking airlines to make vouchers an attractive alternative to consumers instead of a refund - see here) due to COVID-19, as well as the situation on cancelled events in Germany (entitling consumers to vouchers not refunds - see here). In the meantime, in the UK the Competition and Markets Authority (CMA) encouraged consumers to report (through an online form) if they had been affected by unfair cancellation terms as a result of COVID-19. So far this has resulted specifically in a closer investigation of the COVID-19 Taskforce (set up on March 20) as to holiday accommodation providers and their cancellation policies. Already one big provider - Vacation Rentals (responsible for Hoseasons and Cottages.com) - announced the reversal of their cancellation policy, which means consumers could expect a full refund (see here). The full refunds are due to consumers as it was unlawful to travel to the rented accommodation at the time and/or for the accommodation to be made available.

If you want to report on how the national enforcement authorities help with unfair cancellation policies in your country, please leave a comment!

Default judgments not without ex officio unfairness test - CJEU in Kancelaria Medius (C-495/19)

Last Thursday the CJEU issued another judgment confirming the need for national procedural laws to facilitate effective judicial review of unfair contract terms - Kancelaria Medius (C-495/19). Polish procedural law was closely examined in this judgment, as it mandates national courts to issue default judgments also in cases brought by traders against consumers (in the given case, the claim was for debt collection based on a concluded by the consumer credit agreement). This means that if the defendant-consumer fails to appear at court and defend their rights, after they have been duly notified of the claim, default judgments for traders should be issued based solely on the documents disclosed by traders. The court may not contest the validity of the presented documents of its own motion, unless there are 'reasonable doubts' or a risk of 'circumventing the law', which normally will not occur if the presented information is succinct (para. 16). This would prevent national court to ex officio examine unfairness of contract terms.

The referring court raised this issue following the previous case law of the CJEU in Profi Credit Polska (see our analysis here) and Aqua Med (see our analysis here). The CJEU adheres to its previous judgments in these two cases and again emphasises the need for national procedural rules not to stand in the way of ex officio assessment of unfairness of contract terms in consumer contracts (by 'adopting the measures of inquiry needed to ascertain whether a term in the contract is unfair'), where the court has doubts as to whether the terms are unfair. Only then the Member States may claim that they comply with the obligation of Article 7 UCTD to provide effective consumer protection against unfairness, by ensuring that both the principle of equivalence and of effectiveness are observed (para 32). It falls within the ambit of the dispute, and thus is not prevented by the delimitation by parties of the subject matter of an action and the principle of ne ultra petita, for the national court to require the trader to present the content of the contract, on which the application for the claim is based (in the given case - the credit agreement signed by the consumer, instead of an unsigned pr forma contract) (paras 44-45). 

The CJEU suggests to Polish courts specifically to use the principle of harmonious interpretation in interpreting Polish procedural rules on default judgments, namely to broadly interpret the exceptions of 'reasonable doubts' and 'circumventing the law' to accommodate ex officio assessment of unfairness. As long as such a broad interpretation would not be contra legem, it would allow Polish law to be perceived in conformity with the UCTD (paras 48-49). If that is impossible, Polish procedural rules standing in the way of ex officio unfairness test should be disapplied (para. 51).

Airbnb as intermediary in civil law? News from the Low Lands

Dear readers, 

it is not too late to report on a recent development in Dutch consumer law whose features make it likely relevant beyond local borders. 

On 9 March, just before the country transitioned to "intelligent lockdown" because of Corona, the Amsterdam district court gave a very consumer-friendly judgment in a case between a Dutch holiday maker and accommodation platform Airbnb. 

The basis for the case is a rule in Dutch law according to which real estate intermediaries cannot charge both the owner and the tenant for their intermediation services. The Amsterdam court agreed with the claimant that this rule should also apply to Airbnb, ordering the company to refund the fee unduly paid by the consumer. 

The Court rejected a number of counter arguments raised by Airbnb, ranging from the non-applicability of Dutch law under the platform's T&Cs to the scope of the Dutch rule - which originally was intended for residential leases - to, importantly, the qualification of Airbnb itself as intermediary. 

Readers of this blog may remember that Airbnb brought the French attempt to treat it as a real estate intermediary, which would result in it being subject to licensing requirements, before the CJEU, obtaining a victory against French regulators. The Dutch case at hand poses the interesting question whether the CJEU's ruling would stand in the way of considering Airbnb an intermediary for civil purposes only. A perfunctory look at the Information Society Directive (2000/31 EC) suggests the Dutch rule can be defended as being outside the scope of the harmonisation brought about by the Directive, which does not intend to harmonise rules of contract law other than the ones standing in the way of online contracting as such. 

Meanwhile, the first specialised service has emerged, offering consumers to automatise their claims for redress of Airbnb fees. The possibility of redress is open to consumers who have booked after mid-2016.