Earlier this year we reported on the interpretation of Directive 93/13/EEC on unfair contract terms (UCTD) proposed by the Advocate General Kokott in case C-81/19 Banca Transilvania. The questions referred in the case concerned, firstly, the exclusion from the scope of the UCTD of terms reflecting mandatory statutory provisions in Article 1(2) and, secondly, the conditional exclusion of core terms in Article 4(2) from the scope of fairness assessment. In both respects the Advocate-General proposed a pro-consumer reading, widening the scope of relevant assessment and elaborating on the competences of national courts to fill gaps in the contract. In the judgment issued last week, however, the Court of Justice departed from the AG's opinion and limited its reply to the first question only.
Facts of the case
The case was brought by two Romanian consumers, who entered into a credit refinancing agreement, converting the original loan in Romanian leu into an agreement denominated in Swiss francs. Due to subsequent fluctuations in the CHF/RON exchange rate, the amount which they ultimately had to pay increased considerably. The claimants argued that the bank failed to provide them with adequate information on the exchange rate risk, which they found unreasonably disadvantageous. The bank responded that the contested term reflected the principle of monetary nominalism expressed in the Romanian Civil Code and, therefore, fell outside the scope of the unfairness test in line with Article 1(2) of the UCTD. Against this background, the referring court asked the CJEU whether a
contractual term which reflects a supplementary rule of national law articulating a general principle (such as the principle of monetary nominalism) is subject to the
provisions of the UCTD. In case of an affirmative answer, a further question was raised as regards the analysis of core terms under Article 4(2) of Directive 93/13 and the associated legal consequences to be drawn by national courts.
Exclusion of contract terms reflecting mandatory statutory or regulatory provisions
Pursuant to Article 1(2), contractual terms which reflect mandatory statutory or regulatory provisions are not subject to the UCTD while recital 13 explicitly clarifies that this also extends to the rules
"which, according to the law, shall apply between the contracting parties
provided that no other arrangements have been established". One could assume that this definite formulation leaves no doubt about the scope of the exclusion. However, the provision has been interpreted differently by the Romanian courts, leading the referring court to wonder how far it indeed applies to supplementary provisions.
For the Advocate General Kokott the reference constituted an opportunity to clarify the scope of the exclusion, paving the way to its judicial fine-tuning in a pro-consumer manner. The AG admitted that the exclusion in Article 1(2) covered contractual terms reflecting both mandatory and supplementary (default) rules, but proposed a qualification at a later stage. Specifically, according to the AG, the exclusion only applied to the provisions which were adopted specifically for the type of contract concerned or were applicable to the contract according to a legislative reference. This conclusion was justified by a teleological argument, following which it was only possible for the national legislature to "strike a balance" between the parties inasmuch as the specific arrangement between the parties was indeed envisaged by it. Consequently, following the opinion, if the provision was not intended to create a balance between consumers and sellers or suppliers, the trader should not be able to rely on Article 1(2). Having reached this conclusion, the AG moved to the analysis of the remaining questions.
The Court of Justice, however, did not see eye-to-eye with the reading of Article 1(2) proposed by the AG. Even though it stressed that the exclusion was to be interpreted strictly (para. 24), it did not agree with the consequences drawn by the AG from the previous case law explaining the rationale of analysed provision. In this regard, the Court reiterated that the exclusion "is justified by the fact that, in principle, it may legitimately be supposed that the national legislature struck a balance between all the rights and obligations of the parties to certain contracts" (para. 26). Accordingly, it stressed, the fact that such a balance has been struck does not constitute a condition for the application of the exclusion in Article 1(2) of Directive 93/13, but the justification for such an exclusion (para. 27). Consequently, to establish whether the conditions for applying the exclusion are met, the national court has to determine whether the contractual term in question reflects mandatory provisions of national law that apply between contracting parties independently of their choice or provisions that are supplementary in nature and therefore apply by default. The Court did not elaborate on what it means to 'reflect' the relevant rules, as it previously did in Aqua Med (see our comment here). Rather, it merely referred to the findings of the national court, according to which the contested term did indeed reflect the provision of national law and confirmed that the supplementary nature of that provision was irrelevant for the application of Article 1(2).
Concluding thought
While the judgment of the Court may be seen as conducive to greater legal certainty it does not necessarily contribute to an increased consumer protection. The pro-consumer reading proposed by the AG was not entirely unfounded and seemed well-aligned with the rationale of the provision as well as the requirement to interpret the exceptions strictly and ensure a high level of consumer protection. While in the case at hand, the Court was not ready to expand the scope of fairness assessment under UCTD, the case is not entirely lost for the consumers. Firstly, national courts should continue to assess whether the analysed contract term indeed "reflects" the relevant national provision. Secondly, due to the minimum level of harmonisation introduced by the UCTD, Member States may decide to extend the scope of the fairness assessment, for example in the direction proposed by AG Kokott.
