Dear readers,
if you were hoping for some inspiring CJEU news to keep your mind away from pandemics, impending festivities and other disasters, we may this week have just what you were looking for - or not, but only time will tell :)
Yesterday, the CJEU's first chamber delivered a judgement sparked by the creativity of Romanian courts which could make courts in other Member States take a closer look at their potential role in unfair terms dispute. To understand the case, it is useful to take a small step back.
As you may remember, in a string of cases culminating famously in the Dziubak decision, the court had established that unfair terms may not be replaced unless two+1 conditions are fulfilled:
a) the contract must, under the applicable national law, not be capable of existence without the unfair term
and
b) the invalidity must be to the consumer's disadvantage.
If these two conditions apply, the term may be replaced with otherwise applicable non-mandatory rules - the existence of which is a third condition. What if there are no otherwise applicable rules?
In the case at stake, Romanian courts were struggling with exactly this problem. While on occasion, as in Dziubak, a consumer may actually prefer the whole contract to be invalidated, in several Romanian cases courts were left alone with the prospect of invalidating contracts or facing a stalemate. Some courts had sought to apply non-mandatory rules which had entered in force at a later stage and were thus not applicable to the contentious contracts, but other courts had decided to instate "regulated" negotiations between the parties. In its decision, the CJEU endorses - and, to a certain extent, even requires, this approach, making space for a new wave of procedural innovation in unfair terms adjudication. To what extent this will materialise, though, will of course depend on a number of factors, including importantly national legislation. Let's see what the court says.
According to the CJEU, the Directive's article 6 does not seek to "prescribe uniform solutions" after a term has been declared unfair [see para 39]. However, once it has found a term unfair, the national court invested with the dispute must, "while taking into account all of its national law, take all the measures necessary to protect the consumer from the particularly unfavourable consequences which could result from the annulment of the loan, notably the fact that the seller or supplier could immediately claim the debt from the consumer" [para 41].
The above means that, in circumstances such as the ones at stake, nothing precludes a court from instating negotiations between the parties in order to establish a viable method for calculating the interest rate "provided that it sets out the framework for those negotiations" and that the negotiations themselves seek to establish "an effective balance" between the parties' rights an obligations, considering in particular the objective of consumer protection underlying the Unfair Terms Directive [see para 42]. In doing so, however, they should keep in mind that their intervention should not go beyond "what is strictly necessary to restore the contractual balance", which in turn means "to protect the consumer from the particularly unfavourable consequences" that annulment would bring about. A more substantive intervention would undermine the achievement of the paramount objectives pursued by the directive, namely restoring equality between the parties and deterring professionals from using unfair terms [para 44, para 38]
Combined, the elements in the reasoning seem to suggest not only that the Directive does not preclude the instigation of "regulated" negotiations, but even that courts are required to take action in this way when this is allowed [or not prohibited] under the applicable national rules. While the CJEU's caveat against substantive intervention leaves open questions as to what courts should do in case negotiations stall, the decision seems mainly aimed at moderating the possibly harsh effects of the case-law which came to be epitomised in Dziubak while preventing consumer-unfriendly readings which some MS courts may be a bit too eager to embrace.
