Dear readers,
it has taken a while to figure out what made me puzzled at the Dexia decision which the CJEU rendered two weeks ago, but now I managed to put my finger on it. The decision concerns "share leasing" contracts, a speculative instrument whereby consumers - by and large - acquire shares from a bank and return them after some time, possibly making profit if the share price has (sufficiently) risen in the meantime. The contract made provisions for the case of early termination which essentially made it very likely for Dexia to make actual profit from such an event rather than just compensate its costs and missed gains. The combination of terms giving rise to such consequences was in principle declared unfair by the Dutch Supreme Court, leaving lower courts with some concerns.
On its face, despite the complexity of the underlying contracts, what the two Dutch courts had asked the CJEU was to more or less restate the (precedent-wise) obvious:
- is a term which establishes a significant imbalance between the rights and duties of the parties, to the consumer's disadvantage, also to be considered unfair when on certain occasions it may (somewhat unexpectedly) turn to the consumer's advantage? (Yes)
- can a court replace a non-essential term of the contract which has been declared unfair by applying supplementary rules of national law? (No, unless for some reason said national law makes the contract invalid without the term and this is to the consumer's disadvantage).
After looking back, there is indeed nothing new under the sun as concerns the first question: the Court had explained several times in the past (since Banco Primus at least! thanks @Anna van Duin for digging this up), and clearly repeats here, that a term's assessment under the unfair terms directive cannot depend on circumstances which will only emerge after the contract's conclusion. Rather it must be assessed in light of the way it affects the parties rights and duties, seen at the moment the contract is entered into. As the court states at para [57], a different conclusion would undermine the term's invalidity as mandated by the Directive's article 6, allowing courts to only disapply unfair terms when unfavourable circumstances arise while leaving them otherwise in place.
So far, so good. Dutch courts, in fact, love to disapply rather than invalidate terms, so we can understand how the constellation at hand would require extra persuasion on the side of the Court of Justice - next to, let us be honest, the fact that the terms had been used in a vast number of contracts.
Now, on to the the second question, which turns out to be a bit more complicated. The Hague court of appeals asked whether, after invalidating the terms in the agreement, it could apply rules of general contract law allocating damages arising from termination of a contract between the parties to determine the respective position of Dexia and its client as a result of the termination.
We do know since Kásler that courts can only replace an unfair term with a national supplementary provision when the contract would be invalid otherwise (and this would be to the consumer's disadvantage). However, what is a supplementary rule? from Kanyeba we know that general rules on damages do not count as supplementary rules and can thus be applied instead of a penalty clause - subject of course to the claimant invoking them and providing that they suffered damages. Furthermore, in Caixabank, the Court had recently validated the application of statutory rules on the allocation, between parties, of necessary notary fees. It had done so, notably, without even referring to its case-law, just apparently finding it plain that this must be possible. What, thus, distinguishes the rules in Dexia from the ones which were considered applicable in Kanyeba and Caixabank?
It seems that the rules allocating contractual damages in this case, and in particular the way that they had been operationalised in case-law, establishing that damages would be as a rule split 2/3-1/3 between bank and consumer, fulfil most closely the notion of supplementary rules of national law that has been implied in the case-law so far. They are clearly rules of contract law, they are non-mandatory, and indeed they supplement not only the contract but also general rules on damages. Not applying them, also (contrary to what would have happened in Caixabank), does not leave a problematic gap. They just make the consumer's situation more advantageous.
The feeling remains, however, that we are still not done with this kind of questions. With national courts still struggling on questions as apparently moot as the first one in this case, how can we expect any clarity on an objectively more complicated matter? If the CJEU keeps showing no willingness to help by looking more systematically at its own case-law, we can expect more confused national courts to ask for help in the coming times.
