Lexitor saga takes (perhaps not so) unexpected twist: CJEU in UniCredit Bank Austria v VKI (C-555/21)

 Dear readers, 

while some of you may think this blogger spends too much time online (true), lately social media have been a great source of information concerning new case-law - take Thursday's CJEU decision in case C-555/21 on non-interest costs in the case of early repayment of mortgage credit as an example. Within an hour of the Court issuing a press release, I could see the judgment *everywhere*. People in my bubble were, in general, not happy (see eg fellow consumer lawyer Catalin Stanescu; however, I should say: people were not happy, except some fellow Italians, see * below). What happened? 

In 2019, the CJEU decided Lexitor, a case in which it was requested to decide whether article 16 in the 2008 Consumer Credit Directive, regulating the unwinding of consumer debt in case of early repayment, required also non-interest costs to be returned pro rata tempore. In that case (see our post here), the CJEU ruled that indeed this would be the case: a different interpretation, in particular, would have made it too tempting for credit providers, who are to a large extent unilaterally able to set up the remuneration structure for consumer credit, to set up a business model largely based on low interest and high fixed costs.

This case sent airwaves throughout Europe, even if more visibly so in some systems: in Italy, for instance, it led to a recent decision by the Constitutional Court that may or may not need to be reconsidered after today. Why?

An important question outstanding after Lexitor was whether the established interpretation should be limited to the Consumer Credit Directive or could also be extended to the 2014 Mortgage Credit Directive - this in particular given that the two directives contain textually similar provisions and hence a consistent cross-directive interpretation may be good for legal certainty. Today's decision seems to suggest that it can be extended, as a matter of national law - but such extension is anyway not required by EU law. In particular, the preliminary reference asked whether the Austrian provisions preventing the recovery of non-interest costs unconnected to the duration of the credit contract was compatible with article 25 of the 2014 Directive. The CJEU concluded that it is. 

In the case of mortgage contract, the referring court [see para 18] had already observed, much of the fees that do not depend on the duration of the credit are actually outside of the credit provider's control: think for instance of notary costs, obtaining an assessment of the value of the house and so on. In such context, the CJEU found, the risk of perverse incentives found in Lexitor does not seem so serious to justify the consequences that a strict interpretation of the right to pro rata restitution would entail [see para 32].  

While somewhat irrationally finding solace in the idea that the standardised information to be provided pursuant to the Mortgage Credit Directive would prevent abuse on the side of credit providers by empowering consumer choices [para 33-34; reader, take it from someone who has recently concluded a mortgage contract - it doesn't], the Court also makes space for appreciation of the circumstances of the case and arguably national variations. This emerges from paras 37-38, according to which it is for national courts, seized with a dispute, to ensure that the Directive's protective aims are not circumvented and that costs that are in fact remuneration for the availability of cash over time are not accounted for under different headers to avoid restitution. This is an interesting and imposing task for national courts (with possible further implications such as: what would be the contractual consequences of a misclassification? would it in any event entail an unfair commercial practice? would the courts have to perform this check ex officio if for any reason they are confronted with the case?).

In Italy, the Judgement has drawn particularly much attention - Lexitor had previously led to a consequential decision of the Italian constitutional court and had drawn quite the criticism in Law & Econ circles (see eg here), which means this weeks decision has been quickly celebrated by parts of Italian academia.  

Deposit on recyclable packaging not included in a selling price - AG Emiliou in Verband Sozialer Wettbewerb (C-543/21)

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Last week, on February 2, AG Emiliou issued his opinion in the case Verband Sozialer Wettbewerb (C-543/21) concerning interpretation of the 'selling price' from the Price Indication Directive (Directive 98/6/EC). The facts of the case concerned yoghurts and drinks sold in glass containers, which consumers could return for re-use and recycling purposes. The products were sold at a specified total price 'plus ... deposit'. The question discussed was whether the total selling price should have included the cost of the deposit. 

Article 2(a) Directive 98/6 determines as a 'selling price' the 'final price for the unit of a product, or a given quantity of the product'. A few points in AG Emiliou's opinion drew my attention:

Final components of the price 

AG Emiliou refers to a previous case in Citroën Commerce (C-475/14) where the Court determined two conditions for qualifying a component of the price as a 'final one': 1) it needs to be a pecuniary consideration for the acquisition of the product; 2) unavoidability and foreseeability thereof (paras 38-40). Whilst the first condition seems to be fulfilled here by consumers paying money as the deposit on the glass container, acquisition of which is necessary to purchase a drink/yoghurt, the second condition is more difficult to pin down here. On the one hand side, the deposit has to be paid at the time of the purchase, thus it could be deemed unavoidable. On the other hand, consumers may get their money back if they return the packaging, which could make the payment ultimately avoidable (para 48).  The question then is whether we assess the unavoidability of payment at the moment of the purchase of a product, or by looking holistically at a given transaction. Even in the latter case, there could be situations when consumers do not return the deposit and thus forfeit the payment, not necessarily voluntarily. The Commission draws attention in its submission to the fact that tourists may leave the country with a container and not be able to return, that glass containers may easily be broken or even repurposed by consumers themselves at home, all of which would not allow consumers to reclaim the deposit (para 49). To AG Emiliou these would not be typical situations though (para 51), invoking German governments submission that at least in case of plastic containers - 96% would be returned for recycling. There is a difference though in durability of plastic vs glass containers, and Germany has quite a long history in recycling efforts, compared to many other European countries. However, one cannot but agree with AG Emiliou that the deposit at least can and even should be refunded (para 52), which could lead the CJEU to conclude that it is an avoidable part of the price. 

Selling price vs price per unit

An interesting argument to not count the deposit within the selling price is made by AG Emiliou in reference to the need to allow consumers to have insights into price per unit of a product. Indeed, if we would include deposit price in the product price, this could obscure the comparison between yoghurt/drink prices of competitors, if consumers would return the packaging and be refunded their deposit money (paras 59-61, 65). At the same time, AG Emiliou does not give enough weight to the Commission's argument, in my opinion, that not including deposit money in the selling price may mislead consumers (esp. vulnerable consumers) as to the total price of the product at the moment of its purchase (para 62).

Environmental context

'Deposit-refund schemes are, above all, tools of environmental policy...' - thus starts para 69 introducing AG Emiliou's arguments based on the green agenda of the EU policymakers, highlighting various recent developments aimed at promoting recycling of consumer goods packaging. This concludes with a claim that by splitting the price, providing a separate quote for the deposit, consumers' attention may be easier drawn to the fact that the container could be recycled or reused (para 77). First, this argument makes information design/transparency claims, without, however, justifying them by referring to any literature showing that providing consumers with a separate price point would indeed increase their awareness of the recyclability of a container. Second, it is interesting to observe how interpretation conducted through the lens of current policy objectives could introduce new meaning to old provisions.

Price reduction for travel services not performed due to pandemic - CJEU in FTI Touristik (C-396/21)

On January 12, the CJEU issued a judgment in FTI Touristik (C-396/21) as to the application of the Package Travel Directive  (Directive (EU) 2015/2302) in the times of a global pandemic. Specifically, the question raised by the national court was whether national restrictions adopted to fight the spread of Covid-19 could be perceived as leading to non-conformity of a package, if such restrictions were imposed globally. 

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The travellers booked a 2-week package holiday from Germany to Greece for March 2020 and, unfortunately, were unexpectedly subject to the first wave of pandemic restrictions being put in place (e.g. beaches were closed, curfew was adopted, access to swimming pools/sunbeds was prohibited, entertainment was discontinued). Their 'holiday' ended early, after 7 days. Could they claim price reduction for the package they purchased considering that it was performed in a very limited scope?

Art. 14(1) PTD entitles travellers to price reduction in any circumstances when there was a lack of conformity, unless it was attributable to them. As the CJEU observes, there is one condition to obtain this remedy (lack of conformity) (para 21), with AG Medina pointing out also that there is only one exception to this - attribution to a traveller (para 16 Opinion of AG Medina, para 23 judgment). As the lack of conformity is defined as a 'failure to perform or improper performance of the travel services' (Art. 3 point 13 PTD), this concept is not linked to fault or any specific circumstances that led to non-conformity. The objective nature of this finding does not allow for considering the cause/origin of the lack of conformity (para 22). Consequently, even if non-conformity results from extraordinary circumstances, these would not impacts its finding (para 24). 

Further, as the CJEU rightly observes, the structure of Art. 14 PTD clearly divides remedies that travellers could always claim (provided they did not contribute to it) - that would be price reduction, and these they could claim only if the organiser or parties involved in the provision of travel services were responsible for the non-conformity - that would be compensation (para 24). There would be no need to separate these remedies in the structure of the Directive, if either could be excluded from consumer rights by the occurrence of extraordinary circumstances (para 24). This dissociation of the two remedies occurred during the legislative process, which serves to prove the intention of the legislator to equip consumers in the right to price reduction in the majority of non-conformity cases (para 30). 

Consequently, irrespective of whether Covid-19 restrictions are recognised as force majeure  or a 'general life risk' (para 33), consumers have a right to claim price reduction for the lack of conformity of their package. Their claim will, however, be restricted to non-performance or improper performance of these services that were included in the contract (para 37), incl. services that were not explicitly mentioned in the contract but could be linked to it based on the purpose of the travel (para 38). In this case, courts will need to consider e.g. whether access to the public beach would be linked to the purpose of the travel, even if it was not guaranteed in the contract. Also, the assessment of the 'appropriateness' of the price reduction itself needs to objectively consider the travel services' value (para 39).

It is important to note, as well, that the CJEU specifically addresses whether PTD applies in a situation of a pandemic, stressing that 'the application of Directive 2015/2302 is not limited to instances of travel disruption of a certain scale or at a local level.' (para 29).

This judgment will allow at least some travellers whose travel was affected by the pandemic to claim remedies easier. However, the preliminary reference was limited to circumstances where the travel started before pandemic restrictions were put in place. It will likely not apply to these cases, when the contract was concluded and travel began after restrictions were already imposed (para 33 Opinion of AG Medina).