Suspending payments of monthly loan instalments for consumers awaiting finding of unfairness - CJEU in Getin Noble Bank (C-287/22)

Photo by Towfiqu barbhuiya on Unsplash

On June 15th, aside the Bank M judgment (see our previous comment here), the CJEU addressed Polish law implementing the Unfair Contract Terms Directive also in the case Getin Noble Bank (C-287/22). Also in this judgment the CJEU chose for a consumer-friendly interpretation of the UCTD, precluding national courts from dismissing a consumer's application for the grant of interim measures (namely, a suspension of the payment of the monthly instalments due under a loan agreement) when a decision on the invalidity of the loan agreement, due to unfairness of its terms, is pending. Such interim measures should be granted by national courts, if this is necessary to ensure 'the full effectiveness' of the invalidity decision. 

Polish consumers in the given case claimed unfairness of terms in a loan agreement converting the loan amount into Swiss francs at the purchase rate fixed by the bank, with monthly instalments repayable in Polish zlotys at the Swiss francs sale rate, also unilaterally fixed by the bank. What interests us, and the courts, however, is that in their claim they asked for the following interim measures being granted: 1) suspension of the obligation to pay monthly instalments until the final judicial decision; 2) prohibiting the bank to issue consumers with a notice of termination; 3) prohibiting the bank to publish any information that the applicants are in default on their loan payments during this time. The first sought measure could help with the improvement of the financial situation of consumers, who are likely to await the first court's decision for min of 2-3 years (para 53). The second measure would prevent the bank from taking punitive measure as a result of consumers' pursuing their claims. The third measure would not allow the bank to tarnish consumers' credit score.

Polish law allows to grant interim measures only when there is a 'legitimate interest' of the applicants in them, which amounts to showing that "the failure to grant interim measures would prevent or seriously impede the enforcement of the forthcoming judgment in the main proceedings or the achievement of the purpose of the proceedings in that case" (para 19). Polish courts have so far not been willing to recognise the existence of such an interest in Swiss francs loan cases, due to either of the following: 1) invalidity of a contract as a result of unfairness not leading to enforcement; 2) the need for interim measures to help avoid consumer harm, which could e.g. occur if the bank was in a poor financial situation; 3) consumers possibly being required to repay the loan capital when unfairness and invalidity is declared, which means that their continued payment of monthly instalments would be beneficial to them, limiting the final repayment amount (para 20).

The CJEU first refers to the past judgment in Aziz case (see our comment on it here), recalling that it already precluded national law from not allowing to grant interim measures to consumers awaiting a declaration of unfairness (and its consequences), when interim measures were necessary to ensure that the final national judgment is effective in protecting consumers (para 41). In Aziz case the interim measures were related to staying enforcement proceedings when consumers defaulted on paying their mortgages, which in Spain led to accelerated proceedings of mortgage enforcement.

Further, it reminds that in the case Fernández Oliva and Others (joined cases C-568/14-570/14 - see here) it considered granting of interim measures as necessary to protect consumers from the risk of paying higher than necessary monthly instalments during lengthy judicial proceedings (para 42).

As, pursuant to Polish law, consumers may only claim repayment of monthly instalments already paid at the moment of bringing an unfairness claim to court, this means that without the interim measures, they would need to bring a second claim to courts after succeeding in the first one (para 22). They would also be obliged to pay legal costs for the second time (para 50). The CJEU highlights that such an application of Polish law would make at least partially the forthcoming final decision ineffective, as it would "not have the effect of restoring the legal and factual situation of that consumer in the absence of that unfair term" (para 48).

Importantly, it is up to national courts to consider how likely the finding of unfairness is in a given case. If there is sufficient evidence of unfair terms, the removal of which could lead to invalidating the contract, plus there is evidence that consumers are likely to overpay banks without courts granting interim measures - the latter should be awarded (para 59).

Recyclable packaging priced separately - CJEU in Verband Sozialer Wettbewerb (C-543/21)

The CJEU agreed today with the opinion of AG Emiliou in the case Verband Sozialer Wettbewerb (C-543/21). I commented on this opinion previously on our blog (see here), and as the CJEU confirmed the AG's opinion today, my remarks expressed in the previous blog stand. 

To briefly remind our readers, the referring German court asked for a clarification on the concept of a 'selling price' from Directive 98/6/EC on price indication. The question was whether consumers purchasing goods in returnable (glass) containers should see the deposit for the returnable container included in the product price, as it would be part of the final selling price, unavoidable and foreseeable. The CJEU confirms that this is not the case and that such deposits should be priced separately. 

Both AG Emiliou and the CJEU focused mainly on the avoidability of the deposit becoming a final part of the selling price, as even if consumers decide not to return the container and obtain a reimbursement, in theory they could and maybe even should have done so (paras 21-23). Additional argument relates again to the legislative aim of ensuring consumers make better-informed decisions. CJEU states that consumers receiving separate information on the price of a product and on a deposit for a container would be better able to compare products available on the market, and different deposit schemes (paras 25-27). The CJEU invokes the average consumer concept as a benchmark for a consumer who should be able to add the two price points together and assess the final price. The latter is a response to the Commission's concern about possible confusion as to the final price of vulnerable consumers (para 62 AG Emiliou's opinion). 

Iliad aka cancelling Amazon Prime subscription

Most of our readers probably have already seen this news, but it is still interesting to address it: Federal Trade Commission (FTC) charged Amazon for the use of dark patterns/manipulative practices in its practices related to subscription (and its cancellation) to Amazon Prime (see FTC Takes Action Against Amazon...). Whilst this case plays out in the US, it will be fascinating to follow it and learn from it for European academics and enforcement authorities alike. 

The topic has been alive in the European academia, amongst the consumer protection and market authorities and policymakers for a few years now (see the recording of the debate on dark patterns as a challenge to online consumer protection, held during the Internet Governance Forum 2022, in which I took part, here). On EU level, in 2022, the EDPB issued Guidelines 3/2022 on Dark patterns in social media platform interfaces (see here). The European Commission addressed the issue of data-driven practices and dark patterns in its 2021 guidance to the Unfair Commercial Practices Directive (see here). The Commission indicated the applicability of the UCPD framework to combat such practices, when they apply to B2C relations. Yet, the Commission released results of a screening of retail websites in January 2023, which was conducted with the CPC Network, showing the prevalence of various manipulative practices online in the EU as well (see here). Clearly, more enforcement is needed, which highlights the importance of the FTC case.

The main charge against Amazon is that it knowingly, by use of 'online manipulative, coercive, or deceptive user-interface designs', caused consumers to enrol in Amazon Prime, an automatically-renewing subscription service, without their consent. This was done, e.g. by making it difficult to locate an option to purchase a product on Amazon without subscribing simultaneously to Amazon Prime.

Image by Jo Justino from Pixabay

Amazon also purposefully complicated the cancellation process, instead of enabling subscribers to cancel, stopping them from doing so. They showed multiple pages consumers had to go through, rejecting various other options than cancellation, e.g. stopping the auto-renewal, accepting subscription at a discount. How complex did they make it? Amazon itself used the term 'Iliad' to describe this cancellation process: 'an allusion to Homer’s epic poem set over twenty-four books and nearly 16,000 lines about the decade-long Trojan War' (see Project Iliad...). What defence will they use and how will the case unfold? To be continued. 

On the right of withdrawal in credit agreements - the CJEU in C-50/22 Sogefinancement

Earlier this year in March, the CJEU delivered a judgment in C-50/22 Sogefinancement SAS that clarified the scope of Directive 2008/48/EC on consumer credits in regard to its rules on the right of withdrawal.

Article 14 of the Directive provides consumers with the standard European14 days right of  withdrawal. However, in order to make the withdrawal right more effective, national rules may provide for a period of time within which the loan should not be issued to the consumer. Pursuant to Article 14 para 7 the Directive's rules on right of withdrawal shall be without prejudice to any such national rules. 

In the present case, Sogefinancement concluded a consumer credit contract with the defendants. When a dispute arose in regard to the performance of the contract, the ruling national court raised on its own motion the fact that the loan was issued to the customer in breach of the Consumer Code - the funds had been given to the consumer before the 7 days national mandatory waiting period. The finance company appealed against this decision arguing that the matter of nullity should have not been raised by the court outside the national 5 year limitation period and that in fact that any action to nullify the contract should have been initiated by the parties and not the court. 

The CJEU reasoned that 'by allowing the Member States the option of adopting or maintaining provisions establishing a period of time during which the performance of the contract may not begin, the use of the words ‘without prejudice’ in Article 14(7) of Directive 2008/48 means that the full and imperative harmonisation effected by that directive as regards the consumer's right of withdrawal does not cover the arrangements for the start of performance of a credit agreement and, in particular, for making funds available to the borrower' (para 29)

It follows that, where 'Member States lay down, in exercise of the option conferred on them by Article 14(7) of Directive 2008/48, provisions laying down a period during which the performance of the credit agreement may not begin, the national procedural rules governing the raising by a court of its own motion of, and the penalty that it imposes for, a breach by the lender of such provisions fall within the retained competence of the Member States, without being regulated by that directive or falling within the scope of that directive' (para 32).

National law temporarily exempting travel organisers from full refund in cash ruled not compatible with EU law (Case C-407/21)

As expected, some of the disputes regarding the termination of travel related contracts due to the Covid-19 outbreak have arrived at the attention of the CJEU. On June 8, the Court issued two judgments establishing that national laws which temporarily exempted travel organisers from the obligation of full refund are not compatible with EU law. Here, we look at Case C-407/21.

Facts of the case 

In March 2020, at the beginning of the Covid-19 outbreak, the French Government adopted an order aimed at safeguarding the cash flow and solvency of the service providers impacted by the pandemic. The order established that ‘where a travel and holiday sales contract is ‘rescinded’ between 1 March and 15 September 2020, the organiser or retailer may offer, instead of a full refund of any payments made under the ‘rescinded contract’, a credit note [voucher] which the customer may use under certain conditions’ (para 12). The offer would be valid for 18 months and, after that period, if not accepted, the trader would have been required to provide a full refund. The provision derogated from Article 12(2) and (3) of Directive 2015/2302 on package travel and linked travel arrangements. The latter provisions, combined, establish that if the organiser or the traveller terminates the contract due to ‘unavoidable and extraordinary circumstances (…) affecting the performance of the package or which significantly affect the carriage of passengers to the destination’ the traveller is entitled to a full refund. 

Two consumer organisations (Union fédérale des consommateurs – Que choisir (UFC) and Consommation, logement et cadre de vie (CLCV)) brought an application before the referring court (Conseil d’État) against the French Minister for Economic Affairs, Finance and Recovery, requesting the annulment of the order. UFC and CLCV claimed that the order was in violation of Article 12, pursuant to which the consumer is entitled to a full refund within 14 days from the termination of the contract. The referring court noted that immediate full refunds to all consumers may have jeopardised the very existence of the operators and thus the chance for those consumers to obtain it; it stayed the proceedings and referred to the CJEU.

Can the trader provide a voucher instead of a cash refund?

 

The CJEU observes that although the Directive does not define the concept of ‘refund’, the everyday meaning of the term refers to the ‘to the fact of returning to a person a sum of money which that person has paid out or advanced to another person’ (para 25). Further, Article 12(2) and (3) refers to a payment made. According to the Court, it thus follows that the concept does refer to the return of cash. Further, the fact that the reimbursement must be made within 14 days from the termination makes it clear that the refund should consist of cash: that short period in fact guarantees that the traveller will again ‘be able to dispose freely of the sum spent on the package’ (para 30). Receiving a sum of money, writes the Court, better protects consumers than receiving a voucher, and thus ensures a higher level of consumer protection, which is the objective of the Directive (para 33). The Directive must thus be interpreted as providing that the organiser of a travel package is required to provide a full refund in the form of a sum of money. However, this does not preclude the traveller from voluntarily accepting a voucher if the option of the cash refund remains available. 

What if there is a global pandemic? 

The Conseil d’État asks the CJEU whether the Directive must be interpreted as requiring traders to provide a full cash refund within 14 days even when, because of a global pandemic, this would risk jeopardising the existence of the whole travel organisers’ sector. Preliminarily, though, the CJEU must establish whether Article 12(2) and (3)(b) on unavoidable and extraordinary circumstances applies to the French order regarding the Covid-19 outbreak. In essence, it must establish whether the pandemic can be qualified as an unavoidable and extraordinary circumstance. The Court answers the question in the positive and argues that, for sure, it must be considered that a health crisis on a global scale makes ‘it impossible to travel safely to the destination as agreed in the package travel contract’ (Recital 31, Directive). Further, the Covid-19 outbreak certainly is to be regarded as beyond the control of the traveller (Article 3(12), defining what an unavoidable and extraordinary circumstance is). Article 12 thus applies to the contracts terminated due to the global pandemic. 

 

The force majeure hypothesis and consumer protection 

The French government also argues that the Covid-19 pandemic constitutes a case of force majeure thus allowing a derogation from Article 12. However, as observed by the Advocate General, from the travaux préparatoires of the Directive it emerges that the concept of unavoidable and extraordinary circumstance was meant to replace and exhaustively implement that of force majeure (paras 55-56). That being the case, no derogation is allowed since Article 12(2) and (3) does not provide for it. Such a derogation would lower the level of consumer protection for the travellers whose contract is terminated due to the pandemic and whose circumstances are protected under Article 12 (para 61). National legislation of the sort of the French order’s is thus in violation of the Directive (para 62). 

As suggested by the Slovak Government, a force majeure claim may be used also to argue that a Member State has not complied with EU law when ‘the non-conformity of national legislation with the provisions of a directive is justified on the grounds of force majeure so as to ensure that that legislation may continue to apply during the necessary period’ (para 68). This argument cannot be applied to the French order: the latter’s application, by suspending the reimbursement obligation ‘is not confined solely to cases in which such constraints, in particular financial constraints, have actually occurred, but extends to all contracts terminated during the reference period, without taking into account the specific and individual financial situation of the travel organisers concerned’ (para 70). 

The State aid solution 

The Court further observes that the French Government, contrary to other Member States, decided not to recur to any State aid measure allowed under Article 107 (2)(b) TFEU. The use of State aid would have helped overcome the liquidity problem which the Government considered as justifying a derogation from EU law. In light of all of the above, thus, the Directive must be read as precluding Member States from temporarily releasing traders from the full refund obligation in order to overcome the solvency issue emerged due to the global pandemic. 

Principle of sincere cooperation 

Finally, the Conseil d’État asks whether a national court before which an action for the annulment of national legislation contrary EU law has been brought can adjust the temporal effects of its decision, to avoid the damages arising from the annulment. There have been cases in which this has been allowed, in the presence of ‘overriding considerations relating to the protection of the environment or to the need to eliminate a genuine and serious threat of disruption to the electricity supply’ (para 82). The CJEU though decisively excludes that a threat to the economic interests of the travel operators is comparable to a threat to the environment and electricity supply. The French Government itself had in fact noted that the damages would be ‘limited’ (para 84). In light of the principle of sincere cooperation, EU law must thus be interpreted as not allowing the national court to adjust the temporal effects of its decision on the annulment of legislation contrary to Article 12(2) to (4) of the Directive. 

The ruling emphasises the imperative nature of the provisions of the Directive and thus reinforces the pivotal role of consumers within the internal market. By receiving a full cash refund within 14 days from the termination, consumers can freely dispose of that sum and invest it in other purchasing activities not prevented from the pandemic (e.g., Amazon deliveries). Further, once again, it emerges clearly that consumer interests enjoy a prominent position in the Union and their prevalence over traders’ financial interests remains undisputed also in exceptional times such as those of the Covid-19 pandemic. This is true, in particular, when alternative measures such as State aid would have allowed the French Government to prevent the solvency issues potentially encountered by travel operators.

Upon unfairness of mortgages, banks may suffer financially - CJEU in Bank M. (C-520/21)

Last Thursday the CJEU issued a much-awaited judgment in the Polish case Bank M. (C-520/21), another case dealing with the fallout of mortgage loans concluded by consumers in a foreign currency. This time the questions asked by the national court pertained to the consequences for the parties of the court declaring the whole contract null and void. When a mortgage loan contract is invalidated, it is clear to the referring court that that parties need to reimburse the sums payment (the bank should receive the loan principal, consumers - monthly payments, fees, commissions and insurance premium). But could other sums be claimed, mainly on the basis of unjust enrichment under national law? For example, could consumers claim from banks interest on the amounts they overpaid over the years, due to changes to currency exchange rates? Could banks in turn claim from consumers interest on the sum of money they were not able to otherwise invest as they provided it as a loan principal? Polish banks have indeed threatened consumers pursuing the unfairness of mortgage loan terms by asserting claims against consumers in such cases on the basis of the non-contractual use of the capital (Banki pozywaja frankowiczow, by przerwac bieg przedawnienia). 

The court relies heavily in its opening statement on the previous judgment in the case Gutiérrez Naranjo and Others (see our comment here), recalling the importance of the restitutory effect of the declaration of unfairness: Consumers must be brought back to the position (legal and factual), they would have been in if the unfair term had not existed (paras 61, 65). The second important function of the consumer protection against unfairness is to deter sellers and service providers from imposing unfair terms on consumers. National law then, in order to be compliant with the UCTD, needs to facilitate restoration of consumers to the position they would have been in if not for unfairness, as well as needs not to undermine the deterrent effect of the UCTD (para 68).

In this light, if national laws facilitate consumers claiming additional compensation from banks than the reimbursement of the monthly sums paid etc, this should not undermine the objectives mentioned above. To the contrary, such legal options may enhance the deterrent effect of the consumer protection framework against unfairness (paras 69-71). The Court recalls the need to adhere to the principle of proportionality though, which means that national courts should assess whether consumer claims do not go beyond what is necessary to achieve the above-mentioned objectives (para 73).

The same reasoning could not be applied to assess the compliance of national laws allowing banks to claim further compensation from consumers than the reimbursement of the loan principal. Such a legal option would undermine the deterrent effect of the protective framework (para 76). It could also discourage consumers from seeking to complain against unfair terms, as it may be more economically beneficial to continue with the performance of a contract containing unfair terms (para 79). The Court is not dissuaded from concluding this by arguments raised by banks indicating the fragility of the financial market at the moment, as well as claims that consumers will be receiving their loans 'free of charge' (para 80). The Court falls back on the principle nemo auditur turpitudinem allegans (no one may rely on their own wrongdoing). As banks chose to use unfair terms in their mortgage loan contracts, they may not now complain that they will lose their profits (para 82).

This judgment follows previously issued AG Collins' opinion. It has been rejoiced in Poland, where banks started counter-suing consumers not only for the return of the loan principal but also for the compensation for its use during the loan period, before the mortgage contract is annulled. Banks generally estimated such compensation to equal at least 50% of the loan principal, which would seriously impede any consumers' winning claim as to unfair mortgage loan terms. Now, if only the Polish courts were given additional resources to actually be able to handle all these cases, so that consumers could find their redress in a timely fashion.

Costs of repatriation flights during Covid-19 not covered by Regulation 261/2004 - CJEU in Austrian Airlines (C-49/22)

On Thursday, June 8th, the CJEU issued a judgment in the Austrian Airlines case (C-49/22). The national court asked for help with interpreting Articles 5 and 8 of Regulation 261/2004 on air passenger rights regarding assistance that operating airlines need to offer passengers of cancelled flights, as well as passengers' rights to reimbursement and re-routing. 

Facts

Image by Stephen Cruickshank from Pixabay     

Passengers in this case were stuck on a beautiful island of Mauritius, when Covid-19 led to cancellation of their return flight. The airline did not inform them directly thereof, despite having their contact details. When they heard about the cancellation from their travel agent (a day later), they managed to arrange for a return flight home via the Austrian consulate. Ironically, the repatriated flight was with Austrian Airlines as well, and took place at the time their original return flight was scheduled. As the passengers were asked to contribute to the cost of the repatriation flight, they are trying to claim this amount back from Austrian Airlines. The claim is that the airline failed to organise re-routing of passengers, which they had to arrange and pay for themselves. 

Repatriation flight not a re-routed flight

The CJEU first considered whether the repatriation flight could be considered a re-routed flight, for which organisation and cost Austrian Airlines would need to take responsibility. The short answer is: Repatriation flight does not qualify as a re-routed flight. Despite Regulation 261/2004 not defining a re-routed flight (para 25), and everyday language suggesting that this notion would be broadly interpreted (para 26), the CJEU highlights the need for the 'commercial nature' of a re-routed flight (para 29). This need stems both from the legal basis for the adoption of Regulation 261/2004 and some of its provisions referring to concluded contracts and fee-paying passengers (Art. 2(b) and 3(3)). Sensibly, the CJEU stresses that as the repatriation flight is not commercial in nature, it may differ from commercial flights in terms of available services and conditions on board, and would not be in the discretion of the operating air carriers to offer to passengers (paras 31-32).

No EU entitlement to reimburse costs of a repatriated flight

May a passenger claim repatriation costs back from the operating airline of a cancelled flight? Unsurprisingly, this would not fall within the scope of the reimbursement provided for in Article 8 Regulation 261/2004, which specifies the passengers' right to claim back costs of the ticket for the parts of the journey not made (paras 40-41). Although, Art. 12 Regulation 261/2004 allows passengers to claim 'further compensation', assessed on an individual basis, from the airlines but only provided that national or international law gives them such a claim (para 36). The CJEU stresses, however, that Article 8 by listing various rights of passengers (reimbursement or re-routing) implies that the air carrier has an information duty about these rights, which only when fulfilled would lead to passengers being able to effectively exercise their rights (paras 43-44). If the air carrier fails in this information duty, which forms part of its obligation to offer assistance to passengers, the passenger is entitled to 'reparation in kind' (para 48). This will be limited to what 'proves necessary, appropriate and reasonable to remedy the shortcomings of the operating air carrier' (para 49).

It is then unlikely that passengers could use Regulation 261/2004 for claiming costs of their repatriation back from the airlines whose flights were cancelled due to Covid-19. Even if the airlines breached their obligations under EU law (to inform about flight cancellation, about passenger rights in the even of cancellation, offer assistance, reimburse part of the travel costs), the compensation claimed would aim to compensate for damages arising from this breach rather than be related to costs of the repatriated flight.

Throwback to last summer: the notion of producer clarified by the Court (C-264/21, Keskinäinen Vakuutusyhtiö Fennia)

Our last two posts concerned the notion of the consumer in the context of two judgments issued earlier this week (CJEU confirms..., Financial benefits...). Today we would like to draw your attention to an older judgment, which we have not yet had a chance to comment on, C-264/21, Keskinäinen Vakuutusyhtiö Fennia. The ruling similarly involves one of the basic concepts of consumer law - this time the concept of the producer. 

Facts of the case

The preliminary reference was made by a Finish court in the context of a dispute between an insurer and Koninklijke Philips, a known Dutch corporation offering electronics. The background is unfortunate: a consumer bought a coffee machine and on the following day their house caught fire. The insurer paid for the damage and sought compensation from Philips under product liability law. The defendant argued, however, that it could not be considered a 'producer' of the defective product. While Philips' logo was visible on the product, the packaging also made clear that the coffee machine was manufactured in Romania by Saeco International Group SpA, a Philips subsidiary. Against this background, the referring court expressed its doubts whether the very fact that a person has put his trademark on the product or authorised it to be put on the product is sufficient to qualify that person as a producer, or whether additional criteria must be fulfilled.

No additional conditions required

To recall, pursuant to Article 3(1) of the Product Liability Directive (PLD) a 'producer' is defined as the manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part and any person who, by putting his name, trade mark or other distinguishing feature on the product presents himself as its producer. The Court considered that definition to be formulated in a clear and unambiguous manner, noting that it can also include persons who are not involved in the process of manufacturing (para. 27). Referring to the objective of the directive, namely to protect the consumer, the Court concluded that the producer's definition should be given a broad interpretation (para. 31). By placing the liability of a person who presents himself as a producer on the same level as that of the actual producer, the EU legislature intended to ease the burden of having to determine the actual producer of the defective product (para. 33). Accordingly, it cannot be required that the person who has put his name, trade mark or other distinguishing feature on the product, or who has authorised those particulars to be put on the product, also present himself as the producer in some other way in order to be regarded as a 'producer'.

Lessons for online marketplaces?

The conclusion of the Court is not surprising considering the circumstances of the case at hand. Some parts of the reasoning are nevertheless interesting, keeping the broader landscape of market transactions in view. In particular, it is worth drawing attention to para. 34 of the judgment which is formulated as follows:

Furthermore, it should be noted that, by putting his name, trade mark or other distinguishing feature on the product at issue, the person who presents himself as a producer gives the impression that he is involved in the production process or assumes responsibility for it. Accordingly, by using such particulars, that person is effectively using his reputation in order to make that product more attractive in the eyes of consumers which, in return, justifies his liability being incurred in respect of that use.

The Court therefore acknowledges the importance of reputation in market transactions and links it to liability. This brings to mind other situations in which an involvement of a third party makes products appear more attractive/reliable, as in the case of online marketplaces. Article 6(3) of the Digital Services Act takes account of this very scenario, at least to some extent. Similarly, the potential liability of online marketplace providers has been the subject of discussions concerning product liability. However, the proposal for a new product liability directive, presented last year, provides for platform liability only in a narrow set of cases. It remains to be seen whether that liability will be extended as part of legislative negotiations. The reasoning of the Court in C-264/21, Keskinäinen Vakuutusyhtiö Fennia, could arguably support a more daring approach.

Financial benefits from a loyalty programme cannot deprive one of consumer status - case C-455/21, Lyoness Europe

Yesterday we reported on a case discussing the consumer notion under the Unfair Contract Terms Directive in the context of dual purpose contracts. Interestingly enough, this was not the only ruling on Article 2(b) UCTD issued by the Court on that day. Another one is C-455/21, Lyoness Europe, in which the Court similarly engaged with the consumer notion, although in somewhat different circumstances.

Facts of the case

  Image by storyset on Freepik

The dispute related to a membership programme offered by Lyoness Europe (currently myWorld), making it possible for the customers to purchase goods and services from collaborating traders on favourable conditions. One of the customers - a natural person working as a mechanical engineer - believed that the contract contained unfair terms and decided to sue the provider. Among others, the claimant questioned the lawfulness of a term designating Swiss law as the applicable law.

Easy case: membership programme

The Court focused on the easier problem arising in the dispute, namely whether a natural person who becomes a member of a scheme allowing certain financial benefits in connection with the purchase of goods and services is a 'consumer' within the meaning of Article 2(b) UCTD. Not surprisingly, the Court concluded that such a person does qualify as a consumer where he or she is acting for purposes which are outside his or her trade, business or profession. Like in case  C‑570/21, YYY, on which we reported yesterday, the Court emphasised the nature of the service covered by the contract, which may show the purpose for which that service is being acquired (para. 49). In this context, the Court concluded that a natural person who seeks to benefit from advantageous conditions in the context of the purchase of goods and services for non-commercial purposes cannot lose the status of 'consumer' by the mere fact that he or she derives financial benefits (refunds on purchases, commissions or other promotional advantages) from the participation in the scheme. Joining a club to get deals for your purchases does not make you a trader.

Unanswered questions: dual purpose contracts

The referring court also explicitly asked about the application of Article 2(b) UCTD to dual purpose contracts. The Court considered those questions inadmissible, stating that there was nothing in the preliminary reference to suggest that the case indeed involved such a contract. The conclusion seems justified. But the question also sheds light on the additional dimension of the differentiated interpretation of the consumer notion in contract law and private international law. As we know from case C-191/15, VKI vs. Amazon, a choice of law clause included in standard terms can be considered unfair if it leads the consumer into error by giving him the impression that only the law of that Member State applies to the contract, without informing the consumer that under Article 6(2) of the Rome I Regulation he or she also enjoys the protection of the mandatory provisions of the law that would be applicable in the absence of that term (para. 71). In case of dual purpose contracts, however, the very same person may qualify as a consumer under the UCTD and not qualify as such under Rome I Regulation. How then should a perfectly transparent term be formulated?

CJEU confirms: consumer notions in contract law and private international law are not equivalent

Earlier today the Court of Justice issued the judgment in case C‑570/21, YYY. (Notion de consommateur). The case concerned, once again, the notion of the consumer under Directive 93/13/EEC on unfair terms in consumer contracts (UCTD). The Court has already dealt with similar problems in its earlier case law, recently e.g. in case C-485/21, S.V. (Immeuble en copropriété). The judgment confirmed that the notion of the consumer in mixed-purpose contracts under UCTD should be understood broadly. The ruling does not come as a surprise; what is nevertheless noteworthy is an explicit confirmation that the notion of the consumer in contract law is different from that in private international law. The Court, moreover, provided additional guidance on the interpretation of consumer notion in joint credit agreements.

Facts of the case

The case involved a credit contract concluded between a bank and two married debtors, one of whom self-employed. The loan amount was devoted partly to the professional purposes and partly to the private purposes. Specifically, 35% of the loan was used to make outstanding payments for the company of one of the debtors, while the remaining 65% was used to used to finance renovation works in the debtors' house. Against this background, a question was raised whether the contract qualified as a business-to-consumer contract and fell within the scope of the UCTD.

"Not predominant" vs. "negligible" purpose

The referring court requested the interpretation of Article 2(b) UCTD, which defines the notion of the consumer, explicitly enquiring about the relevance of the Gruber case law in that context. To recall, the Court established in Gruber that a person who concludes a contract for goods intended for purposes which are in part within and in part outside his or her trade or profession may not rely on the special rules of jurisdiction, unless the trade or professional purpose is "so limited as to be negligible" in the overall context of the supply. This seemed to be at odds with the wording on mixed-purpose contacts found, among others, in Directive 2011/83/EU on consumer rights (CRD). Specifically, pursuant to recital 17 of the CRD where the contract is concluded for purposes partly within and partly outside the person’s trade and the trade purpose is "so limited as not to be predominant" in the overall context of the contract, that person should also be considered as a consumer.

As mentioned, already the previous judgments of the Court suggested that the Gruber test cannot be applied more broadly to consumer law, but is limited to the specific context of applicable law and jurisdiction. The Court has now made this distinction explicit. It drew attention to a close connection between the UCTD and the CRD, recently strengthened via the Omnibus Directive (para. 43). The Court emphasised that both directives follow the same main objective, namely to provide for a high level of consumer protection (para. 42). It also observed that a wording similar to that in recital 17 CRD can also be found in the ADR Directive and the ODR Regulation, suggesting that the legislator intended such a broader reading to have a horizontal nature (para. 45). Accordingly, the notion of the consumer under UCTD must be understood as also covering a person who concludes a dual purpose contract if the trade purpose is so limited as not to be predominant in the overall context of the contract.

The more restrictive reading of the consumer notion in mixed-purpose contracts continues to be relevant in the domain of private international law. Here, as the Court noted, additional objectives must be considered, namely the legal certainty and predictability of the jurisdiction. The more recent Schrems judgment does not undermine this reading (para. 47). 

Joint credit agreements

Having clarified the outer boundaries of the consumer concept, the Court went on to provide more specific guidelines on its interpretation in the case at hand. Firstly, it stressed that the referring court should take all circumstances of the case into account, including the nature of the product or the service. In case of mixed-purpose credit contracts, the Court indicated that the scope of professional and personal components of the contract and the dominant purpose of the contract should be considered. The Court then went on to formulate more specific criteria, noting that they are neither exhaustive nor exclusive (para. 58). In particular, the quantitative breakdown of the borrowed sum between the two respective purposes may be an important criterion. However, also qualitative criteria may turn out to be relevant, e.g. the fact that only one of a larger number of debtors pursues a professional activity or that the granting of a loan, initially intended solely for private purposes, was made conditional upon the partial allocation of the borrowed amount to the repayment of trade-related debts.

Overall, the judgment in case C‑570/21, YYY, is a welcome ruling, dispelling some persisting doubts about the reading of consumer notion in different legal acts. Nonetheless, the differentiated interpretation may, in itself, pose practical challenges, as the second judgment issued on the same day illustrates.