"Young promise" or just a consumer? CJEU in C-365/23 [Arce]

Today the Court of Justice has delivered a truly remarkable judgment that I am eager to share with readers of this blog (available here, even though for now only in French and Latvian). The decision concerned a contract concluded between "A", a professional in the business of offering career development services for sports talents, and "C", then 17 and represented by his parents to the ends of concluding the contract. 

According to the contract, concluded on 14 January 2009 for a period of fifteen (15) years, A would offer a wide range of services in support of C's development as - hopefully, professional - basketball player. In return, C would pay A 10% of all the net revenue he was to earn for the duration of the contract, plus VAT, as long as such income would pass the threshold of 1500 euros per month. 

A bit over a decade into the contract, A sued C for failing to fulfil their obligations under the contract, with a claim amounting to over 1,6 million euro - 10% of what the player had earned from sport clubs until that point in time. [We are not sure how this was calculated, but A would likely know since accounting services were included in the contract]

Latvian tribunals, which were competent to adjudicate on the dispute, were not keen to grant A's claim: the demand was rejected in first and second instance on ground that the term was unfair under Latvian consumer law; A took the case to the Latvian Supreme Court, which in turn raised *twelve* preliminary questions for the CJEU. Luckily, not all questions have to be answered and not were equally challenging, so the analysis here will be limited to the most salient points. All have to be seen to pertain to the Unfair Terms Directive - from the definition of consumer under that directive to the scope of minimum harmonisation. 

Consumer contract?

First: was the "career development services" contract a consumer contract? The referring court noticed (see para 31) that across different jurisdictions different stances were noticeable concerning similar cases, with a court in France having concluded that a young talent concluding a comparable contract had to be considered a consumer, while an earlier German case has excluded the applicability of consumer law to the type of services at hand. 

The Court of Justice answered that, to the extent that the minor at hand was not a professional player at the time of concluding the contract, they should be considered consumers - and hence enjoy consumer protection. The fact that the player later engaged in professional sports does not change this conclusion as the party's quality as consumer must be, for the purposes of unfair terms rules, ascertained only with reference to the moment that the contract was concluded. The fact that the contract concerned the player's "eventual professional career" doesn't change this conclusion either. 

While the Court recalls its previous decision in Costea, other decisions concerning the notion of consumer when "bordering" professional activities, such as Gruber, were not discussed. This means, however, that it is difficult to immediately assess the reach of the judgment: will this "generous" take also cover adults who engage comparable services in the hope to undertake a professional activity that they have not engaged in yet, or is this interpretation limited to the case of minors who have not engaged yet in the relevant professional activity? AG Rantos' reasoning in his opinion, as reported on in Joasia Luzak's overview of last month, seems to suggest a broad applicability (which may go against the common assumptions in several member states!).

"Price" term exempted from control?

Having established that the Directive was applicable to the contract under consideration, the CJEU had to consider whether the term was actually subject to the unfairness test. This was contentious since article 4(2) of the Directive famously dictates that the test shall not concern "the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration". A claimed that the term should then not be subject to judicial control. The CJEU agreed as to the applicability of the exception - in line with the second part of article 4(2) then, the national courts would only be able to assess the term's unfairness if the term did not comply with the requirement of transparency - being "in clear and intelligible language". 

In this respect, the CJEU seemed to suggest that the term may not comply with the transparency requirement: it is however for the national court to ascertain whether the term was sufficiently clear that the consumer could understand its impact on their legal and economic position. In this respect, the Court considers that both the information provided to the consumer (and their representatives!) at the time of concluding the contract and, interestingly, the term spelling out what services A would provide against the agreed remuneration should be seen as relevant to the assessment. Furthermore, since Latvia had not yet explicitly implemented the exemption of article 4(2) by January 2009, it is possible that on the basis of minimum harmonisation the term would still be open to scrutiny even if transparent. The Court then proceeds to answer questions that would be relevant in case the term can be subject to control. 

Is the term unfair? 

As we know, it is for national courts to decide whether a specific term is unfair; the CJEU, however, can provide parameters to support the national courts, which they have done in a number of cases. In this specific case, the Court adopts a reasoning which is in some way new - at least to the extent that it seems to establish a hierarchy or order of reasoning between the two prongs of the unfairness test - that the term causes a significant imbalance contrary to good faith. While these two elements (good faith and significant imbalance) are often considered as hardly distinguishable, the Court here suggests that one should "at first" consider the possible violation of the principle of good faith, and "second" ascertain the eventual existence of a significant imbalance. This is not unheard of, as the references in the decisions show, but it is usually not regarded as more than a style clause. 

In assessing whether the term is unfair, thus, the CJEU asserts, the national court should consider on the one hand whether the professional, dealing in honest and reasonable way, could expect the consumer to accept the term in individual negotiations, while on the other hand considering national default rules to ascertain whether the clause created a significant imbalance in the rights and obligations of the parties (compared to their rights in case nothing had been agreed). In doing so, and this is genuinely new, it can consider "fair market practices" around the pricing of similar services at the time of the contract's conclusion, or "the obligations that a reasonably informed consumer could expect to incur" (see para 84). The Court takes these additional criteria from the AG's opinion and it will be interesting so see whether this reference to market practices will prove to be incidental (it is after all a rather niche subject!) or take hold. 

Fundamental rights?

Finally, the Latvian Supreme Court wanted to know whether fundamental rights should be considered in assessing the term - in particular the right to property (art 17 EUCFR) and the requirement for public authorities and private entities to pay the highest attention to the "best interest of the child" when taking decisions concerning minors (art 24 EUCFR). In this sense, the CJEU first observes that the Charter is applicable (see para 99) to the questions at issue since they fall within the MS's implementation of EU law (on this, the Court has been holding that this applicability is in no way affected by minimum harmonisation, which we won't be again questioning now). Setting aside with no further ado the relevance of article 17, the Court focusses on article 24: indeed, national courts should take it into account when making decisions concerning the unfairness of terms included in contracts concluded by (at the time of conclusion) minors. This is in line with fairly established idea on the indirect horizontal application of fundamental rights. At the same time, the CJEU seems cautious to avoid over-protective applications: consideration of the best interest of the child, the Court explain, does not exclude that the national court could consider the fact that the parents, concluding the contract on the child's behalf, were familiar with the environment of professional sports, or the fact that C was already 17 at the moment of concluding the contract (see para 103). 

Hence to conclude: C was a consumer; the clause is in principle exempted but may be open to control either because lacking transparency or because Latvian law did not incorporate the exemption at the time the contract was concluded; if the national court does assess the clause, they should consider national default rules, good market practices of the time as well as the best interest of the child, but also consider that supposedly competent parents acted as representatives. Also, not discussed here because not at all surprising, if the term would be found unfair the national court would not be able to proceed to mitigation of the due sum - which opens to the usual drama around consequences since the contract would then likely be invalid. 

What will happen once the case is back with the Latvian courts then? Readers who have access to Latvian sources - do reach out to let me know! This case has all the ingredients of an instant classic.

Information duties in consumer credit: the CJEU in C-677/23

At the end of January, the CJEU delivered another judgment interpreting Directive 2008/48 on Consumer Credit. In C-677/23 A. B., F. B. v Slovenská sporitel’ňa a.s. consumers alleged that the credit contract did not contain all the necessary elements provided by the Directive. The dispute thus involved the interpretation of Article 10 (2), which provided the mandatory content for the credit contract. Two subparagraphs came under scrutiny in this case.

Duration of the credit agreement

One problem was that the credit contract did not provide for its entire duration. However, it did lay out the number of instalments to be paid. Under Article 10(2)(c), the credit agreement shall specify clearly and concisely the duration of the credit agreement. The question for the CJEU, therefore, was whether it is sufficient to comply with this provision by indicating the number of instalments. 

 

The CJEU concluded that since the duration of a credit agreement is closely linked to the performance of the parties' contractual obligations “the indication of the duration of the credit agreement, in accordance with Article 10(2)(c) of Directive 2008/48, does not necessarily have to be made through a formal indication of the precise date on which that agreement begins and ends, provided that its terms enable the consumer to determine that duration without difficulty and with certainty” (para. 43).

Assumptions used in the calculation of the APRC

The second question considered by the CJEU was about interpretation of Article 10(2)(g) according to which the credit agreement shall specify in a clear and concise manner “the [APRC] and the total amount payable by the consumer, calculated at the time the credit agreement is concluded; all the assumptions used to calculate that rate shall be mentioned." The wording in the contract was the following: "The credit has been granted immediately, in full; the borrower shall fulfil his or her obligations under the terms and conditions and within the time limits set out in the credit agreement; the interest rate shall apply until the end of the credit relationship". Another part of the contract provided that “the agreement shall be concluded for a … fixed period until the full settlement of all relationships arising in connection with the credit granted". The consumers considered these unclear. 

 

The CJEU considered the purpose of the provision and asserted that it is aimed at making the consumers aware of their rights and duties (para. 58). Moreover, reference to the assumptions must enable consumers to verify whether the APRC has been calculated correctly and, if not, to assert their rights, particularly the right of withdrawal, the period of which is extended in case of breach of Article 10 (para 59). Reference to the assumptions should also enable consumers to exercise their other rights provided by national legislation, including sanctions for non-compliance, which in this case, under the applicable Slovakian law, meant that the credit is interest-free (para 59). 

 

The CJEU concluded that assumptions used for the calculation of APRC are "vitally important" for consumers (para. 61), which meant that the "the assumptions used to calculate the APRC must be expressly mentioned in the credit agreement and that it is not sufficient in that regard that the consumer may himself or herself identify them by examining the terms of that agreement" (para. 64).

Concluding thoughts 

 

This judgment reinforced the importance of consumer information for the enforcement of consumer rights. Whilst it is questionable to what extent assumptions in the calculation of APRC are understandable for individual average consumers with no legal and financial background even if they are expressed in clear and precise language, the CJEU rightly held that if information is scattered around the contract and not expressed clearly and straightforwardly it is even more difficult to consumers to comprehend the effect and consequence of the terms of their contract. This judgment is, therefore, a further push towards clearly structured and worded contracts that at least give consumers a chance to understand their rights and duties and enforce their rights accordingly.

The judgment continues to be relevant under the new Directive 2023/2225 on Consumer Credit, which contains the scrutinised provisions in Article 21(1)(d) and (g).

Case CJEU, C-510/23: national procedural time limits, public enforcement and consumer law effectiveness

In case CJEU, C-510/23, Trenitalia v. Autorità Garante della Concorrenza e del Mercato, the Court of Justice took a stand on the necessity to ensure that time limits enshrined in national procedural laws concerning administrative proceedings shall not impair the ability of effectively tackling anti-competitive or anti-consumer behavior.

The case concerns a sanction addressed by the AGCM, the Italian consumer and market authority, to Trenitalia, the primary Italian rail transport company. Trenitalia challenged the decision in court, claiming that the Authority did not respect the 90-day time limit prescribed by Italian law to start the proceedings. This infringement would lead to the annulment of the sanction imposed to Trenitalia for unlawful behavior. The administrative tribunal of the Lazio region referred therefore to the Court of Justice the question on whether this Italian legal provision was compliant with EU law; and specifically, with Articles 11 and 13 of the Unfair Commercial Practices Directive. The Court stated that EU law does not preclude national legislation to impose certain time limits for concluding or starting administrative proceedings, given however that these limits do not undermine the effectiveness of consumer law. The procedural autonomy of Member States must be balanced with the need to guarantee effective consumer protection.

The case was decided in parallel and coherently with Case C-511/23, Caronte&Tourist v. Autorità Garante della Concorrenza e del Mercato, regarding the same issue of law. This latter case concerned the proceedings for anti-competitive behavior started by the AGCM against the corporation “Caronte&Tourist”, the main provider of ferry services across the Strait of Messina, connecting the Italian regions of Sicily and Calabria. The CJEU established the illegitimacy of national legislation requiring the competent Authority to commence the investigation for alleged infringement of competition law by notifying the statement of objections to the undertaking within a period of 90 days. The CJEU further held that the measure sanctioning the lack of respect of that period of time by annulling the final decision undertaken by the Authority, and also precluding to begin a new infringement procedure for the same practice and state of affairs, was not consistent with EU law, and specifically with Article 4(5) and Article 13(1) of Directive (EU) 2019/1, to empower the competition Authorities of Member States to be more effective enforcers and to ensure the proper functioning of the internal market. 

Both rulings confirm the importance of effective enforcement of EU competition and consumer protection law. However, while the Trenitalia case emphasises more the need to balance procedural autonomy with effective consumer protection, the Caronte&Tourist case seems to go slightly further, making explicit the necessity for national laws not to impose constraints, also regarding procedural time limits, which could hinder the overarching goal of competition in the internal market. To this aim, the Court resorts to the principles of effectiveness, equivalence, and effet utile.

Artificial intelligence in financial services - new report by Finance Watch

Today, Finance Watch, a non-profit association dedicated to reforming finance in the interest of European citizens, published a new report: 'Artificial intelligence in finance: how to trust a black box?' authored by its Chief Economist Thierry Philipponnat.

As AI-powered systems increasingly drive financial decision-making in areas such as creditworthiness assessments, insurance pricing and investment products, the report asserts that the core principles of financial regulation accountability, responsibility, and transparency are being tested.

Against this backdrop, the report identifies several critical concerns: 

• Lack of transparency: AI models operate as “black boxes”, generating outputs without clear explanations of their reasoning, making human oversight and intervention impossible.
• Consumer protection under threat: In retail finance, the deployment of AI could lead to opaque creditworthiness assessments (see for an example here), pricing discrimination, discriminatory lending, and misleading financial advice. 
• Supervisors face AI challenges: Supervisors tasked with enforcing regulation face challenges in keeping pace with financial institutions' deployment of AI and delivering on their mandates.
• Market stability is at risk: Increasingly dependent on third-party AI providers, financial institutions face operational risks from unregulated external systems and concentration risks, where a handful of dominant AI firms control critical models and infrastructure, creating systemic vulnerabilities. 

As a response, the report urges a reassessment of the financial regulation framework: 

1. Expand the scope of the AI Act to cover all financial services
2. Establish a clear liability regime that holds providers of AI-powered services accountable for damages caused by an output of an AI system
3. Conduct a regulatory gap analysis to ensure all AI-driven financial activities are adequately regulated.

Credit reference agencies, consumer profiling and the GDPR: the CJEU in C-203/22

On February 27, 2025, the CJEU delivered an important judgment on the interpretation of Article 15(1)(h) and Article 22 of Regulation (EU) 2016/679 on General Data Protection (GDPR) in C-203/22 CK Magistrat der Stadt Wien v Dun & Bradstreet Austria GmbH.

The facts

The mobile phone operator refused CK’s request to conclude or extend the mobile telephone contract for a monthly payment of a mere EUR 10. The refusal was justified with CK not passing a creditworthiness check with the credit reference agency D & B, which carried out an automated assessment. Unsurprisingly, CK was unhappy with the decision; her credit score was good. She brought the matter to the Austrian data protection authority and, with this, started a long way to the preliminary reference, going through various instances and avenues for protection.  

The referring court raised several questions, which the CJEU grouped into essentially two questions:

The first question

Must Article 15(1)(h) be interpreted as meaning that, in the case of automated decision-making, including profiling, within the meaning of Article 22(1), the data subject may require the controller to provide, ‘meaningful information about the logic involved’ in the decision making, which would mean an exhaustive explanation of the procedure and principles actually applied in using personal data to obtain a specific result, in this case, a creditworthiness assessment.  

According to Article 15 (h), the data subject has the right to obtain from the controller confirmation as to whether his/her personal data is being processed, information on the use of automated decision-making where applicable, including profiling, referred to in Article 22(1) and (4), and meaningful information about the logic involved, as well as the significance and the envisaged consequences of such processing for the data subject.

Article 22 provides that the data subject shall have the right not to be subject to a decision based solely on automated processing, including profiling, and that certain data enlisted in Article 9(1) GDPR such as racial or ethnic origin, religious beliefs cannot be considered in data processing.

Profiling, in this context, means automated processing of personal data, consisting of using personal data to analyse or predict the consumer's economic situation.

In its analysis, the CJEU first turned to a literal interpretation of the wording of Article 15 (h) and concluded that the concept of ‘meaningful information’ under that provision may have various meanings in different language versions of GDPR, which should be taken to be complementary to each other. In addition, the ‘logic involved’ in automated decision-making, which constitutes the subject matter of ‘meaningful information’ is capable of covering a wide range of ‘logics’ concerning the use of personal data and other data with a view to obtaining a specific result by automated means. The CJEU held, that the provision covers all relevant information concerning the procedure and principles relating to the use, by automated means, of personal data with a view to obtaining a specific result.

The CJEU next turned to contextual analysis of the concept of ‘meaningful information about the logic involved’, within the meaning of Article 15(1)(h). In this analysis the CJEU looked at the  Guidelines on automated individual decision-making and profiling for the purposes of Regulation 2016/679 and other provisions of the GDPR providing information duties of data controllers. The CJEU concluded that information duties relate to all relevant information that should be provided in clear, concise, transparent, intelligible and easily accessible form, using plain and clear language

Finally, the CJEU looked at the purpose of the provision, asserting that the purpose of the data subject’s right to obtain the information provided for in Article 15(1)(h) is to enable him or her to effectively exercise the rights conferred on him or her by Article 22(3), namely, the right to express his or her point of view and to contest the relevant decision. This, in turn, requires the right to obtain an explanation of the decision.

The CJEU then concluded that under Article 15(1)(h) the right to obtain ‘meaningful information about the logic involved’ in automated decision-making must be understood as a right to an explanation of the procedure and principles actually applied in order to use, by automated means, the personal data of the data subject with a view to obtaining a specific result, such as a credit profile. In order to enable the data subject to effectively exercise the rights conferred on him/her by the GDPR and, in particular, Article 22(3), that explanation must be provided by means of relevant information in a concise, transparent, intelligible and easily accessible form. Notably, the court further provided guidance on what is considered to be ‘meaningful information about the logic involved’ in automated decision-making. The procedures and principles actually applied must be explained in such a way that the data subject can understand which of his/her personal data have been used in the automated decision-making and the extent to which a variation in the personal data taken into account would have led to a different result. The requirements of Article 15(h) cannot be met by the mere communication of a complex mathematical formula, such as an algorithm, or by the detailed description of all the steps in automated decision-making since neither of those would constitute a sufficiently concise and intelligible explanation.

Second legal question

Another important contribution of the present judgment is the consideration of the relationship between Article 15(1)(h) and Directive 2016/943 on trade secrets, given that D&B argued that the logic of their automated decision-making, including what information is considered in which way, is a trade secret and should, therefore, not be disclosed.  

The CJEU highlighted that the protection of personal data is not an absolute right. Restrictions are possible of the scope of the obligations and rights provided for in, inter alia, Article 15 of the GDPR, but only when such a restriction respects the essence of the fundamental rights and freedoms and is a necessary and proportionate to safeguard the protection of the rights and freedoms of others. However, the result of any consideration on the limits of the protection of personal rights should not be a refusal to provide all information to the data subject.

The CJEU concluded that Article 15(1)(h) must be interpreted as meaning that, where the controller takes the view that the information to be provided to the data subject is a trade secrets, within the meaning of point 1 of Article 2 of Directive 2016/943, that controller is required to provide the allegedly protected information to the competent supervisory authority or court, which must balance the rights and interests at issue with a view to determining the extent of the data subject’s right of access provided for in Article 15 of the GDPR.

Our analysis

This decision is significant in addressing the long-standing problem of the lack of transparency in automated decision-making by credit reference agencies,  an important problem in the EU. Given that in most countries we have access to our credit reports we can know what data is considered in their decision making in producing a credit score and a credit report, however, credit reference agencies have refused disclosing the way this data is processed, the logic behind their decision making, in what way and to what extent various data is considered (weighted) in their decision making.  Although based on this decision, consumers are still not entitled to get hold of that information directly, but a first step has been made by mandating disclosure to the relevant authority who then makes a decision on whether or not to disclose it to the consumer, balancing the rights and interests of the two parties. This and other judgments of the CJEU (see C-634/21 SCHUFA Holding) may be gradually bringing transparency into this traditionally very untransparent area.

As credit reference agencies nowadays use artificial intelligence for automated decision-making, the judgment is relevant for advancing transparency considerations of AI systems.

Finally, given that the judgment tackles the operation of credit reference agencies, which are frequently used by creditors to assess the affordability of loan applications, it is relevant for responsible lending rules in Directive 2023/2225 on consumer credit (CCD2), which in Article 18 refers to creditworthiness assessment based on automated processing of personal data.