Max Schrems is a consumer - with respect to his own claims, Court says

Source: https://twitter.com/maxschrems

Yesterday, on 25 January, the judgment in the second high profile case concerning the battle of Max Schrems against Facebook was delivered by the Court of Justice. The ruling does not come as a big surprise to those familiar with the earlier opinion of Advocate-General Bobek (for a broader overview of the dispute itself and the AG's opinion see our earlier post here). Indeed, the Court decided to follow the midway approach proposed to it by the AG. According to the Court, a claimant does not lose the status of a 'consumer' for purposes of establishing jurisdiction of the court seised, as a result of his engagement in activities such as book publishing, lecturing, operating websites, fundraising and collecting claims of numerous consumers. However, the jurisdictional privilege arising out of Article 16(1) Regulation No 44/2001 (Brussels I; currently Article 18(1) Regulation No 1215/2012) does not extend to collective redress.

Question 1: Is Schrems himself a consumer?

The Court began its analysis by recalling the general rule of actor sequitur forum rei, upon which the Brussels I regime is based, and the consequent requirement to interpret the rules which derogate from it strictly. This applies to Article 16(1) which allows consumers to bring proceedings against their contractual counter-party in the courts for the place where they are domiciled. 

It then reaffirmed its established line of reasoning, according to which:

• in the interpretation of the term 'consumer' for purposes of Brussels I regulation reference must be made to the position of the person concerned in a particular contract, having regard to the nature and objective of that contract and not to the subjective situation of the person concerned (para. 29);
• only contracts concluded outside and independently of any trade or professional activity or purpose, solely for the purpose of satisfying an individual's own needs in terms of private consumption, are, in principle, covered by the special rules aimed to protect the consumer as a weaker party (paras. 30-31).

Mixed purpose and dynamic assessment

The judgment further recalled that in mixed purpose scenarios, i.e. where a person concludes a contract for a purpose which is partly within and partly outside his or her trade or profession, the Gruber test applies. Consequently, a person can only rely on the jurisdictional privilege available to consumers if the link between the contract and that person's trade or profession is so slight as to be marginal and, therefore, has only a negligible role in the context of the supply in respect of which the contract is concluded, considered in its entirety (para. 32).

Having in mind the conclusion reached in Gruber as well as the Court's repeated references to the strict interpretation requirement in the commented judgment, the reasoning presented so far did not appear to bode well for Schrems. Neither did the following passage of the judgment, which introduced an element of novelty to the Court's existing jurisprudence and could be of considerable relevance for the future cases. 

"[I]t is necessary, in particular, to take into account, as far as concerns services of a digital social network which are intended to be used over a long period of time, subsequent changes in the use which is made of those services" (para. 37). Consequently, "a user of such services may, in bringing an action, rely on his status as a consumer only if the predominately non-professional use of those services, for which the applicant initially concluded a contract, has not subsequently become predominately professional" (para. 38).

The Court has thus made clear that the subsequent change of the purpose, for which the services provided under the contract are used, should not be disregarded. This is already a very important take-away. The importance of these follow-on factors is, nevertheless, far from clear. While the Court does not refer to it explicitly, it seems that the time of contract conclusion could still be perceived as the main point of reference, as reasoned by the AG. Based on this premise, one could argue that it is at this stage that the strict Gruber test should be applied. Indeed, the negative formulation "has not subsequently become predominately professional" leaves room for a more consumer-claimant-friendly interpretation at a subsequent stage.

The contract, not the person

As seen from above, with respect to mixed-purpose long-term contracts the judgment leaves several important questions open and its consumer-claimant-friendly reading may be regarded as a stretch. The answer provided by the Court was, nevertheless, favourable to Schrems. The reason seems to lie in the character of his "professional" use of Facebook services. According to the Court, acquiring expertise in the field covered by the services at issue and giving assurances for the purposes of representing the rights and interests of other service recipients cannot lead to the loss of one's consumer status. This is because: 

• as mentioned before, an assessment of the 'consumer' status is undertaken irrespective of the subjective situation of the person concerned, in particular his or her knowledge and information possessed (para. 39);
• a contrary interpretation would prevent an effective defence of the rights that consumers enjoy in relation to their contractual partners who are traders or professionals (here especially: the protection of personal data) and would disregard the objective set out in Article 169(1) TFEU of promoting the right of consumers to organise themselves in order to safeguard their interests (para. 40).

Question 2: Can Schrems bring claims of other consumers in his domestic court?

Article 169(1) TFEU, however, did not prove helpful in respect of the second question. Emphasising once again the requirement of strict interpretation, the Court found that the special protection granted to a consumer as a party to the legal proceedings applies only in so far as the claimant or defendant is, in fact, a party to the consumer contract in question (paras. 44-45). A situation of a consumer to whom claims of other consumers were assigned was thus treated analogously to that of a consumer organisation. A different interpretation would, according to the Court, lead to the establishment of a specific forum for consumers to whom claims of other consumers have been assigned, which is nowhere to be found in the Brussels I regulation and which would undermine the predictability of attributing jurisdiction (paras. 46-48).  

Consequently, the jurisdictional privilege set out in Article 16(1) of Regulation No 44/2001 does not apply to the proceedings brought by a consumer for the purpose of asserting the claims assigned to him by other consumers, irrespective of whether the assignors are domiciled in the same Member State, in other Member States or in non-member countries.

Concluding thought

The judgment appears to be a win for consumers who decide bring their civil claims against traders to a court and take their disputes seriously - a result which is hard not to agree with. The ruling is, nevertheless, far from a sweeping consumer victory. Despite a reference to the consistency of EU law in para. 28, the Court maintained the established reading of Gruber for jurisdictional purposes and accepted that consumer status can be lost over time. Last but not least, even if the Court's choice to leave the collective redress dimension up to the European legislator cannot be denied legal grounds, it goes without saying that transnational private enforcement of consumer law remains an issue. One can hope, however, that the experience made in discussions on the GDPR regarding that latter point, along with the recent steps taken by the Commission as a follow-up to its 2013 recommendation on collective redress, will eventually bring something more concrete to reason about.

Is Max Schrems a consumer? AG Bobek in C-498/16

On Tuesday, 14th November, Advocate-General Bobek delivered an important opinion in case C-498/16 Schrems v Facebook. Readers of this blog will certainly remember an earlier court battle involving the same parties, fought entirely on the grounds of data protection law, which resulted in the invalidation of the Commission's Safe Harbour decision and its later replacement with a somewhat more robust, yet no less controversial, framework renamed as Privacy Shield. The present case also revolves around data protection issues, albeit in a more horizontal setting. These, however, are not the focal point of the commented opinion as the preliminary reference had been made before  national courts even began to assess the merits of the action. This was due to the doubts as to whether the court seised was at all competent to try the case.

Legal framework and the contested issue 

In the EU competence of national courts to hear and adjudicate disputes in civil and commercial matters is established under the so-called Brussels framework. The instrument which currently lies at its heart is Regulation No 1215/2012 (Brussels I bis), which, as of 2015, repealed and replaced Regulation No 44/2001 (Brussels I). The case at hand still refers to the previously applicable act, but – as the provisions under analysis have not been affected by the reform (recast) – the interpretation provided by the AG and, ultimately, the Court remains of direct relevance also to the law as it currently stands.

Key provisions under dispute are Articles 15 and 16 of Regulation No 44/2001. Both of them form exceptions to the general rule of actor sequitur forum rei set out in Article 2(1) and aim to assist consumers in the pursuit of their claims against traders. Pursuant to Article 15(1)(c) if a matter relates to a contract concluded by a person for a purpose, which can be regarded as being outside his or her trade or profession (the consumer) and the contract has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer's domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities, the special regime laid down in the subsequent provisions kicks in. This includes Article 16(1) according to which "a consumer may bring proceedings against the other party to a contract either in the courts of the Member State in which that party is domiciled or in the courts for the place where the consumer is domiciled".

Relying on these provisions, Max Schrems – an Austrian national domiciled in Austria – lodged a number of claims both on his own behalf as well as on behalf of several others Facebook users who assigned claims to him concerning the company's alleged infringements of the data protection rules. The defendant contested the jurisdiction of the Austrian court, submitting that Schrems cannot rely on the consumer status as he has been using the platform not only for personal, but also – and increasingly – for professional purposes. According to the defendant, the fact that Schrems specialises in data protection law, publishes books, delivers lectures for remuneration, operates a website and a Facebook page concerning the ongoing litigation, coordinates collective redress and collects donations for that purpose suggests that he no longer acts merely in his private capacity. Secondly, in view of the defendant, jurisdiction established for Schrems was, in any case, not transferable onto other persons who assigned claims to him.

AG opinion

The opinion of AG Bobek does not bring a clear win for either of the parties. Indeed, the AG ultimately sides with Schrems on first account and with the social network's operator on the other. The proposed reading of the regulation is supported by an extensive reasoning, which appears to be well grounded in the existing case law and not particularly ground-breaking. On a closer look, however, the opinion offers several hints which could lead to important developments in the jurisdictional regime for consumer contracts.

Question 1: Consumer status

As regards the interpretation of the notion of a consumer for purposes of Article 15(1), the AG points out, in a seemingly conservative way, that the assessment should always be contract-specific, that the parties should generally able to rely on the status of the other party determined at the time of the contract’s conclusion and that in case of ‘dual purpose’ contracts the Gruber case law should be applied (paras. 29-34).

However, on a more careful reading, the opinion appears to be more nuanced. Starting from the last point: the AG first reminds that, in line with Gruber, if a contract serves both professional and private purposes "the consumer status is maintained only if the connection between the contract and the trade or profession of the person concerned is 'so slight as to be marginal', meaning it had only a negligible role in the context in which the contract was concluded" (para. 34). Direct reference to the key passage of that judgment highlights the discrepancy between the Court's early case law on dual purpose contracts and the subsequent legislative developments on that matter. Indeed, in a number of more recent acts such as Directive 2011/83/EU on consumer rights (recital 17) or Directive 2013/11/EU on consumer ADR (recital 18) the EU legislator opted for a somewhat different – and more consumer-friendly – approach towards mixed purpose contracts. Naturally, indications included in the preambles of several acts do not preclude the applicability of the CJEU's test, especially in other contexts. By way of illustration, a more stringent stance towards consumer status in private international law can potentially be justified by reasons of procedural certainty.

This, however, does not seem to be the reading the AG is after. Despite direct references to the fairly tough standpoint in Gruber, he also presents some very interesting points as to how he understands that ruling and, ultimately, considers Schrems to qualify as a consumer. In this respect, two observations made by the AG in para. 59 are worth highlighting.

In the words of the Advocate-General: "First, what Gruber aims at, in my view, and what should remain negligible within one single contract, are activities having immediate commercial aim and impact, in the sense of structured and profit-making activity being the driving purpose of such use."

This may appear somewhat contradictory to one of his earlier observations regarding the interpretation of the phrase 'trade or profession'. Indeed, one can read in para. 31 that the term relates "in broad terms to one's economic activity" meaning that for a person to be disqualified as a consumer the contract at issue does not have to be "necessarily connected with immediate economic profit", but what matters is rather that it is "entered into in connection with an ongoing, structured economic activity". On the whole, however, it seems that the AG seeks to align, step by step, the reading of Gruber with the more recent trend concerning the issue of mixed purpose, which, in itself, is to be welcomed.

The second observation made by the AG in para. 59 is equally non-standard and goes back to his earlier discussion on the possibility of losing (or gaining?) the status of a consumer over time (paras. 35-41). While the AG confirms that the status of a party should generally be determined at the time of the contract's conclusion and not at the moment when the action was lodged, he does not consider this point to be absolutely fixed. "In abstract terms" and "in rather exceptional cases" a dynamic approach to consumer status could be envisaged (para. 39). This could be true particularly for long-term relationships, in which the aim of a contract is not specified or the contract is open to different uses. If, under these circumstances, there is "a clear evolution" of the type of the capacity in which the applicant has made use of the contract, the potential dynamism of the contractual relationship would need to be assessed (para. 59). While the application of this more flexible approach towards consumer status has not changed this assessment with regard to the claimant, if shared by the Court, the reading proposed by the AG could shake the foundations of consumer law as we know it.

Question 2: Collective redress

By contrast, the AG was not inclined to go into similarly subtle distinctions with regard to the second question and considered that Article 16(1) of Regulation No 44/2001 simply does not leave room to the interpretation advocated by the applicant (with the support of the intervening governments). It his view neither the text, not the context and the purpose of that regulation, support the establishment, solely on the basis of that act, of a new special jurisdiction with respect to claims assigned to a consumer on the same subject by other consumers domiciled in the same or another Member State or in a non-member state. This remains in line with the earlier case law, in which the CJEU  prevented both private companies (Shearson Lehman Hutton) and consumer organisations (Henkel), acting as assignees of the rights of the consumers, from relying on the special head of jurisdiction designed for the protection of the latter. According to the AG, the Court did so not only because those legal persons were not 'weaker parties', but also because they were not parties to the contract in question, which was also the case for Schrems (para. 96).

The Advocate-General thus denied the consumer-assignee the possibility of collecting numerous claims in the single proceedings carried out in his domestic court. This, however, was not yet his final word. In his concluding remarks the AG decided to share some broader views concerning the need for  an EU-wide collective redress in consumer matters. According to Bobek, collective redress undoubtedly "serves the purpose of effective judicial consumer protection" and may provide "further systemic benefits to the judicial system". He notes that the question is not only extensively discussed in the legal scholarship, but has also already led to several attempts at a legislative action and that, all in all, the EU legislator appears to be best placed to devise the relevant system, including its jurisdictional dimension. Consequently, even if it does not propose a major shift with respect to the assignment of claims under the applicable regime, the AG's opinion could provide for an additional impulse to revive these important discussions. This will, nevertheless, largely depend on whether the Court actually picks up on the many interesting proposals put forward by its advisor.