"Günstige Preise": Advocate-General's Opinion in Amazon EU case (C-191/15)

Amazon EU, the European branch of a well-known e-commerce company, has been accused of using unfair terms by the Verein für Konsumenteninformation (VKI), an Austrian consumer organisation. Amazon EU has its seat in Luxembourg, but it operates in Austria via www.amazon.de, a German website promising "Günstige Preise". The general conditions of sale contain a choice of law for the law of Luxembourg, which VKI says is unfair. Now solve the riddle: what law is applicable to the dispute between VKI and Amazon EU?

http://curia.europa.eu/jcms/jcms/Jo2_7026/fr/

Advocate-General Henrik Saugmandsgaard Øe, who was appointed last year, presented his solution to this riddle yesterday (see the full opinion here, in French), following a preliminary reference from the Austrian Oberster Gerichtshof. He breaks it down into three questions:

1. On the basis of which rules on the conflict of laws should the applicable law be determined: Rome-I or Rome-II? In other words, does the underlying issue of law concern a contractual or a non-contractual obligation?
2. Follow-up question: what law is applicable?
3. Is the choice of law at issue unfair (within the meaning of Directive 93/13)?

The case brought against Amazon EU by VKI is an action for an injunction for the protection of consumers' interests (Directive 2009/22). Although VKI acts in the collective interests of Austrian consumers, the Advocate-General's proposed answers are relevant as well for website users all over Europe.

If you are mainly interested in the (potential) unfairness of a choice of law, you can jump directly to the third heading below. For our readers with an interest in private international law, we will also discuss the more technical matter of Rome I vs. Rome II and the practical consequences.

1. Rome I or Rome II (paras. 32-66)?

The first question is relevant, because the Rome I Regulation (593/2008) would lead to the applicability of the law of Luxembourg, while the Rome II Regulation (864/2007) would lead to the applicability of the law of Austria. VKI claimed that Amazon EU's general conditions of sale violated, among other things, the Austrian Konsumentenschutzgesetz and Datenschutzgesetz on consumer protection and data protection respectively. The Handelsgericht Wien and the Oberlandesgericht Wien had both determined the applicable law in accordance with Rome I. However, as the Advocate-General points out, VKI acts in the general interest and its action for an injunction is abstract and preventive, i.e. forward-looking; it is not connected to specific individual consumer contracts. VKI is not a party to the contracts with Amazon EU, nor is there a contract between Amazon EU and VKI itself. VKI's right to bring an action has been assigned to it by law and its goal is to prevent the use of unlawful terms. In the context of jurisdiction (the Brussels I Regulation), the Court of Justice had already decided that such an action cannot be qualified as a "contractual obligation" (Henkel, C-167/00). The Advocate-General proposes a parallel interpretation of Rome I. He rejects the view that a "symmetry" is necessary between an action for an injunction on the one hand and an individual action - based on a concrete and existing contract - on the other, because of the different and supplementary nature of both actions. In this respect, he refers to Article 5 of Directive 93/13, which gives separate rules of interpretation for individual actions. Indeed, in the context of this Directive, the Court of Justice distinguishes between individual and collective actions (see, e.g., our blog here). Hence, the applicable law should be determined on the basis of Rome II.

2. What law is applicable (paras. 67-81)?

Pursuant to Article 6(1) Rome II, the law applicable to a non-contractual obligation arising out of an act of unfair competition shall be the law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected. The Advocate-General puts forward that "unfair competition" includes the use of unfair terms which are likely to affect the collective interests of consumers. Therefore, Austrian law is applicable. Furthermore, the Advocate-General argues that the exception of the general lex-loci-damni-rule in Article 4(3) Rome II - when the tort/delict is "manifestly more closely connected" to another country - should not be applied, because it should not be possible to circumvent Article 6(1) by seeking a closer, personal link between the parties, for example the existence of a contract. He refers again to the argument that an action for an injunction is not connected to individual consumer contracts. 

What are the practical consequences? The action for an injunction is governed exclusively by Austrian law. An individual action would be governed by the law of Luxembourg, on account of the choice of law in the general conditions of Amazon EU. According to the Advocate-General, consumers in Austria would nevertheless still be protected by mandatory provisions of Austrian law. Pursuant to Article 6(2) Rome I, a choice of law may not have the result of depriving consumers of the protection afforded to them by virtue of the law that would otherwise have been applicable, i.e. the law of the country of their habitual residence. This had also been the conclusion of the Oberlandesgericht Wien: consumers cannot lose the protection they enjoy under Austrian law, in particular the Konsumentenschutzgesetz.

So far, so good. However, if we follow the Advocate-General's reasoning that the action for an injunction is not connected to individual consumers and that the underlying issue of law concerns a non-contractual obligation, then we may conclude that consumer associations such as VKI cannot rely on Rome I. Interestingly, the Advocate-General subsequently refers to Article 6(2) Rome I in order to determine whether the choice of law at issue is unfair in the relation between the consumer and the seller. 

3. Is the choice of law unfair (paras. 82-104)?

In the Advocate-General's opinion, a choice of law is not in itself unfair because it may be disadvantageous to consumers. A choice of the law of another country may nevertheless have a chilling effect, deterring consumers to bring an action against the seller. They are presumably unacquainted with the laws of that country; the laws of their own country are in general more familiair and accessible, if only because of the language, and can thus be more easily invoked. The Advocate-General considers it especially important that consumers are informed in a clear and understandable manner about their rights; contractual terms should not be misleading. Terms containing a choice of law must be sufficiently transparant, in that they should specify unambiguously that consumer still have the possibility to invoke mandatory provisions of the laws of their own country (under Article 6(2) Rome I), in particular those laws which implement the acquis regarding consumer protection and which may - in case of minimum harmonisation - offer even a higher level of protection than required. If no explicit reference to the laws of the consumers' own country, they could get the incorrect impression that the contract is governed only by the law of another country. This may cause a significant imbalance to the detriment of consumers, which is unfair in the sense of Directive 93/13.

Thus, the Advocate-General de facto introduces a new requirement for a choice of law in consumer contracts, by connecting Article 5 of Directive 93/13 - providing that terms must always be drafted in plain, intelligible language - to Article 6(2) Rome I. This does not mean that all potentially applicable mandatory provisions should be listed, but consumers should at least be notified that they cannot lose the protection afforded to them under the laws of their own country.

Data protection (paras. 105-128)

Lastly, the Advocate-General addresses the question which law is applicable to the processing of personal data under Directive 95/46. Pursuant to Article 4(1) of this Directive, the territory of the Member State on which the controller is established is decisive. It is up to the national court to assess whether Amazon EU can be said to have an "establishment" in Austria, and whether the processing of personal data is perhaps more closely connected to activities in Germany. 

Concluding remark
So far, Amazon EU does not seem to have changed its general conditions of sale yet (see the Verkaufsbedingungen, the screenshot below was made on 3 June 2016):

Article 10 also contains a forum choice for the courts of Luxembourg, but explicitly states that consumers can submit claims either in Luxembourg or in the EU Member State where they live (cf. Brussels I). It would be to Amazon EU's credit if they would follow the Advocate-General's opinion and add a similar clarification for the choice of law for the law of Luxembourg.

Ex Officio Examination of the Status of the Buyer and Burden of Proof in Consumer Sales - Opinion AG Sharpston in case Froukje Faber (C-497/13)

27 October 2014: Opinion AG Sharpston in case Froukje Faber (C-497/13)

Today AG Sharpston handed down her opinion in a case where the consumer Froukje Faber bought a used car from Autobedrijf Hazet. The Dutch court of second instance dealing with the case asked for an interpretation of the  consumer sales directive. 

The car caught fire four months after having been handed over to Ms Faber. Neither in the proceeding in the first nor in the second instance Ms Faber claimed that she had bought the car for private purposes. The court asked if it had to examine out of his own motion - in violation of national rules and as a duty arising from the directive - whether the purchaser is a consumer. Unsurprisingly, GA Sharpston argued that national courts have this duty (due to the principle of effectiveness).

The wreck had been dismantled before the cause of the fire was found out. The Dutch court asked if it had to apply Art 5 (3) which partially reverses the burden of proof for the benefit of consumers ex officio, a question the GA answered in the affirmative. According to GA Sharpston, the consumer has to proof the lack of conformity if the latter becomes apparent within six months of delivery. He or she, however, does not have to show the cause for the lack of correspondence. For the present case this means that Ms Faber has to show that the fire occurred and '...why, as a result of the fire, she considers that the car which was delivered to her did not correspond with the car which, based on the contract and other relevant information, she had expected to receive. ... in the present case, it may be sufficient for Ms Faber to show that the product can no longer (properly) perform the function for which it was purchased...'. It is then up to the seller to proof that the car was in conformity with the contract at the moment of delivery. 

The Netherlands made use of the possibility to introduce a rule under which the buyer has to notify the seller about the presumed lack of conformity of the good in due time (Art 5 [2] consumer sales directive). The Dutch court asked how far this duty to notify goes. AG Sharpston highlighted that the buyer, when notifying the seller, does not yet have to proof the lack of conformity.

Harmonisation of insurance contract laws?

Short after the Parliament's first reading vote on the Common European (now, Distance) Sales Law, the Commission might be starting a new contract law harmonisation challenge. 

Last Friday, indeed, the previously appointed Expert Group delivered its report on barriers to cross-border trade in insurance products.

Presenting the report, Commissioner Reding underlined how "only a few customers can buy insurance products in other countries, with just 0.6% of all motor insurance premiums and 2.8% of property insurance premiums offered across EU borders." 

The Group's main finding is that important differences exist in the contract law rules of especially life, motor and liability insurance products, which make it harder- and more expensive- for traders to offer "pan-european" products and for consumers/policyholders to take their insurance with them as they move between European countries. Of course rules outside contract law could also play a role in generating such barriers, but these rules remained beyond the Group's subject of investigation.

Unsurprisingly, the problem is found to be less severe in the large risks segment, where the cross-border dimension has been for a longer time usual business. 

Want to know more? You can take a look at the report.

The effects of contracts beyond frontiers

Should consumers in Europe care about deplorable labour conditions under which clothing and other products they bought in the EU were manufactured somewhere else in the world? In the PhD thesis that she defended at the University of Amsterdam today, Lyn Tjon Soei Len makes a case for the invalidity under rules of contract law in Europe of economic transactions for goods made in sweatshops. She takes inspiration from the capabilities approach developed by Martha Nussbaum to argue that a society aiming to be minimally just should not support market activities that have adverse effects on the central capabilities of others elsewhere. A summary of the main lines of her research can be found in a previous publication on 'European Contract Law and the Capabilities Approach: On Distributive Responsibility for Contract Law'.

L&E of CESL

On Friday 27 and Saturday 28 April 2012, the Institute for Law and Economics of the University of Chicago Law School will host a conference on 'European Contract Law: A law-and-economics perspective'. The contributions to the conference will, among other topics, assess the newly proposed Common European Sales Law:

'The movement to harmonize European contract law generated various proposals for uniform statutes and optional instruments, culminating by the recent Draft Common European Sales Law. This ambitious reform envisions a uniform Sales Law for Europe with strong consumer protections, enacted by every member nation. Transactors will be able to choose this law to govern their transaction in place of existing contract law.

The Chicago conference brings together a group of leading scholars from Europe and from the University of Chicago, exploring the law and economics perspectives of the proposed harmonization. Is such an optional statute a desirable regulatory tool? What economic goals might it serve? Are the protections enacted in it suitable? What can be learned from the American experience with uniform commercial laws?'

More information and the programme can be found on the conference website.

Reding on Common European Sales Law

The text of Commissioner Reding's speech at the currently ongoing conference on the future of European Contract Law, organised by the Polish presidency, is now available on the website of the European Commission. Reding emphasises the potential role of the recently proposed Regulation on a Common European Sales Law:

'The optional Common European Sales Law will provide companies with an easy and cheap way to expand their business to new markets. It will bring more choice, security and a better deal to consumers. In the Commission's analysis, it's a win-win situation: for businesses and consumers who want to take advantage of our Single Market. Europe needs to develop and exploit such win-win situations. Because we have no time to lose in our fight for stability, growth and competitiveness of this marvellous continent. Some say in these days that Europe is in danger. I do not share this negative view. I believe Europe is full of opportunities and of potential that we just need to unlock with determination. And the optional Common Sales Law is one of these opportunities.'

Some first-hand news on the conference proceedings will probably follow next week when Joasia, who is attending the conference, will be back from Warsaw. Furthermore, Eric Clive promised to post on the conference on the Edinburgh European Private Law blog.

Tune in on the European Commission today - press conference at 12.30

Commissioner Reding has called a press conference for 12.30 today on which she will announce a proposal to bring more coherence to European contract law. It is expected that this will entail a proposal for an 'optional instrument' that contracting parties may choose to apply to their agreements.

It should be possible to follow the press conference 'live' through the Commission's website.

To be continued...

Contract law - work in progress

Earlier, we posted on the publication of the Expert Group on European Contract Law's 'feasibility study' for a future instrument in this field. The European Commission's work (in progress) on the further development of the proposed rules can now be followed on the website of DG Justice.

To be continued.

EP adopts CRD

By an overwhelming majority, the European Parliament today adopted the Consumer Rights Directive. The Directive is meant to strengthen consumer rights in off-premises contracts, especially in online transactions. In its press release following the vote in Parliament, the European Commission enumerates ten ways in which the CRD will give consumers stronger rights when shopping online. These include: protection against 'cost traps' (e.g. paying for 'free' services, such as recipes), banning pre-ticked boxes on websites, allowing the consumer a 14-days withdrawal period, and requiring traders to give better information on digital content (e.g. concerning compatibility of the digital content with hardware and software, and application of technical protection measures).

The next steps in the legislative procedure now are the following:

- Formal approval of the agreed text of the CRD by the EU Council of Ministers (September);
- Publication of the new Directive in the EU's Official Journal (this autumn);
- Transposition of the new rules into the national laws before the end of 2013.

Between parentheses: Seeing all these cheerful messages, one might almost forget that the review of the acquis communautaire in the field of consumer law once (not so very long ago, in 2004) was intended to cover eight Directives. The reduction of the scope of the CRD, first to four Directives (2008) and now to merely two (distance selling and doorstep selling; thus excluding standard terms and hardly providing any general rules on consumer sales) may reflect political reality, but seems somewhat disappointing in light of an idealist agenda for further harmonisation of European contract law.

To be continued...

Reding on the future of European contract law

Last Friday, EU Justice Commissioner Viviane Reding delivered a keynote speech at the “Towards a european contract law” conference in Leuven. Unfortunately, this speech did not have the same aesthetic elegance as an earlier speech on the topic of cloud computing by Reding, but it is still worth devoting a couple of lines to it.

In her speech, Reding gives a brief overview of the development of European contract law. The speech comes in the usual politically correct forms, but some lines may come in handy the next time you write about European consumer policy. For example. Reding argues that “In many ways, today is a “moment of truth” for European Contract Law.”

In her speech, Reding gives a brief overview of the development of European contract law, including the recent developments concerning the work of the expert group (existing of mainly academics) and the sounding board, made up of representatives of the legal profession, businesses and consumers. Reding also shortly discusses the contributions to the public consultation, presenting different options for the future of European contract law, concluding that the responses show ‘a high degree of controversy about what the Commission should do next.’

Not surprisingly, Reding does at this point not favour full harmonisation of European contract law, nor a compulsory European Code. As expected, the way forward in the view of the Commission is an optional instrument. In a climate of – be it mild – euroscepticism, taking little steps seems the Commission’s only way forward in the process of the development of European private law.

Reding stresses that in the process of making an optional instruments, four issues of concern deserve special attention:
1) It must be made sure that if consumers opt for the instrument they do this consciously, i.e. not by accident;
2) The optional instrument must take into account the reality of the modern information society;
3) The optional instrument must be made effective for small- and medium sized companies;
4) It must be decided whether the optional instrument can only be applies in cross-border transactions or also to domestic transactions.

A proposal by the Commission is expected in November this year.

To read the speech, click here.

Expert advice on the future of European contract law

Just a quick note to announce the publication of the results of the Expert Group on European Contract Law. Commissioner Reding stated the following:

"After more than 10 years of intense work on contract law by the European Union, I am grateful to the members of the expert group for having consolidated, simplified, modernised and narrowed down the preparatory work done so far into a feasibility study. It is also good to see that contract law experts from very different legal traditions and professional backgrounds arrived at a consensus on the document. The result of the expert group is without doubt a major step in the work towards a future European contract law instrument, which the European Parliament's Legal Affairs Committee favoured in a vote last month. This study provides the EU institutions with a toolbox for any future EU initiative in the field of contract law. I plan to discuss this further with the European Parliament, the incoming Polish Presidency and stakeholders to see whether and how this toolbox can serve as the basis of a political follow-up initiative on contract law this autumn. My goal is that SMEs and consumers should benefit from a user-friendly contract law instrument, especially when it comes to cross-border transactions in the Single Market."
More information can be found in today's press release and on the Commission's website. Interested parties are invited to send their feedback to the Commission by 1 July 2011.

Optional instrument more of an option with every day.

The creation process of the European Contract Law as an optional instrument continues with the European Parliament's Legal Affairs Committee approving yesterday a report that favours this option. The European Commission presented a few options that would allow to achieve a more coherent approach to European contract law in its Green Paper (discussed previously on this blog). One of the options was to introduce an optional instrument that would be an alternative to national contract laws, an alternative that parties to a contract could freely choose instead of national laws. It would most likely apply only to cross-border transactions, and would have to guarantee a sufficient level of consumer protection to be attractive. Now, Diana Wallis, a member of the EP, prepared her own report on policy options for progress towards a European Contract Law in which she favors the optional instrument. The European Parliament's Legal Affairs Committee voted overwhelmingly in support of that draft report.

Press relese may be found here.

Procedure file may be found here.