May airlines use T&Cs to prohibit passengers from assigning their rights to claim damages? - CJEU in Air Europa Lineas Aéreas (C-173/23)

In today's Air Europa Lineas Aéreas judgment (C-173/23) the CJEU looked into the application of the Unfair Contract Terms Directive (UCTD) to contracts concluded between air passengers and air carriers. Specifically, the passenger in case suffered damages as a result of a delay in receiving his checked-in baggage. He assigned his claim for damages against the air carrier (Air Europa) to a third party (Eventmedia). The air carrier disputes the transfer of rights to Eventmedia, claiming that assignment of passenger rights is prohibited by a clause in its general conditions of carriage (para 12). The referring court had sufficient evidence to declare this clause unfair ex officio but had doubts whether it could do so procedurally. First, the consumer was not part of the judicial proceedings, as he was represented by the assignee of his rights (whose standing was contested). Second, if the court declared the clause unfair the consumer, still remaining outside the judicial procedure, would not have received a chance to object to the application of this finding. 

Ex officio unfairness testing after consumers assigned their claims

First, the CJEU reminds that it has already previously declared (in the DelayFix case - C-519/19) that the UCTD's application is based on the capacity of the parties when they were concluding a contract (B2C) rather than the identity of parties entering into a dispute (paras 17-18). Therefore, the UCTD applies to more cases than just the ones, in which a dispute is between B2C contractual parties (para 25).

The CJEU reminds further that the ex officio judicial mechanism aims to compensate for the imbalance between consumers and professional parties (para 29). Other procedural issues remain in the discretion of the Member States, provided that they comply with the principles of equivalence and effectiveness (para 31).

To comply with the principle of equivalence here, the national court needs to determine whether national law allows it to ex officio assess whether a contractual term is contrary to national rules of public policy. If the answer is affirmative, the unfairness assessment also needs to take place ex officio (paras 34-35). This conclusion is not impacted by the consumer's presence in the judicial procedure, as if conditions for the applicability of the UCTD have been fulfilled (e.g., contract concluded B2C) its provisions benefit from having been assigned an equivalent status to domestic rules of public policy.

The assessment differs regarding the observance of the principle of effectiveness, as this considers the specifics of each procedure and the role that the contested legal provision plays in it. Specifically, " (...) whether a national procedural provision makes the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its special features, viewed as a whole, and, where relevant, the principles which lie at the basis of the national legal system, such as the protection of the rights of the defence, the principle of legal certainty and the proper conduct of proceedings (...)." (para 37). Here then the fact that the procedure occurs between two professional parties weakens the need to provide as much protection against unfair terms, as if a consumer was one of the parties in the dispute, as there should be more balance between parties in the dispute (para 38). The principle of effectiveness does not require then the national court to test unfairness ex officio (para 39), unless the professional assignee of the consumer's claim had no real chance to rely on the unfairness in the procedure (para 40).

Consequences of unfairness in light of audi alterem partem when consumers are not part of the judicial process

When national courts find a term unfair ex officio, they follow the rules of audi alterem partem, of a fair hearing, by apprising parties in the dispute of court's findings and giving them an opportunity to debate these and to be heard (para 44). This applies also in case the dispute is between the assignee of the consumer rights and it is this assignee that needs to be informed of the unfairness finding, alongside the trader (para 46). As the consumer is not a party to the dispute, they do not need to be informed of the court's finding of unfairness and do not need to address it (para 49). It is the assignee of their rights that may object to it instead (para 47), although, obviously, they are unlikely to do so as they would then lose standing in the procedure (para 48).

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The first part of the judgment has enormous practical relevance, as air passengers commonly assign their rights for compensation to third parties. It is, therefore, important for the effectiveness of passenger protection framework that air carriers could not block this process by prohibiting the transfer of rights in their general terms and conditions. This judgment will help assure this further, following the previous judgment in the DelayFix case (see our comment here), as professional assignees of consumers' claims will be able to raise unfairness of the prohibition of transfer of rights themselves. If this is prohibited or hindered, they could then rely on the breach of the principle of effectiveness and expect national courts to test unfairness ex officio (pursuant to para 40). This way assures more legal certainty than relying on the ex officio unfairness testing due to the principle of equivalence, as it could differ between the Member States whether ex officio testing of measures of public policy was allowed.

Place of performance for multi-leg journeys - CJEU in LOT Polish Airlines (C-20/21)

Last week, on 3 February 2022, CJEU issued another judgment interpreting Article 7 Regulation 261/2004 on air passenger rights this time in combination with the interpretation of Article 7 Regulation 1215/2012 (Recast Brussels Regulation) in the case LOT Polish Airlines (C-20/21). The dispute concerned the jurisdiction of a national court over a claim for compensation of a delayed flight. 

The flight in case consisted of two legs of a journey with Lufthansa AG - Warsaw (Poland)-Frankfurt am Main (Germany)-Malé (Maldives). The first flight was operated by LOT Polish Airlines and its delay led the passengers to miss the second flight and arrive in Malé with more than 4 hours of a delay. The passengers claimed compensation for a delayed flight with a local court in Frankfurt am Main (Amtsgericht Frankfurt), which then disputed its jurisdiction as neither a place of departure or arrival listed in the contract of carriage (para 10). The referred question asked whether Frankfurt could be perceived as a place of performance pursuant to Article 7(1)(b) Regulation 1215/2012, which allows to determine domicile in contractual disputes regarding provision of services with reference to the place in which services were provided or should have been provided.

Previously, the CJEU has already confirmed the applicability of the jurisdiction rules governing contractual disputes to air passengers, regardless of the fact that their claims may be directed at operating air carriers with whom they did not conclude a contract (flightright and Others). The CJEU now reiterates the rules on determining jurisdiction for disputes where there are several places in which services were provided to looking for a place with the closest connecting factor between the contract and the court having jurisdiction (para 22). This tends to be the place where the 'main provision of services is to be carried out' (see Rehder). This should not be limited to the place of first departure and last arrival for a journey that consists of various legs (para 23). However, in the current case as the dispute arises from the delay of the first flight and the claim is raised against the air carrier operating that first flight, it seems that the place of first departure remains closely linked to the dispute and hence courts of that place should have jurisdiction (para 25). Consequently, the CJEU considers the courts of the place of arrival of the first leg of the journey not to have jurisdiction (para 27). The claim should be brought to courts of Warsaw rather than Frankfurt then, which is also considered to guarantee predictability and legal certainty for both parties (para 26).

Where will the courts 'catch' mobile consumers?

As part of our effort to look back to last year and cover any cases that we might have missed at the height of the pandemic, the CJEU's order in case C-98/20 mBank S.A. v PA on Regulation 1215/2012 (Brussels I Recast) deserves a mention.   

The case involved the interpretation of Article 18(2) according to which '[p]roceedings may be brought against a consumer by the other party to the contract only in the courts of the Member State in which the consumer is domiciled,’ and raised the question of the time at which the consumer's domicile is to be determined. 

PA was a 'mobile' consumer who has concluded a consumer credit agreement with mBank in the Czech Republic where he/she was domiciled at the time when the contract was concluded, however, he/she subsequently moved and had her/his address in Slovak Republic at the time when mBank sued the consumer for payment default. 

The CJEU ruled that the concept of 'consumer's domicile must be interpreted as designating the consumer's domicile at the date on which the court action is brought. In justifying this approach the court looked at the literal interpretation of the provision that refers to ‘the Member State in which the consumer is domiciled (emphasis added)’; to requirements of legal certainty in situations where consumers could have changed their domicile even several times in the course of the given legal relationship and a similar solution offered by 1968 Brussels Convention. Importantly, the court also notes, this solution is consistent with the purpose of the special jurisdiction established for consumer contracts, that is, to protect the 'economically weaker and less experienced' party to the contract.

No international jurisdiction when consumers move countries? - AG Sánchez-Bordonna in Commerzbank (C-296/20)

On September 9 AG Sánchez-Bordonna issued an opinion in the case Commerzbank (C-296/20) on whether the Lugano II Convention was applicable in the case to determine the jurisdiction over consumer credit contract.

Image by iXimus from Pixabay

Lugano II Convention is an international convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters to which the EU is a party. It provides consumers with an additional layer of protection in order to restore the balance in the complex situation of international jurisdiction matters (paras 23-24). There is a question of whether this Convention should apply to the case at all, as at the moment of the conclusion of the consumer credit contract both parties were domiciled in the same Member State - Germany. There was, therefore, no international element to their transaction at that time that could have required the use of international conventions to determine the appropriate forum for their dispute resolution. However, when the bank sought to recover payments from the consumer of their debit balance on their current account, the consumer has changed it domicile to Switzerland. This has prompted the reference to the Lugano II Convention.

AG Sánchez-Bordonna emphasises that the Lugano II Convention should not be applicable in a situation where the foreign, international element of the legal relationship between the parties to a contract arises subsequently to the contract's conclusion. AG's reasoning is based partially on the historical reasons for the adoption of the special consumer jurisdiction rules, as well as economic arguments, which support an interpretation that only if a trader or service provider established in one Member State pursues a commercial activity and directs it at consumers in another country, these special rules could apply. By such active targeting of consumers in another country, the professional willingly takes on themselves the risk of having to accept international jurisdiction if there is a dispute between them and their consumers (e.g. para 56). If a consumer with whom the trader has a contract decides to change domicile, that lies beyond what the trader can reasonably foresee, however (e.g. para 72).

The AG proposes an alternative solution as well, that is to accept the fact that a different international jurisdiction may be applicable to the dispute when the consumer has moved their domicile after the contract's conclusion but only if the country to which they moved is one where the trader pursues their economic activity, as well. As the trader would have needed to foresee the possibility of the application of the foreign jurisdiction in such cases, their interests would have been protected more (para 100).

Overall, AG Sánchez-Bordonna recommends the Court to conduct a careful balancing of interests exercise to ensure that both consumers' and traders' interests are protected.

Which court has jurisdiction over an online defamation case? AG Hogan's Opinion in Case C-251/20

A person or a company that has been defamed on the Internet may demand not only the removal or rectification of discrediting comments, but also compensation for any material or non-material damage suffered. The question is which court should be addressed, since comments posted on the Internet may be accessible in various Member States. This query is the focus of the dispute in case C-251/20 Gtflix Tv vs. DR pending before the Court of Justice. Last Thursday (16.09.2021) Advocate General Gerard Hogan issued his opinion. 

According to the general rule of jurisdiction, arising from Regulation No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, persons domiciled in a Member State may, regardless of their nationality, be sued in the courts of that Member State (Article 4(1) of Regulation No 1215/2012). Various exceptions to this rule are laid down, establishing different criteria for connecting a dispute to the courts of other Member States. For example, Article 7(2) of the Regulation stipulates that a person may also be sued in another Member State - in matters relating to tort, delict or quasi-delict, before the courts for the place where the harmful event occurred or may occur. This exception is justified by the need to ensure the sound administration of justice, legal certainty and to "avoid the possibility of the defendant being sued in a court of a Member State which he could not reasonably have foreseen" (see recital 16 of the Regulation). In such situations, the court of the place where the event giving rise to the damage has occurred or is likely to occur is more competent in the sense that it is closer and better placed to assess the extent of the damage and its consequences. Unfortunately, determining the place of the damage and the competent court is sometimes dubious in cases of online damage caused by posting false or infamous statements, which can be accessed in different Member States. The implications of such statements may be diverse in each jurisdiction. For example, negative comments about a person or a company may considerably affect their good name or professional standing in a certain state because they are well-known or economically active there. In such a case, the extent of the damage may be significant. Conversely, in another state, where the person or company is not known, access to defamatory comments may not have negative consequences. 

The dispute in the Gtflix case concerns precisely whether the Czech company Gtflix (as it was nicely expressed in the Opinion - "which produces and distributes what is sometimes euphemistically described as as adult content television programmes") can bring a claim against a Hungarian citizen (also a producer and distributor of pornographic films) before a French court? Gtflix accuses the Hungarian producer of posting disparaging remarks on websites and forums, and seeks, inter alia, an order requiring DR to cease all acts of disparagement against Gtflix and to pay compensation for both economic and non-material damage. However, the French courts have raised doubts as to whether they have jurisdiction in this case. In other words: may Gtflix, while seeking both rectification of the data and removal of the content and compensation for material and non-material damage, bring such proceedings before the courts of each Member State in the territory of which the content was accessible on the Internet, or must it bring such proceedings before the court having jurisdiction to order the rectification of the data and removal of the defamatory comments? 

The question referred by the French court refers to some divergence in the case-law of the Court of Justice arising from the judgments in cases eDate Advertising and Others (C‑509/09 and C‑161/10) and  Bolagsupplysningen and Ilsjan (C-194/16). In the former, the Court held that a claimant as a result of online defamation may bring an action before the court having jurisdiction over the defendant's domicile, the place where the harmful event occurred or the place where the claimant's centre of interests is located (understood, for example, as the place of habitual residence or professional activity). In such cases, the court may rule on the entirety of the damage suffered. Furthermore, according to the Court, the claimant may also bring an action before other courts of the Member States in which the publication in question is or has been accessible, but in that case the court may rule only in respect of the damage or injury caused in the territory of the Member State concerned. This construction is sometimes also referred to as the 'mosaic approach', as it introduces a principle of jurisdiction sharing. 

In case Bolagsupplysningen and Ilsjan the Court stated, however, that a claim for rectification or deletion of online comments cannot be brought before the courts of each Member State (despite the ubiquity and accessibility of information on the Internet in various places), but only before the same courts as those which had been granted jurisdiction to hear the merits of the case for full compensation for damage. With this in mind, Advocate's opinion focused on a detailed analysis of the mosaic approach, trying to find arguments both for the Court's retention and possible abandonment thereof. Ultimately, AG concluded that he is not convinced by either solution (see point 79 of the Opinion). He therefore suggested that a good practice would be to complement the mosaic approach with an additional "focalisation criterion", i.e. a criterion verifying that the publication in question (such as discrediting content) is targeted specifically at the public in the territory of a given Member State. The application of this criterion would make it possible in practice to reduce the number of courts having jurisdiction to hear the dispute. 

In conclusion, in the AG's view a claimant who seeks both the rectification/deletion of certain content and compensation for the non-material and economic damage resulting from the dissemination of disparaging statements on the Internet, may bring an action or claim before the courts of each Member State in the territory of which content published online is or was accessible, for compensation only for the damage caused in the territory of that Member State. Nevertheless, the claimant should be able to demonstrate that it has "an appreciable number of consumers in that jurisdiction who are likely to have access to and have understood the publication in question". 

Now we are awaiting the judgment of the Court. We will keep you informed, so stay tuned! 

AG De La Tour on Volvo and others (C‑30/20): Article 7(2) of Brussels I establishes international and domestic jurisdiction in cases of tort harms and anticompetitive practices

Case C-30/20 (AG’s Opinion here) concerns the interpretation of Article 7(2) of Regulation (EU) No 1215/2012 (Brussels I), which states that a person can be sued in the place where the harmful event occurred (regarding tort, delict or quasi-delict harms).

Between 2004 and 2009, RH (the claimant) purchased five trucks from Volvo for its road transport business. In 2016, the Commission found that there was a cartel between fifteen truck manufacturers, including AB Volvo, Volvo Lastvagnar AB and Volvo Group Trucks Central Europe GmbH concerning medium trucks and heavy trucks (in the period between 1997-2011). RH sued the Volvo group in Spain, even though three of the four sued companies are based outside of Spain. The Volvo companies contested the international jurisdiction of Spanish courts, and argued that Article 7 refers to the place where the ‘event giving rise to the damage occurred’, which would be the place where the cartel was formed. The referring court questioned whether Article 7 of Brussels I refers solely to international jurisdiction or also to domestic jurisdiction, especially considering existing national case law determining that this rule does not determine the territorial domestic jurisdiction of a court in private competition actions. In this sense, the referring court asked the CJEU whether Article 7(2) of Brussels I should be interpreted as imposing only international jurisdiction in matters relating to tort, delict or quasi-delict, and whether the domestic court with jurisdiction should be determined by national civil procedure rules, or if, on the other hand, Article 7(2) also determines domestic territorial jurisdiction without the need to refer to domestic regulation.

AG De La Tour considered that Article 7(2) does not only impose international jurisdiction, but also determines domestic jurisdiction. The Advocate General analyzed the literal, systematic and teleological element of interpretation. When comparing Article 4(1) of the Brussels I Regulation with Article 7(2), the Advocate General stated that, while the former refers to ‘the courts’ of the Member State where the persons sued are domiciled, the latter refers to ‘the courts for the place’. This difference in wording seems to point towards different jurisdiction scopes. Additionally, since Article 7(2) is a special jurisdiction rule, AG De La Tour reminded that these rules are meant to protect a weak party, and, in that sense, these special rules have a nature of derogation. Finally, these special rules are meant to allow the party to choose the courts of a Member State based on the place with which the dispute has a particular connection, as well as to facilitate the sound administration of justice.

In addition, AG De La Tour considered that this analysis should be supplemented by further details as to the place where the alleged damage occurred, as well as to the specific designation of the court having special jurisdiction. In this sense, the Advocate General differentiated the current case from related cases (such as Tibor-Trans, where the CJEU determined that ‘where the market affected by the anticompetitive conduct is in the Member State on whose territory the alleged damage is purported to have occurred, that Member State must be regarded as the place where the damage occurred for the purposes of applying Article 7(2)’). The Advocate General concludes that, in the relevant related cases, the justification of the connecting factor adopted by the CJEU indicates that the ‘distinctive feature of competition litigation was taken into consideration in concrete terms’ (para 66). 

AG De La Tour also stated that the determination of the place where the damage occurred operated by the CJEU in Tibor Trans is not sufficient to specify the exact location of the court having territorial jurisdiction, which constitutes a source of legal uncertainty (para 70). The AG considered, therefore, that the CJEU should complement the answer given in Tibor Trans, particularly by taking into account ‘the number of proceedings which could be brought due to the extent of the cartel at issue’. In particular, the Advocate General noted that it is necessary to consider that, especially in the vehicle sales and transport sector, the place where the market (affected by the cartel) leads to additional costs is not necessarily the place where the goods were purchased (para 79).

For these reasons, the Advocate General calls for the CJEU to clarify the criteria for identifying the relevant court when interpreting the expression ‘place where the harmful event occurred’ (Article 7(2) Brussels I Regulation), and for the CJEU to draw a parallel with case Verein für Konsumenteninformation, where the CJEU held that ‘the place where the damage occurred is that where the vehicle in question was purchased’. The Advocate General also highlighted that it is important to assess the meaning of ‘purchase’ because, in the context of these proceedings, RH concluded leasing agreements, under which it became the owner of the trucks. This assessment should be done from an economic perspective, because the claim for compensation is based on competition law (para 86). AG De La Tour then interprets it as meaning ‘the place where [the] transaction was concluded’, understood in a wide sense as the place where the agreement was reached (and not where the price was paid) (para 88). Therefore, according to the Advocate General, the criterion of ‘the place where the transaction was concluded’ is sufficient to identify the court ‘objectively best placed to analyse the constituent elements of the defendant’s liability’. In this case, that means the place where the trucks were purchased by RH.

However, the Advocate General also highlighted that, to protect the objective of providing easier access to evidence, two criteria for establishing the location of damage can coexist (para 108). In that case, AG De La Tour also proposes that ‘if the place where the damage occurred does not correspond to that where the injured party carries on business, the action may be brought before the court in whose jurisdiction the injured party is established’ (para 110).

Finally, the Advocate General also considered that, despite the fact that Article 7(2) of the Brussels I Regulation determines territorial jurisdiction at both an international and domestic level, the CJEU should interpret it as allowing Member States to centralize the jurisdiction in certain specialized courts (para 130).

Professional assignees of consumer claims may rely on the UCTD - CJEU in DelayFix (C-519/19)

The CJEU issued a judgment today in DelayFix case (C-519/19), which pertained to a dispute under Polish law involving aspects of both substantive and procedural consumer protection. Namely, a flight from Milan (Italy) to Warsaw (Poland) was cancelled and the passenger who was due compensation from the operating air carrier (Ryanair) for this cancellation assigned their claims to DelayFix. When DelayFix filed this claim in a Polish district court, Ryanair invoked a jurisdiction clause from their terms and conditions, which assigned the jurisdiction to Irish courts instead. The questions this situation raises are twofold, really: 1. whether the assignee of the passenger's claim for compensation is bound by a clause from the air carrier's terms and conditions that were incorporated in a contract of carriage between the passenger and the air carrier; 2. if yes, could the assignee invoke the unfairness of such a clause?

Assigning of claims and jurisdiction clauses

The CJEU reminds in this judgment that "(...)in principle, a jurisdiction clause incorporated in a contract may produce effects only in the relations between the parties who have given their agreement to the conclusion of that contract" (para 42). This results from the need to protect third parties who have not consented to such specific clauses. However, if, and only if, national law provides that when a third party, not privy to the original contract, succeeds the original contracting party in all their original rights and obligations, then that third party could be bound by the jurisdiction clause (para 47).

Validity of jurisdiction clauses

The CJEU reminds again that the validity of a jurisdiction clause needs to be assessed in light of the law of the country whose courts are designated in that clause, i.e. Irish law in this case (paras 49-50). This, of course, means that the UCTD remains applicable, as well, as it applies to the contracts concluded in the air transport sector (para 52). The interesting observation of the CJEU comes from paras 53-54, where the CJEU invokes a previous judgment in the Lexitor case (see our comment here) as setting a precedent to apply EU consumer law regardless the identity of the parties in the dispute, but on the basis of the capacity of the parties to the agreement. The CJEU further states that this should be applicable to the UCTD. The following parts of the judgment are unsurprising, as the CJEU reminds that jurisdiction clauses are likely to be considered unfair as they may hinder the consumers' rights to take legal action (paras 55-59).

CJEU on jurisdiction in Dieselgate disputes: C‑343/19, VKI v Volkswagen

Dear readers, 

as many of us prepare to enjoy some well-deserved holidays, we should not neglect to pay attention to a judgment by the Court of Justice from this week which can have important consequences on Dieselgate litigation. 

Since the scandal known as Dieselgate emerged a few years ago, several individuals, consumer organisations and law firms have started actions against Volkswagen to claim damages or other remedies in connection with the company's emissions fraud. While national courts are gradually also starting to render important decisions on the subject, this week the Court of Justice had to answer an important question: which national courts have jurisdiction to adjudicate on actions for damages brought by disappointed consumers?

image: pikist.com

Under article 7.2 of the so-called Brussels I regulation (n 1215/2012), a person domiciled in a Member State can be sued in a different member state, in tort cases, when this is the place where the "harmful event" has occurred or may occurred. 

In the case of Dieselgate claims, the referring Austrian court doubted what would have to be considered as the harmful event: is it the installation of a "defeat device" making the car's tracking of emissions unreliable, or is it, as claimed by the plaintiffs, the place where the defective vehicle has been purchased?

Recalling its earlier case-law, the CJEU (para 23) asserted that the concept of the "place where the harmful even occurred" covers both the place where the damage has occurred and the place where the damage-generating event took place.

The damage suffered by the buyers emerged immediately with the purchase of a vehicle whose value was lower than the price paid due to its defect and was not purely financial loss exactly because the vehicle was defective (para 35). For this reason, the damage emerging at the moment of purchasing the vehicle is suitable for establishing jurisdiction in the MS where the contract was concluded - in this case, Austria. 

According to the Court, this outcome does not undermine legal certainty as a manufacturer who sells in several Member States can expect to be sued in these MS and because, given the nature of the damage, courts of the state in which the contract has been concluded will be best placed to investigate the loss. Indeed, the CJEU observes, the possible loss of market price of the defeat vehicles depends very much on local market conditions, which means that courts of the MS where the original sale has been made can assess whether the consumer has suffered a loss of value. 

By taking away exceptions of jurisdiction, the CJEU has thus cleared one of the stumbling stones standing between consumers and effective remedies in this interesting saga. 

Compensation for delayed flights also for package travellers - CJEU in Primera Air Scandinavia (C-215/18)

Going through the backlog: last week, on 26 March, the CJEU issued a judgment in Primera Air Scandinavia (C-215/18). The judgment has not yet been published in English, thus our readers may be especially keen to find out what did the Court decide in this air passenger rights case where air travel was included in a package travel contract (about the opinion in the case read here).

Compensation for a delay of a flight included in a package travel contract

The CJEU follows the reasoning presented by AG Saugmandsgaard Øe and decides that air passengers may claim compensation for a delayed flight from the operating air carriers pursuant Regulation 261/2004 also if their air travel follows from a package travel contract that they have concluded with a travel agency (paras. 31-37). As a reminder, Package Travel Directive does not contain a similar right to compensation which could lead to awarding passengers with double compensation for the same loss. This differentiates this judgment from the one in the case of Aegean Airlines where passengers wanted to claim reimbursement of a flight ticket's price, which right they also had on the basis of the PTD.

Jurisdiction 

Brussels I Regulation (Regulation 44/2001) specifies which court has jurisdiction over disputes resulting from a contractual relationship, as well as provides for special jurisdiction rules for consumer contracts. One of the questions raised asked whether a claim for a compensation may be perceived as a contractual one, considering that there was no contract between the operating air carrier and the consumer, but rather between the consumer and the travel agent. The CJEU again follows the AG's reasoning and previous case law (see flightright) in applying broad interpretation to the notion of a 'contractual' claim. It is namely not relevant whether the parties in the proceedings had a contractual relationship, but instead whether the claim between them follows from a voluntarily adopted obligation of one of these parties towards the other one (paras. 45 and 48-49). Therefore, jurisdiction rules applicable to contractual claims (art. 5 Brussels I Regulation) are applicable here. However, special jurisdiction rules from section 4 on consumer contracts do not apply here, as for their applicability it is actually necessary that a contract was concluded between consumers and the defendant (paras. 59-60).

Conclusion

In the given case, as the flight was conducted between Czech Republic and Iceland, the claim could be raised in one of these two countries, as they both may be seen as places of performance of the contract. This is convenient for the passenger who was domiciled in the Czech Republic. However, if the passenger in case was domiciled e.g. in France, they would not be able to benefit from a possibility to file a claim in French courts, following the special rules on jurisdiction for consumer contracts.

This judgment is very interesting, but it needs to be mentioned that the current COVID-19 crisis shows us that in practice air passenger rights might not be very helpful. Airlines who had to cancel flights en masse in the past weeks, keep on choosing not to reimburse passengers' air tickets but rather issue them with vouchers for future flights. That is a clear breach of Regulation 261/2004. Of course, accepting the voucher does not take away consumers rights to further claim the reimbursement, but whether such claims will be successful, even if consumers decide that the hassle is worth the trouble, remains to be seen. Some authors of this blog may be the guinea pigs in the upcoming legal battles and will keep you posted!

Cancellation of connecting flights: whom to sue and where? Case C-606/19 flightright

On 13 February the Court of Justice delivered an order in case C-606/19 flightright concerning jurisdiction over the claim for compensation brought against an air carrier in charge of the final leg of the journey divided into several legs, confirmed in a single booking.

The case involved two passengers who booked a journey from Hamburg (Germany) to San Sebastian (Spain) via London and Madrid, comprising of connecting flights operated by different carriers. The problem faced by the passengers was cancellation of the third flight of the journey, operated by Iberia. The question to be addressed was whether a claim against Iberia could be brought before the court in Hamburg. Pursuant to Article 7(1)(a) of Regulation No 1215/2012 (Brussels I bis) in matters relating to a contract, a person domiciled in a Member State may be sued in another Member State in the courts for the place of performance of the obligation in question. The subsequent provision explains that in the case of the provision of services the place of performance of the obligation in question is generally the place in a Member State where, under the contract, the services were provided or should have been provided.

It was already clear from the previous case law that both the place of departure and that of arrival must be considered as the principal places of the provision of services under a contract for carriage by air, which in turn gives the person bringing a claim for compensation on the basis of Regulation No 261/2004 a choice of jurisdiction. This is the case for both direct flights and, mutatis mutandis, situations in which the journey with connecting flights consisting of a confirmed single booking for the entire journey comprises two legs. In the latter case, the passenger can also choose to bring the claim before the court or tribunal which has territorial jurisdiction over the place of departure of the first leg or one having jurisdiction over the place of arrival of the second leg.

The present case dealt with a similar legal matter yet with relation to a multi-leg flight, operated by different carriers. According to the Court none of this affected the procedural position of the passenger experiencing a cancellation or delay. First of all, the Court stressed that a contract for carriage by air consists of a confirmed single booking for a three-leg journey establishes the obligation for an air carrier to carry a passenger from a point A to a point D. The place of performance, within the meaning Article 7(1) of Regulation No 1215/2012, can therefore be the place of departure of the first leg of the journey (point A).

What is more, the rule of special jurisdiction for matters relating to a contract set out in that provision does not require the conclusion of a contract between two persons, but the existence of a legal obligation freely consented to by one person in respect of another on which the claimant’s action is based.  This is the case for an air carrier performing obligations under Passenger Rights Regulation No 261/2004 on behalf of another carrier having a contract with a passenger, in line with Article 3(5) of that regulation. Consequently, even though there were no complications on the first leg of the trip and the Hamburg-London flight was not operated by Iberia, the claim against the carrier could be brought in the Hamburg court.

How to claim from air carriers when flight included in a package travel contract - AG Saugmandsgaard Øe in Primera Air Scandinavia (C-215/18)

Last Thursday AG Saugmandsgaard Øe issued an opinion in the Primera Air Scandinavia case (C-215/18 - English text is not available), interpreting provisions of Regulation No 261/2004 on air passenger rights and of Regulation No 44/2001, that is Brussels I, on jurisdiction. The passenger, domiciled in Prague (Czech Republic), was flying with Primera Air Scandinavia airlines between Prague and Keflavik (Iceland). She purchased the tickets for this flight at a Czech travel agency. Unfortunately, the flight was delayed for more than 4 hours, thus she has claimed compensation on the basis of Article 7 Regulation 261/2004 (as it was interpreted in the Sturgeon case, i.e. as applicable to long delays, too). The airline refused to pay the compensation claiming extraordinary circumstances. The passenger decided to go to court with her claim, but the Czech courts had doubts as to their jurisdiction due to the uncertainty as to which, if any, provisions of Brussels I Regulation could apply in this case.

The issues in this case pertained to:

1. whether the passenger had a contractual relationship with the air carrier in the meaning of Art. 5(1) Brussels I Regulation, as her flight was part of a package travel contract concluded with a travel agency;

2. whether the legal relationship between the passenger and the air carrier was a B2C relationship;

3. whether the air carrier had a locus standi as a defendant in a case raised on the basis of Regulation No 261/2004, even if the passenger concluded a package travel contract falling under the scope of Directive 90/314?

Legal relationship between passenger and air carrier

As Art. 5(1) Brussels I Regulation introduced special jurisdiction rules for disputes based on contractual claims, the Court was asked to elaborate on whether there was a contractual relationship between the passenger and the air carrier. After all, the passenger concluded a contract with the travel agency instead, for a package travel contract encompassing the contested flight. AG Saugmandsgaard Øe recalls that in the judgment in joined cases flightright (C-274/16, C-447/16 and C-448/16) the Court has already decided that claims from Regulation No 261/2004 may be raised as contractual claims against an operating air carrier, even if the passenger purchased the flight ticket from another air carrier (para. 30). The core of Art. 5(1) Brussels I Regulation is seen applying special jurisdiction rules when there was a case of a voluntary acceptance of a legal obligation of one party towards another party (rather than recognition of their role as contractual parties) (para. 31). AG Saugmandsgaard Øe decides that in the given case the same reasoning should apply (para. 34-35), as the operating air carrier voluntarily decided to perform the obligations towards the passenger that under the concluded package travel contract belonged to the travel agency (and their agents). As the air carrier chose to perform the flight between Czech Republic and Iceland, they should have been aware that they will be performing services in these two countries, and thus could face legal claims in courts of one of them (para. 37).

Is this a consumer relationship?

Art. 16 Brussels I Regulation provides for further special jurisdiction rules for B2C contracts. In order for these rules to apply, requirements from Art. 15(1) Brussels I Regulation need to be fulfilled, that is: a consumer status of one party; conclusion of a B2C contract; the B2C contract needs to qualify as a contract defined in this provision (para. 42). Transportation contracts are generally excluded from the scope of this provision, except for package travel contracts (Art. 15(3) Brussels I Regulation). Here, AG Saugmandsgaard Øe sees the difference in case the passenger makes a claim against the travel agency (Art. 16 Brussels I Regulation applies) or the operating air carrier (it does not apply) (para. 45 and ). The literal interpretation of this provision draws attention to the fact that here the role of a defendant as a contractual party is vital to determine the applicability of special jurisdiction rules (para. 48). Only by contracting with consumers, the air carrier could predict in which country he could be sued by their passengers if things went wrong and legal certainty and predictability would be guaranteed (para. 57). Therefore, Art. 16 Brussels I Regulation should be strictly interpreted here.

Can the operating air carrier be sued when a passenger purchased a package travel?

In the recent Aegean Airlines (C-163/18) case the Court decided that the passenger could not claim reimbursement of a flight ticket from the operating air carrier for a cancelled flight, when the flight and the whole package travel contract was cancelled as a result of the travel organiser's insolvency. This is because it is the Package Travel Directive that provides insolvency protection as well as because Art. 8(2) Regulation 261/2004 clearly excludes a possibility of passengers to make such a claim (para. 68). This exclusion is not provided in Art. 6 and 7 Regulation 261/2004 which regulate compensation for a delayed flight. Thus a passenger travelling on a basis of a package travel contract could claim fixed compensation amount for a delayed flight from an operating air carrier pursuant to Regulation No 261/2004 and individualised compensation on the basis of PTD from a package travel organiser (para. 70).

Split jurisdiction for claims under Reg 261/2004 and Montreal Convention - CJEU in Guaitoli and Others (C-213/18)

Since the adoption of Regulation 261/2004 on air passenger rights, its compatibility with the Montreal Convention has been questioned (see e.g. case IATA, C-344/04). In a judgment issued today in the Guaitoli and Others case (C-213/18) the CJEU once again had to address how EU law impacts claims for compensations made by air passengers, when the air traffic is subject to regulation by international treaties, as well. This time it was the application of Brussels I bis Regulation (on jurisdiction) that was particularly problematic.

Facts

Passengers in this case were flying with easyJet (headquarters: UK) from Italy, where they lived, to Greece. Their flight to Greece was first delayed and eventually cancelled, and they have not been provided with any assistance (e.g. meals or drinks), reimbursement or compensation. The passengers filed a claim with the Rome District Court for compensation pursuant to provisions of Regulation 261/2004 as well as material and non-material damages following breach of contractual obligations by the air carrier. For national courts it proved problematic that part of the passengers' claim was covered by EU law and part by international law. The result of such a combined case could have been that different courts could be applicable to adjudicate over different parts of the same claim.

Short recap of the law

Art. 7 Regulation 261/2004 determines that passengers of cancelled flights may claim compensation from an operating air carrier. Such compensation may be claimed pursuant to EU law rules on jurisdiction, which used to be set by Brussels I Regulation, and now are regulated by Brussels I bis Regulation (Regulation 1215/2012). Generally, in cases of claims for breach of contract, the courts for the place of performance of the obligation that has been breached would have jurisdiction (Art. 5(1)(a) Brussels I Regulation and Art. 7(1)(a) Brussels I bis Regulation). The place of performance of air transport services has been previously determined as either the place of departure or of arrival of the air plane, subject to the applicant's choice (see e.g. case Rehder, C-204/08).

Art. 12 Regulation 261/2004 allows passengers to claim compensation for 'further damages', which are interpreted as compensation for other damage than the loss of time. Such other damages resulting from a delay in air carriage may then be claimed pursuant to Art. 19 Montreal Convention. Article 33 Montreal Convention specifies that an action for damages pursuant to the rules of this Convention should be brought either 'before the court of the domicile of the carrier or of its principal place of business, or where it has a place of business through which the contract has been made or before the court at the place of destination'.

Main questions

1. The national court inquired which jurisdiction rules are applicable in case of such a joint claim, and whether the claim should be split and adjudicated by different courts. This is relevant as Article 33 Montreal Convention sets out its own jurisdiction rule, which differs from the rule in Article 5 Brussels I Regulation.

2. It was relevant for the national court to establish whether Art. 33 Montreal Convention, if applicable, determined allocation of jurisdiction on a Member State level, or also locally with a given Member State.

Answer

The CJEU has no doubts that the national court should indeed be determining its jurisdiction separately to claims raised within the same case on the basis of Regulation 261/2004 and separately when these are supported by the Montreal Convention (paras. 37 and 43). This follows from separate regulatory frameworks of both instruments (see also case Flight Refund, C-94/14).

In an equally straightforward answer the CJEU affirms that the Montreal Convention determines jurisdiction of courts also between the courts of a given Member State, as it follows from the wording of Art. 33 (para. 51) as well as the purpose of the rule (paras. 52-54).

Conclusion

This is not a surprising judgment, but it is a judgment that complicates the enforcement of consumer claims against air carriers. Unless a passenger chooses to sue the operating air carrier before the court of the carrier's domicile, the jurisdiction may be split between two courts. The preference is thus given to the rights of a defendant. This general procedural rule may, however, be troublesome when carriers refuse to follow their compensatory obligations flowing from EU and international law, knowing that the chances of consumers enforcing their rights (and at different courts, possibly, too!) are slim.

CJEU judgment in Salvoni: no extra consumer protection in cross-border enforcement

In May we reported on this blog on AG Bobek's Opinion in C-347/18 Salvoni v Fiermonte. The referring Italian court that was requested to issue a Certificate for the cross-border enforcement of an order for payment against a consumer in Germany under the Brussels I Regulation (Recast). The order appeared to be in breach of the Regulation's jurisdiction rules; the consumer was domiciled in Germany, not in Italy. Should the court review and rectify the order, or inform the consumer of the possibility to challenge its enforcement? In this respect, the court referred to the CJEU's case law on Article 47 EUCFR and the Unfair Contract Terms Directive. According to AG Bobek, however, such an "extra layer of protection for consumers" could not be read into the provisions of the Regulation.

The CJEU confirms this in its judgment of 4 September. First, it found that the Certificate-procedure under the Brussels I Regulation can be qualified as judicial in the sense of Article 267 TFEU. Therefore, the preliminary reference was admissible. Secondly, it held that the court that issues the Certificate does not have to (re-)examine (ex officio) the jurisdiction of the court that has given the underlying judgment, even if it involves a consumer. The CJEU made a distinction between jurisdiction (see e.g. Article 17(1) of the Regulation for specific rules on consumer contracts) and recognition and enforcement. In the latter phase, it is the party against whom enforcement is sought who must oppose it. Because jurisdiction is one of the opposition grounds, there is no violation of Article 47 EUCFR. The CJEU's case law on the Unfair Contract Terms Directive does not apply in the context of the Brussels I regulation, which contains rules of a procedural nature. 

As we pointed out earlier, this outcome is understandable in light of the Regulation's framework, which aims to enhance the free movement and rapid enforcement of judgments within the EU, in the light of mutual trust based on legal certainty. From a consumer protection perspective, it possibly leads to a gap in the effective judicial protection of consumers. Not only is a court that has failed to apply mandatory jurisdiction rules (ex officio) in violation of the Regulation not allowed to rectify this; it is not allowed to subsequently inform the consumer of her defence possibilities either.  

Crossing Paths: AG Bobek on jurisdiction in consumer cases under Regulation 1215/2012 and Directive 93/13

Yesterday, Advocate-General Bobek published his Opinion in a case where the Brussels I Regulation (Recast) and the Unfair Contract Terms Directive cross paths (C-347/18 Salvoni v Fiermonte). The case concerns the question what happens if a national court fails to check - ex officio - whether the rules on jurisdiction over consumer contracts have been observed in a cross-border dispute and the court issues an order for payment, even if there are indications that the consumer involved lives abroad? Once the order becomes final, can judicial review still take place in the country of origin before the order is enforced in another Member State?

When the defendant is a consumer, only the courts in the Member State where the consumer is domiciled have jurisdiction under the Brussels I Regulation (Article 18). In the case at hand, the consumer involved - Ms Fiermonte - appeared to live in Hamburg, Germany, which would mean that the Italian court where the order-for-payment procedure was brought did not have jurisdiction. In so far as Ms Fiermonte did not enter an appearance, the court should have declared of its own motion that it had no jurisdiction (Article 28). And if she did appear in court, she should have been informed of her right to contest jurisdiction (Article 26(2) of the Regulation).

Source: e-justice.europa.eu

The court in Milan nevertheless issued an order for payment against Ms Fiermonte, who did not oppose it. The court was subsequently requested to issue a so-called 'Article 53 Certificate'. Under the Regulation such a Certificate is necessary for cross-border enforcement (i.e. in Germany) to demonstrate that the order is enforceable in the country of origin (i.e. in Italy). The court then concluded that it should have verified its jurisdiction.
It found - ex officio - that the order in question was based on a legal relationship between a consumer and a professional. Thus, the order was issued in breach of the jurisdiction rules in the Regulation. The court asked the CJEU whether it should rectify this in the course of the Certificate-procedure. In this respect, it referred to the CJEU's case law on effective consumer protection under the UCTD and pointed out that the automatic issue of the Certificate might deprive Ms Fiermonte of an effective remedy as guaranteed by Article 47 of the EU Charter of Fundamental Rights.

Before we discuss AG Bobek's Opinion, let us briefly recall that in the context of the UCTD, the CJEU has repeatedly held - e.g. in Océano, Pénzügyi Lízing, and most recently Aqua Med - that costs or distance may deter consumers from taking legal action or exercising their rights of the defence. This would be the case where proceedings are brought before a court which is very far away from the consumer's place of residence (see Aqua Med, para 54). If this is already the case in domestic disputes, it applies all the more strongly in cross-border disputes. Moreover, the CJEU has held that rules conferring final and binding effect (res judicata force) on a decision must still meet the requirements of equivalence and effectiveness; see e.g. Finanmadrid. For instance, short time-periods to oppose an order for payment or to challenge its enforcement are problematic, also from the perspective of Article 47 Charter; see e.g. Profi Credit Polska.

Against this background, the referring court's question whether it should review the order and/or inform the consumer of the possibility to challenge its enforcement in Germany is not so strange. In addition, it was unclear whether the documents were properly served and thus, whether Ms Fiermonte had had an actual opportunity to oppose the order for payment. In a domestic situation, it would therefore be questionable whether the requirements of effectiveness and Article 47 Charter are complied with. The court responsible for the enforcement may operate as a last resort.

However, AG Bobek makes a strict separation between the CJEU's case law on the UCTD and the system of the Regulation. In his view, judicial review (ex officio) in the course of the Certificate-procedure is neither permitted nor required by EU law. It would run against the logic and spirit of the Regulation, which is aimed at the rapid and efficient enforcement of judgements abroad. The court must issue the Certificate automatically when the formal conditions are satisfied. It cannot re-evaluate the underlying judgment on points of substance and jurisdiction. This would compromise the Regulation's effectiveness.

Whereas AG Bobek's view is understandable in light of the Regulation's framework, his explanation of the distinction between the Regulation and the UCTD seems a bit artificial. On the one hand, he states that the Regulation lays down rules of a procedural nature, which are not as result-oriented and far-reaching as the (substantive) provisions of the UCTD. Yet, the rationale of the CJEU's case law on the UCTD is that consumers must be enabled to exercise their rights and that, because of their weaker (procedural) position in terms of knowledge and financial means, courts fulfil a compensatory role.
On the other hand, Bobek submits that the Regulation recognises that consumers are worthy of specific protection as defendants and that it contains additional procedural guarantees for that reason. Doesn't this mean that courts should play a role in enabling consumers to exercise their rights under the Regulation as well? It might be true that Ms Fiermonte can make an application for refusal of enforcement of the order in Germany on the grounds of lack of jurisdiction or the absence of due service of documents, but this depends on her initiative (Articles 45 and 46 of the Regulation). To what extent will it be taken into account that Ms Fiermonte is a consumer who might not be aware of her rights or not be able to pay lawyer's fees? (Ironically, the case was about unpaid lawyer's fees.) Shouldn't she at least be informed of her defence possibilities?
Bobek observes that it would be strange for the court to issue a Certificate for enforcement of the order while simultaneously pointing out its allegedly erroneous nature. This would be contrary to the principle of legal certainty. It would also undermine the principle of fair trial if the court would take on the role of the defendant's legal counsel.

Still, one cannot help but wonder why "an extra layer of protection for consumers" as proposed by the referring court could not "be ‘read into’ the provisions of Regulation No 1215/2012". That would be a true crossing of paths.

Another broad interpretation of the notion of a consumer: the CJEU in case C-694/17

Yesterday the CJEU delivered its judgement in C-694/17 Pillar Securitisation Sàrl v Hildur Arnadottir that is yet another judgement interpreting the notion of a consumer. This time  it came under scrutiny under the Convention on jurisdiction and the recognition and enforcement of foreign judgments in civil and commercial matters (known as the Lugano II Convention) and Directive 2008/48/EC on Consumer Credit.

The facts

In March 2005, the defendant, who is a resident of Iceland, obtained a loan for more than 1 000 000 EUR from Kaupthing Bank Luxembourg (KBL) to buy shares in the Icelandic company Bakkavör Group hf of which she was an employee. The loan was supposed to be repaid in a single transfer by 1 March 2010. Guarantee was provided by the company itself, of which the defendant was one of the directors, who signed the guarantee. Subsequently, KBL was divided into two entities. One of those entities, Pillar Securitisation, claimed repayment of the loan, and when the defendant was unable to meet this request, Pillar Securitisation brought an action before the Luxembourg courts pursuant to a term of the loan agreement that conferred jurisdiction to those courts. 

The first and second instance Luxembourg courts declared lack of  jurisdiction on the ground that the defendant should be regarded as a ‘consumer’ within the meaning of Article 15 of the Lugano II Convention, and that the jurisdiction clause should be removed from the contract pursuant to Article 17 of the Convention. The claimant finally turned to the Court of Cassation claiming that the lower courts erred in finding that the claimant acted for non-commercial purposes; that the courts misinterpreted Article 15 of the Lugano II Convention in finding that a loan for more than EUR 1 000 000 could have been taken out by a ‘consumer’ within the meaning of Article 15, and that in order to determine whether the loan agreement was a consumer loan, it must be determined whether that agreement is a ‘consumer credit agreement’ within the meaning of Directive 2008/48. The court stayed the process and referred the following question to the CJEU for preliminary ruling:

The question 

Should Article 15 of the Lugano II Convention be interpreted as meaning that, for the purposes of ascertaining whether a credit agreement is concluded by a ‘consumer’ within the meaning of Article 15 be determined whether the agreement falls within the scope of Directive 2008/48 in the sense that the total cost of credit in question does not exceed the ceiling set out in Article 2(2)(c) and whether it is relevant, that the national law transposing Directive 2008/48/EC does not provide for a higher ceiling.

The answer

Similar to Regulation 1215/2012 (Brussels Regulation), Article 15 of the Lugano II Convention provides an exemption in favor of consumer contracts, conferring jurisdiction on courts where consumers are domiciled. Thus, following the exemption, in the case at hand these would be the Icelandic courts.

In determining whether the claimant was a consumer the CJEU did not consider the purpose of the loan. Starting from the premise that the loan was taken by the claimant for her non-professional purposes (para. 24), the CJEU proceeded with discussing the relevance of the monetary limit of the transaction, and more broadly, the relevance of Directive 2008/48/EC in determining the character of the contract in question. 

The CJEU concluded that the monetary limit of 75 000 EUR that defines credit agreements for consumers within the meaning of Directive 2008/48/EC is not relevant in the present case and neither is the fact that there is no higher limit provided in the applicable national law (para. 48). The CJEU relied on the different purpose of the two instruments. While Directive 2008/48/EC aims to harmonize the substantive law on consumer credit to protect consumers and to facilitate the functioning of the internal market (para. 41), the Lugano II Convention only aims to settle the procedural matter of court jurisdiction in all consumer contracts. According to the CJEU, it would be unattainable to limit the scope of the Convention to only certain consumer credit contacts, especially that the text of the Convention does not impose any monetary limits on any contracts, including consumer credit.

Concluding thoughts

In this judgment the CJEU followed its established approach and observed the various EU legal instrument distinct from each other (see our earlier post here), primarily referring to their purpose. In the present case, it also resulted in accepting the broad notion of a consumer. While I would not argue with the arguments raised by the Advocate General and the CJEU on the unfair nature of having a distinctive approach to credit agreements of different value that may ultimately exclude very small loans from the scope of the Convention causing detriment to those vulnerable consumers that are most in need of this sort of protection; I am puzzled with the result of this judgment and find it unfortunately that the CJEU did not have a chance to tackle the question of whether the purpose of the loan was professional or non-professional. I would think that the amount of the loan and the fact that claimant was one of the directors of the company cast a shadow of doubt at their status as a consumer. Would you agree?

Are expert retail investors consumers? The Opinion of AG Tanchev in C-208/18

Last week AG Tanchev delivered his Opinion in case C-208/18 Jana Petruchová v FIBO Group Holdings Limited involving a very interesting question on the notion of consumer in complex financial transactions.

The facts

On 2 October 2014 the claimant, a resident of Ostrava, Czech Republic entered into a contract (a 'Framework Agreement') with the defendant, FIBO Group Holdings Ltd, a brokerage company established in Limassol, Cyprus. The purpose of the Framework Agreement was to enable the claimant to make transactions on the FOREX market by placing orders for the purchase and sale of the base currency which would be executed by the defendant. To that end, the Framework Agreement enabled the conclusion of individual contracts for difference (CfD's) between the claimant  and the defendant. With the CfD’s the claimant bought and sold the base currency (in the present case USD) and made profit on the difference in the exchange rates applicable to the sale and purchase of the base currency in relation to the quote currency (here JPY).

On 3 October 2014 the claimant entered into a CfD with the defendant. At 15:30:00 she placed an order to buy a certain amount of USD.  The trading system promptly informed her that the up-to-date exchange rate that she accepted and confirmed the order to buy. However, long queues of orders built up in FIBO’s trading system as a result of a jump in the rate of the USD against quote currencies. Consequently, the required amount of USD was purchased later, at 15:30:16, at a slightly less favorable exchange rate and for a higher price. At 15:48:11 on the same day, the claimant instructed the defendant to sell the purchased amount of USD making a gross profit in the equivalent of USD 4 081.33. However, had the claimant’s order to purchase the base currency been executed in a timely manner, not with a delay of 16 seconds, she would have made a profit of USD 13 009.23 that is three times higher of what she actually achieved.

On 12 October 2015 the claimant sued the defendant for unjust enrichment, lodging the claim before the Regional Court, Ostrava; contrary to the Framework Agreement that provided for the jurisdiction of Cypriot courts. The court enforced the jurisdiction clause, and rejected the applicability of Article 17(1) of Brussels Regulation that would enable the claimant as a consumer to bring her claim in a Czech court. This was because, according to the court, the claimant did not enter into the CfD at issue in order to meet her private needs, she had the knowledge and the expertise required to conclude CfD's, and she had been warned that CfD's were not an appropriate instrument for ‘retail clients’ within the meaning of Directive 2004/39. In any event, the view of the court was that  Article 17(1) of the Brussels Regulation had to be interpreted in the same manner as Article 6(1) of he Rome I Regulation, and that consequently financial instruments were excluded from the scope of Brussels Regulation. The appellate court confirmed the lower court's decision, but the Czech Supreme Court disagreed, and turned to the CJEU.

The question

The Supreme Court asked the CJEU whether a natural person who engages in trade on the FOREX market must be regarded as a consumer within the meaning of Article 17(1) of the Brussels Regulation or whether, by reason of the knowledge and expertise required to engage in that trade, the complex and atypical nature of the contract at issue, and of the risks involved, that person cannot be considered a consumer.

The answer 

In delivering his option, AG Tanchev first of all clarified that although Art. 17(1) the Brussels Regulation provides a special jurisdiction for consumer disputes, it does not define the notion of a consumer. The provision only provides that a person, the ‘consumer’, must conclude a contract ‘for a purpose which can be regarded as being outside his/her trade or profession’ (para. 35). Following the CJEU's settled case law, AG Tanchev explained that  Article 17(1) of Brussels Regulation should be interpreted independently by reference principally to the general scheme and objectives of that Regulation, rather than by reference to other, related EU legislation (para. 36, see also parts E and D of the Opinion). Finally, AG Tanchev highlighted that the notion of a consumer must be strictly construed, taking into account the nature and objective of the kind of the contract rather than the subjective position of the consumer in the contract under scrutiny (para. 37).

Looking at the only requirement of Art. 17(1) of Brussels Regulation, the purpose of the contract that must be non-professional, AG Tanchev is immediately inclined to say that the claimant in question is a consumers, given that at the time of conclusion of the Framework Agreement and of the CfD at
issue, the claimant was a university student and although she was also working part time, the CfD was not concluded within her (part-time) profession. This was not disputed between the parties. However, before he would have made his final recommendation, AG Tanchev carefully scrutinized the arguments raised by the Czech courts and the elements of the question referred to for preliminary ruling.

Relevance of knowledge and expertise
AG Tanchev discarded the relevance of knowledge and expertise for defining the notion of a consumer within the meaning of Art. 17(1) of Brussels Regulation. First of all, accepting that CfD transactions require special knowledge will make these a commercial transaction, would effectively exclude these types of contracts from the scope of the Regulation, and this would be contrary to the intention of the Regulation that does not provide for the exemption of any financial contracts/instruments. Secondly, it is also irrelevant that the claimant had some previous experience with CfD's as the Regulation does not require evidence of no prior knowledge and experience in the field. It only requires that a contract is concluded outside the person's trade or profession (paras 43-45). Finally, taking into account the claimant's level of knowledge and information would give priority to the claimant's subjective situation as opposed to the nature and objective of the contract (para 46). This approach would be contrary to the CJEU's established case-law in interpreting the notion of a consumer (referring here primarily to Schrems and Costea).


Relevance of the value of transaction
AG Tanchev also rejected the argument that the high values involved in the transaction make them a commercial transaction rather than a consumer contract. According to the AG Tanchev, in the absence of any specific threshold in the Regulation, this approach would be contrary to legal certainty, making the applicability of the Regulation subject to a variable and not precisely defined factor (para. 51)

Relevance of the amounts of profit made by the transaction 
AG Tanchev discredited the argument that a person should not be considered a consumer if the profit made on the FOREX market accounts for the greatest part of the person's income. According to the AG, it would be contrary to equal treatment if persons achieving the same profit would enjoy different classification (and hence protection) depending on amount of profit relative to their income (para. 52).

Relevance of the consumers involvement 
AG Tanchev also discredited the argument that the claimant should not be considered a consumer because she actively placed orders on the Forex market. Art. 17(1) of Brussels Regulation does not require that the consumer acts in any special way, it neither requires the consumer to stay passive nor to be active (para. 53).

Relevance of the risks involved in the transaction

Finally, AG Tanchev also rejected the importance attached to the risks involved in the transaction, primarily because risks are inherent in the conclusion of CfDs. Therefore, should classification as a
consumer be denied on account of the risks taken, CfDs would systematically fall outside the scope of Article 17(1) of the Brussels Regulation, and this would be contrary to the express provisions of the Regulation that only exempts certain type of transport contracts from its scope (para. 56). On the contrary, the high risks involved in the transaction justify the protection of Brussels Regulation to persons dealing with CfDs (para 57).

Relevance of the number and frequency of transactions 
Finally, the AG considered the relevance of the number and frequency of the transactions executed. Although recognizing that a person carrying out financial transactions regularly over an extended period of time and for significant amounts of money would classify those transactions as a (secondary) profession (para. 58), referring to interpretations of national courts AG Tanchev finally rejected the relevance of this criteria. Reliance on individual circumstances would lead to uncertain outcomes, and would also be inconsistent with the CJEU's approach to look at  nature and objective of the contract rather than the subjective situation of a person in question (paras. 59-63).

Concluding thoughts

This is an interesting case that once again raised the problem of delimiting consumers from non-consumers, now in the context of Brussels Regulation. Taking a 'black letter' approach to interpreting Art. 17(1) of Brussels Regulation, AG Tanchev provided a protective view to the notion of the consumer. However, given his approach of looking at the Regulation isolated from other EU legal instruments, the entire system of protection that comes with the notion of a consumer in EU law might not have been triggered. In fact, taking this approach, could we end up in classifying an individual under one act as a consumer and under another EU  legislation as a business, and would this be a problem? Secondly, do you agree with AG Tanchev's approach in not limiting the scope of the notion of a consumer? Should wealthy consumers likely to engage financial advisers and/or knowledgeable consumers who are able to make prudent decisions deserve the special EU consumer protection regime? More generally, we could also ask whether certain categories of consumers such as high-net-worth individuals need this protection, whether the many protective rules of EU consumer law, primary those on information provision slow down their business, especially their financial dealings? What do you think?