Thursday, 14 November 2019

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).

Wednesday, 13 November 2019

CJEU in Kanyeba: "contract of transport" and the scope of Directive 93/13

Dear readers,

last week the Court of Justice rendered a decision of some consequence in the field of unfair terms - which was to an extent unexpected in light of the somewhat less conclusive AG Opinion published before the summer.

In Kanyeba, the CJEU had to decide on the applicability of Directive 93/13 to the legal relationship between a passenger who had boarded a train without paying a ticket and the railway operator: was this a matter of contract law or, given the fact that the consumer was seemingly not intending to pay the price, a matter or administrative regulations? Under Belgian law, authoritative court decisions had clarified that unfair terms control should apply in either scenario. The referring court, however, seemed to disagree: whether the Directive applies, it reasoned, is a matter of EU law and should thus be clarified by the Court of Justice.

The Court's answer suggests that the Directive does, in principle, apply. This descends from the fact that, according to the Court, Regulation No 1371/2007, which defines certain essential rights of passengers of train transport services, must be interpreted to mean that a contract to transport under the Regulation (and hence, it seems, for purposes of consumer protection) is concluded as soon as a passenger boards a train with the intention to travel - irrespective of whether they have a ticket or whether they intend to purchase one. This conclusion, according to the CJEU, is warranted both by the wording and context of article 3(8) of the Regulation and by the consumer protection goals. The latter would be undermined, the court says, if consumers were exposed to losing all protection as soon as they boarded a train with no ticket. 

The finding may not mean much in the case at stake as the Court observes that the terms and conditions featuring the terms under consideration in Kanyeba - some very steep penalties for failing to buy a ticket in time or pay an extra charge - may quite possibly be exempted from unfair terms control under article 1 of the UCTD, which safeguards national statutory or regulatory provisions if they are applicable irrespective of the parties' will. 

Of probably broader interest - if in itself not incredibly surprising - is the answer given in this case to a further question raised by the referring court: if the penalties were to be found unfair, would the court be allowed to "replace" them by means of general tort law?

The Court's answer comes in two instalments, which I think must be separately considered: 
1) in para 74 the Court reiterates that the Directive precludes "that a national court replace that term, in accordance with the principles of its contract law, with a supplementary provision of national law"; however, a little above the Court reasons that
2) the question whether circumstances such as those at issue in the main proceedings are, moreover, capable of falling within the ambit of the law governing non-contractual liability does not come within the scope of Directive 93/13, but of national law.

The Directive, the Court says, does not seek to harmonise non-contractual liability. Hence, we seem to understand, it does not pre-empt claims in torts by the seller concerning the same circumstances which the penalty clause would have applied to. 

This conclusion makes very good sense and could help clarify some questions that scholars in various Member States have been grappling with in the past few years. In particular, I think it is safe to read two implications into this decision: 
a) a national court cannot decide, so to say ex officio, to grant damages on the basis of general rules to a party who was seeking to enforce an unfair term;
b) however, the Directive does not preclude awarding of damages when the claimant makes a relevant submission and fulfils all the conditions for granting such a claim as established by national legislation. 

While the comparative lawyer in me would have loved it for the Court to engage in a more general analysis on the notion of contract under the UCTD, I think this is a very balanced decision which deals well with a number of relevant issues without excessively muddling the waters or hiding away. 

Tuesday, 12 November 2019

Long live the E-Commerce Directive? First discussions on the Digital Services Act

Last week we informed about the Council's adoption of the first part of the New Deal for Consumers – directive on better enforcement and modernisation of EU consumer protection rules. With the next European Commission soon beginning its mandate, public attention is gradually shifting to the possible new initiatives affecting consumers in the digital market. Political guidelines of the (then-candidate) Ursula von der Leyen, shed light on two major areas: online platforms and artificial intelligence.

In both fields the initiatives are likely to build upon prior developments in the outgoing Commission. To recall, earlier this year the High-Level Expert Group on AI appointed presented Ethics Guidelines for Trustworthy Artificial Intelligence. The guidelines consider many issues of relevance to consumers such as human agency, safety, privacy, transparency, fairness and accountability. So far, however, it remains rather unclear how the guidelines will inform further actions at the EU level. 

By contrast, we are gradually hearing more and more about possible initiatives on online platforms. In this regard, the Commission has so far followed a “problem-specific approach” as illustrated by the targeted amendments to the consumer acquis, audio-visual media law or copyright law, the adoption of P2B regulation as well as multiple soft law measures on tackling illegal content. The E-Commerce Directive has technically remained unaffected, even though the tendency towards more responsibility of platform operators has been quite clear. According to the more recent reports, the Commission under President von der Leyen is expected to step up these efforts under the banner of “Digital Services Act”. The discussion about its shape are also at an early stage, yet it is not excluded that the new approach will turn out to be still more of essentially the same. According to the recent presentation from the Commission to the Council experts, current discussions appear to be centred on strengthening the cooperation between national regulatory authorities and potentially common rules on tackling different types of illegal content (such as hate speech) at the EU level. Consultations are expected to be launched at the beginning of 2020, potentially leading to more concrete proposals by the end of that year. Stay tuned!

Friday, 8 November 2019

Modernisation Directive adopted by the Council

The Council adopted the Modernisation Directive today, i.e. directive on the better enforcement and modernisation of EU consumer law (press release), which introduces changes to the Consumer Rights Directive, Unfair Commercial Practices Directive, Unfair Contract Terms Directive and Price Indication Directive and is part of the New Deal for Consumers legislative agenda. We have commented on the provisions of the draft directive before (see e.g. our previous posts here and here). The full text of the directive may be found on this website

To recall the main changes are as follows:

Consumer Rights Directive:
  • broadening the scope of application to contracts where consumers pay with personal data
  • traders' information duties have been adjusted to accommodate 
    • modern communication means
    • contracts for the provision of digital content and digital services 
    • the need to inform consumers about personalised pricing
    • contracts concluded on online marketplaces - new Art. 6a
  • specifying trader's and consumer's obligations in case consumers withdraw from a contract providing them with digital content or digital services
Unfair Commercial Practices Directive:
  • right to individual remedies for consumers - new Art. 11a
    • incl. compensation for damage, price reduction and termination of contract
  • the notion of a product encompasses digital services and digital content
  • Member States are given more leeway in addressing aggressive and misleading off-premises selling in order to protect consumer interests
  • marketing goods as identical to goods sold in a different Member State, when they differ in composition or on characteristics (dual quality goods) is a misleading action - new Art. 6(2)(c)
  • not specifying whether the seller on an online marketplace is a consumer or a trader is a misleading omission - new Art. 7(4)(f)
  • websites offering search function that presents consumers with an offer of products (but not online search engines) need to provide information on the ranking of products (parameters determining ranking and importance of these parameters)
    • this information is material, and thus lack of its provision will result in finding of a misleading omission - new Art. 7(4a) 
    • it does not matter whether the products are offered by traders or consumers
  • websites offering consumer reviews need to inform consumers (material information) how they guarantee that these reviews were placed by consumers who used or purchased the product - new Art. 7(6)
  • blacklist has new additions: 
    • providing search results without disclosing paid adverts or payments for placement higher in the ranking
    • resale of tickets, when acquired by automated means circumventing limitations on the number of tickets sold
    • placing consumer reviews without taking reasonable steps to ensure they are placed by consumers who used or purchased products
    • placing fake reviews

Unfair Contract Terms Directive:
  • harmonisation of penalties for provision of unfair contract terms (and for breach of obligations under the Unfair Commercial Practices Directive, Price Indication Directive)
    • Whilst previously Member States were obliged to assure effective, proportionate and dissuasive sanctions for breach of obligations to ensure consumer protection against unfair terms, this obligation has been further specified for all 4 directives. The level of penalties traders will be obliged to pay may depend on criteria specified in these provisions (such as the scale and gravity of infringement, repetitive character of infringing consumer law, etc.). 
    • In respect of the UCTD, the harmonisation effect is weakened due to options left to the Member States to limit sanctioning traders with penalties to the infringement of black-listed terms or to situations when traders did not follow administrative decisions placed on them for the breach of the UCTD obligations.
Price Indication Directive: 
  • more information on price reductions
    • e.g. on the lowest price applied by the trader in 30 days (unless goods are perishable or were just introduced on the market) prior to the introduction of the price reduction

Thursday, 7 November 2019

Putting a brake on fast-track proceedings in consumer credit cases? CJEU rules in Profi Credit Polska (vol. 2)

Earlier today the Court of Justice delivered its judgment in joined cases C-419/18 and C-483/18 Profi Credit Polska. The case follows the earlier judgment involving the same party, in C-176/17, as well as the order in C-632/17 PKO Bank Polski. Both of these earlier rulings dealt with the Polish fast-track order for payment proceedings (postępowanie nakazowe) for the enforcement of promissory notes and bank ledger excerpts, respectively (see: Effectiveness of the UCTD revisited... and Ex officio control of unfair terms...). In both cases the Court found that the procedure was not compatible with Directive 93/13/EEC on unfair terms (UCTD) as it required the consumer to lodge a complaint (zarzuty) under comparably strict conditions (as regards time, content and costs) before the national court could analyse the fairness of the underlying credit agreement of its own merits. The order in PKO also included the analysis of Directive 2008/48/EC on consumer credit and in that context established that the national court should also be able to perform ex officio control of the trader's compliance with information duties regardless of consumer's complaint. In the second Profi Credit judgment delivered today, the Court had a chance to clarify what exactly national courts should be examining ex officio, at what stage of the order for payment proceedings and based on what evidence. The judgment brings a bit more clarity to the reading of EU law than its predecessors, but does not dispel the interpretative doubts entirely.

Facts of the case

The case involved several Polish consumers who entered into credit agreements secured by blank promissory notes. Following the debtors' failure to fulfill their contractual obligations, Profi Credit completed the notes with relevant amounts and moved to their enforcement in the order for payment procedure. Under the applicable Polish law, the court hearing the dispute in which an initially blank promissory note is relied upon, is authorised to verify whether the promissory note had been completed in accordance with the promissory note agreement concluded with the consumer. However, such an assessment can only be made in the event of a complaint raised by the debtor, which the latter had failed to do. The creditor, in turn, refused to provide the court with additional documents arguing that he was only obliged to present the duly completed and signed promissory note. In these circumstances the courts in Warsaw and Opole decided to stay the proceedings and ask the Court of Justice for its interpretation of Directives 93/13 on unfair terms and 2008/48 on consumer credit.

Judgment of the Court

First question

In the first part of the judgment, the Court of Justice analysed whether the possibility under national law to secure the payment of a debt arising under a consumer credit agreement by means of a blank promissory note is at all compatible with Articles 3(1), 6(1) and 7(1) of Directive 93/13 and Article 10 of Directive 2008/48. The Court responded in the affirmative, but qualified its answer in several important respects.

According to the Court, both the provision in the consumer credit agreement, requiring the issuance of a blank promissory note, and the more specific promissory note agreement, detailing the rules in accordance with which that note may be lawfully completed by the lender, may fall within the scope of Directive 93/13. The inclusion of such clauses in the standard terms (and its subsequent enforcement in the order of payment proceedings) can, therefore, comply with that directive provided that national courts undertake the assessment of these two types of terms in light of the UCTD. The judgment further synthesizes the criteria of such an assessment, that is good faith, balance and transparency (see para. 54 et seqq). A particularly strong emphasis is placed on that last criterion. Specifically, the national court must determine whether the consumer has received all the information that may have an impact on the scope of his or her obligations and that enables him or her to assess, in particular, the procedural consequences of securing debts arising under a consumer credit contract by means of a blank promissory note and the possibility of subsequent recovery of the debt solely on the basis of that note. The contractual term in question must also be drafted in plain, intelligible language and the consumer must be given the opportunity to examine its content. Finally, in line with Article 10(2) of Directive 2008/48, the national court is required to examine of its own motion whether the obligation to provide information laid down in that directive has been complied with and if not, establish the relevant consequences.

Second question
The second part of the judgment centred around the question whether a national court, which has serious doubts as to the merits of an application based on the initially blank promissory note, must examine of its own motion whether the provisions agreed between the parties are unfair and if so, based on what evidence. The Court, unfortunately, does not clearly specify which provisions agreed between the parties are covered by this reasoning. It seems reasonable to align this part of the judgment with the scope of the previous question and relate it to: a) fairness control of the provision in the consumer credit agreement requiring the issuance of a blank promissory note and provisions of the promissory note agreement; b) compliance with disclosure duties from Directive 2008/48. However, the wording of the judgment is not particularly accurate and the Court appears to switch between the analysis of Directive 2008/48 and the UCTD in a somewhat confusing way (cf. paras. 69 and 70). 

Overall, the key takeaway from this part of the judgment is that the national court should be able to demand the production of the documents on which the creditor's application is based, including the provision in the promissory note agreement. This confirms that the requirement for the national court to undertake ex officio control in the presence of legal and factual evidence required for that task, should not be interpreted restrictively. Rather the national court must investigate of its own motion whether a term in the B2C contract falls within the scope of the UCTD and, if so, to assess whether such a term is unfair. In doing so, the court should interpret national procedural rules, so far as possible, in the light of the Union law and disapply any national legislation or case-law which precludes the ex officio control of the relevant contract term, for example by requiring that such a control can only take place following a consumer's complaint.

Concluding thought

The judgment of the Court in joined cases C-419/18 and C-483/18 Profi Credit Polska seeks to establish a high level of consumer protection also in the fast-track order for payment proceedings. Polish procedural law provides for such proceedings if the facts supporting the claim are evidenced by an exhaustive list of documents, such as invoices accepted by the debtor; request for payment along with a written recognition of the debt; or a duly completed promissory note, the truthfulness and content of which do not give rise to any doubt (Art. 485 of the Polish Code of Civil Procedure). The order of payment is issued ex parte: the debtor is notified of the order and is able to raise a complaint under the conditions described by the Court in the first Profit Credit judgment. It is worthy of note that Polish Code of Civil Procedure was reformed as recently as June 2019 and the order of payment procedure was significantly affected by the reform. Nonetheless, the amendments do not seem to be linked to the CJEU case law or even more generally with consumer protection. The only pro-consumer change is the removal of the order of payment procedure based on bank excerpts - a move, which appears to be linked to the 2015 judgment of the Polish Constitutional Court on bank enforcement titles (a similar legal concept). For the time being, the Polish legislator seems to be unaware of the Court's case law on the UCTD. Time will tell, therefore, if national courts will indeed be inclined to put a brake on fast-track proceedings in consumer credit cases.

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.

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.

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).

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.

Sunday, 6 October 2019

Monitoring duties of online platform operators before the Court - case C-18/18 Glawischnig-Piesczek

Before the summer we briefly referred to the opinion of Advocate General Szpunar is case C-18/18 Glawischnig-Piesczek (see: Recent developments in online content moderation...). Last Thursday, the Court of Justice delivered the judgment in the case, clarifying the interpretation of Articles 15 and 18 of Directive 2000/31/EC on electronic commerce

Source: Pixabay
Background of the case

The case concerned a defamatory comment published on Facebook about a member of the Austrian Greens party, Ms Eva Glawischnig-Piesczek. The politician brought an action against the operator, requesting it to cease and desist from publishing photographs of her if the accompanying text contained allegations identical to those declared illegal or having equivalent content. In doing so she relied on Austrian provisions authorizing the courts to order host providers to terminate or prevent an infringement, in line with Articles 14(3) and 18 of E-Commerce Directive. The referring court, however, run into doubts whether an order to remove or disable access not only to a particular item of information, but also to equivalent items complied with Article 15(1) Directive 2000/31. Pursuant to this provision, Member States shall not impose a general obligation on providers of, among others, hosting services to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating illegal activity. The referring court also wondered about the territorial scope of such an order (for a similar discussion about the right to be forgotten, see: No one-size-fits-all approach to search engine de-referencing...)

Judgement of the Court

The Court gave a comparably broad reading to Article 18 Directive 2000/31 concerning judicial powers to adopt measures designed to terminate alleged infringements and prevent further impairment of the interests involved. According to the Court, Member States enjoy a broad discretion in relation to actions and procedures for taking necessary measures (para. 29). Such a margin of discretion is due to, among others, the rapidity and geographical extent of the damage arising in connection with information society services. Both of these factors were also clearly at play in the present case (para. 36).

Having said that, the Court decided to distinguish between injunctions concerning information whose content is identical to the one which was previously deemed illegal and injunctions concerning information with equivalent content (whose message remains "essentially unchanged and therefore diverges very little from the content which gave rise to the finding of illegality", para. 39).

In the former case, the Court confirmed broad powers of the national court and found that a host provider can be ordered to block access to or remove information with identical content, irrespective of who requested the storage of that information. The injunction granted for that purpose cannot be regarded as imposing on the host provider a general monitoring obligation, but rather concerns the monitoring ‘in a specific case’ (paras. 34, 37). 

When it comes to information with equivalent content the Court sought a balanced solution. It considered that injunctions should generally be able to extend to information, the content of which, "whilst essentially conveying the same message, is worded slightly differently, because of the words used or their combination, compared with the information whose content was declared to be illegal" (para. 41). The objective of an injunction, however, may not be pursued by imposing an excessive obligation on the host provider. To achieve this objective, the injunction must properly identify the specific elements of equivalent information, such as the name of the person concerned, the circumstances of the infringement and equivalent content to that which was declared to be illegal (para. 45). The monitoring of and search for information required of the host provider should be limited to information containing the elements specified in the injunction and be capable of being carried out by automated search tools and technologies (para. 46). Differences in the wording of equivalent content must not, in any event, be such as to require the host provider concerned to carry out an independent assessment of that content.

As regards territorial scope, the Court once again confirmed the broad reading of Article 18(1), Directive 2000/31, which "[did] not make provision ... for any limitation, including a territorial limitation, on the scope of the measures which Member States are entitled to adopt" (para. 49). Following the judgment, therefore, the E-Commerce Directive does not preclude the relevant injunctions from producing worldwide effects. Member States must, nevertheless, ensure that the measures which they adopt take due account of the rules applicable at international level.

Concluding thoughts

The judgment of the Court has multiple implications. Firstly, it strengthens the protection of parties affected by illegal content, but seeks to achieve this without undermining the validity of Article 15. As such, it does not provide for a straightforward solution to each and every future case and sets quite demanding requirements for both national courts and host providers. The former need to define what content they consider to be equivalent to that which had been deemed illegal. How courts will cope with such a task remains an open question. Host providers, in turn, must be ready to to take steps to monitor their platforms for identical or equivalent information, which - as the Court suggests - may require the use of technological tools. The same seems to be true for smaller platforms, even if arguments related to rapidity and geographical extent of the damage may not apply to them with equal force.

The judgment in C-18/18 Glawischnig-Piesczek is clearly relevant beyond the social media context. As noted by Christian Twigg-Flesner in a recent entry, the ruling can also be applied to other platforms like online marketplaces. Operators of such platforms could be required to take steps to monitor their content e.g. as regards the recurring presence of misleading information. The question remains whether the same could also become true for persons engaging in illegal actions.

Finally, attention should be drawn to the brief part of the judgment concerning territorial scope of online moderation. One cannot help noticing the similarity between this question and the one addressed in recent Google case. In Glawischnig-Piesczek, the Court did not provide for an equally balanced framework, but limited itself to stating that injunctions with worldwide effects are not precluded by Directive 2000/31. This remains in line with the opinion of Advocate General Szpunar - notably, the same AG whose advice was followed in the Google case. Both findings are, therefore, not necessarily inconsistent. In fact, the opinion in Glawischnig-Piesczek explicitly refers to the Google case. According to the AG, like with the right to be forgotten, "the legitimate public interest in having access to information will necessarily vary, depending on its geographic location, from one third State to another" (para. 99). Consequently, the limitation of extraterritorial effects of injunctions concerning harm to private life and personality rights, for example by way of geo-blocking, may remain "in the interest of international comity" (para. 100). Whether this is how the Court's reference to "the rules applicable at international level" is going to be read, nevertheless, is far from certain.

Friday, 4 October 2019

Financial expertise does not preclude qualification as consumer – CJEU in Petruchová (C-208/18)

Yesterday, the CJEU issued a judgment in the case C-208/18 Jana Petruchová v FIBO Group Holdings Limited (the case has not yet been published in English; the link refers to the French version). The case concerns an individual contract for difference (CfD) concluded between the claimant and the defendant and, particularly, the definition of a ‘consumer’ in the context of financial investments under Article 17(1) of the Brussels Regulation. The preliminary question referred to the CJEU was whether Article 17(1) of the Brussels Regulation should be interpreted as meaning that a person who engages in the trade of foreign currency exchange is a consumer or whether the individual’s financial knowledge and expertise, the complex nature of the contract, and the risks involved determine that that person is not a consumer. A summary of the facts of the case and an analysis of AG Tanchev’s opinion can be found here.

It is noteworthy that the defendant never argued that the claimant was acting in the sphere of her professional activities (para 46). In fact, the claimant was, at the time of the conclusion of the contract, a university student, which leads the CJEU to immediately ascertain that the contract was not concluded within the scope of the claimant’s professional activities. Instead, the argument is that the professional nature of the contract is not the only criterion that matters when determining whether a party qualifies as a consumer. However, just like AG Tanchev, the CJEU rejected this argument. The CJEU declared that factors such as the amounts involved in the financial transactions, the risks of financial losses associated with such contracts, the financial knowledge or expertise that the person might have or its active engagement in such financial operations are irrelevant in the qualification of a person as a consumer (para 59). In this sense, the CJEU reaffirmed that the crucial test is whether the contract relates to the person’s professional activities or whether the contract’s goal is to satisfy the individual’s personal needs (para 56).

This conclusion is not surprising, since the CJEU had already established (for example, in the Schrems case) that the concept of consumer has an objective character and that it is not connected with subjective aspects such as the particular knowledge that the individual has about the object of the contract (para 55).

Furthermore, the CJEU concluded that even though the definitions of a ‘consumer’ present in other EU legislative instruments are interpretively relevant (para 61), the fact that financial instruments are excluded from the scope of the Rome I Regulation is irrelevant in this case, since the two Regulations pursue different goals (para 64). The qualification of an individual as a ‘retail client’ is also irrelevant for the qualification as a consumer (para 77).

Thursday, 3 October 2019

Half-baked transparency rules in Kiss and CIB Bank (C-621/17)

The CJEU issued another judgment today interpreting provisions of the Unfair Contract Terms Directive, in the case Kiss and CIB Bank (C-621/17). We have provided an extensive comment on AG Hogan's opinion in this case previously (AG Hogan in Kiss and CIB Bank...). The judgment has not yet been published in English (providing comments in that language seems low on the list of priorities of the CJEU - looming-Brexit impact?), but as our blogging team is international, we are able to provide you with a summary.

Generally, the judgment is rather brief but there are some important statements made in it, and some confusing ones.  The national court may have a difficult time applying this judgment.
Core terms
The CJEU supports AG Hogan's opinion that it is the national court who needs to decide whether a given contract term is a core term (para. 33). In the given case the consumer claimed unfairness of terms establishing certain additional charges placed on him when he took out a consumer credit. To the CJEU it does not look like the consumer questioned the adequacy of these charges in exchange for the provided services, but rather more generally contested the reason for having been charged them. Consequently, the CJEU indicates to the national court that it was likely not a core term at stake, which makes art. 4(2) UCTD inapplicable (para. 35).
A subtle distinction has been made in this case. After all, the consumer demanded the recognition of unfairness as he was not told what services these charges were supposed to compensate. Therefore, he did question the existence of a relation between the charges and the services they were supposed to cover. However, pursuant to the CJEU, this apparently does not amount to questioning the adequacy of a charge in exchange for the provision of a service.

Interpretation of transparency under Art. 4(2) and Art. 5 UCTD and substantive transparency
An important side note perhaps, where the CJEU deviates from the reasoning of AG Hogan: In para. 36 the CJEU clearly states that the same requirements for the principle of transparency apply under art. 4(2) and art. 5 UCTD. The CJEU confirms again its judgment in the case Kásler. It also reiterates - after Bucura judgment - the importance of the substantive aspect of the principle of transparency (para. 37). As the contested terms specified the percentage of charges, the duration the charge would need to be paid for, as well as the method of its calculation, the CJEU considers the economic consequences of having to pay these charges to be foreseeable to the consumer (para. 39).

Are credit providers required then to list services for which they charge payments?

... maybe?? This is where the judgment could use some more of the transparency it is trying to evaluate. If we read paras. 43-44 the CJEU seems to indicate that despite there not being a general obligation for credit providers to list all services provided in exchange for various charges, the protection of a weaker contractual party awarded to consumers by the UCTD requires that consumers can reasonably understand or deduct the character of actually provided services on the basis of a contract, as a whole. This should especially facilitate consumers' evaluation of whether various charges or services do not overlap. This btw is exactly the point that Mr Kiss was making, as he claimed that the charges he was asked to pay for are to compensate the bank for services, for which the bank already charges credit interest rates. On the one hand, the national court should then examine whether such an overlap does not occur, which forces the credit provider to account for the services that a given charge aims to compensate. On the other hand, however, the conclusion of para. 45 is not that subtle. There, the CJEU only draws attention to the first part of its conclusions: that the principle of transparency does not require credit providers to list all services provided in exchange for a given charge. 
So, could we infer from the judgment that whilst credit providers do not have to list all services, they should list some of them, justifying why a given charge was set? Not necessarily, as the CJEU further repeats that not listing services for which a given charge was issued does not automatically breach the principle of transparency, provided the consumer can reasonably understand or deduct the character of actually provided services on the basis of a contract, as a whole (para. 54). The credit provider may then take a risk of not listing the services that a given charge should cover, if they think they could later claim that the consumer should have had an idea of what these services might have been.

Art. 5 UCTD as part of the unfairness test under Art. 3(1) UCTD
Another important clarification, in spite of AG Hogan's opinion, is the CJEU stating that assessment of the transparency of a contract term pursuant to art. 5 UCTD is one of the elements of the unfairness test under Art. 3(1) UCTD (para. 49). The CJEU reiterates the principles of the unfairness test as established in older case law (Aziz and Constructora Principado) (paras. 50-51). 

It will, therefore, not be easy for consumers to claim that not having received information on the list of services, for which a given charge is issued, they were unfairly treated by credit providers;
  • first, they would have to be able to prove the lack of transparency, which the credit provider may dispute by stating the consumers should have been able to deduct what services a charge has reasonably covered;
  • second, they would need to be able to prove that they were put at a significant disadvantage by the lack of specificity of these services, which the CJEU does not seem to be convinced had been the case as the consumer's legal position did not seem to deteriorate (para. 55).

CJEU in Dziubak (C-260/18) - no replacement of unfair terms with "usages"

This morning, the CJEU published a much-awaited decision (only available in French and Polish ATM) on unfair terms in foreign currency-indexed loans. In Dziubak, a Polish couple has sued Raffeisen bank over the terms setting the indexation mechanism in the credit contract that the consumers had concluded with the bank. Said terms applied a known mechanism - indexing outstanding amounts in line with the PLN-CHF buying rate and quantifying instalments (due in Zloty) via the selling rate. The particularity in this case was that the bank used its own exchange rate tables, hence being able to directly determine the applicable rates. 

The referring Polish court had no doubts that the terms were, as the Dziubaks had claimed, unfair. However, the court was in doubt as to what the consequences of such finding should be. 

The concerned consumers maintained that the contract should be invalidated. In the alternative, they demanded the court to remove the indexing mechanism and leave the interest determination terms in place - meaning that the contract would become one in national currency, but with an interest rate indexing which is not the one typical for contract in Zlotys.

According to the referring court, such a solution would transform the nature of the contract and hence be in contrast with basic principles of the Polish legal order, such as freedom of contract. As the parties had concluded a foreign currency-indexed credit contract, replacing it with a regular variable interest mechanism would denature the original agreement. 

Raffeisen, on the other hand, suggested that the gap resulting from the removal of the unfair terms could be filled by resorting to general principles of fairness and customs. Interestingly, according to the referring court, one possible outcome of such exercise would be... to reintroduce the unfair terms to the affected contracts, as a reflection of what is "customary" in the relevant market.

As we know, previous CJEU case-law has set very strict limits to the possibility of replacing an unfair term by means of national rules - in particular, the Kásler decision allowed making use of national supplementary or default rules when the contract would otherwise be invalid and such invalidity would be contrary to the consumer's interest. But one crucial question in Dziubak is precisely this - who decides what is (not) in the consumer's interests? Can a court decide that maintaining an unfair term in place is better for the consumer than invalidating the whole contract, even as the consumer maintains otherwise?

Against this background, the CJEU (by and large in line with AG Pitruzzella's opinion, that we discussed earlier) reached a number of conclusions:

1) If national legislation requires a contract to be considered invalid when the removal of an unfair term would change its nature given the resulting difference in its main object - such as could be the case if a foreign-currency indexed rate is turned into a regular variable interest mortgage - such legislation is compatible with the Directive;

2) In this case, the Kasler standard means that invalidation of the contract must be the outcome where the consumer so prefers: given that the Court's case-law grants the consumer final word on whether an unfair term must be considered as binding on them, a fortiori they must be able to decide whether rescuing the contract is or not in their own interest. In this respect, the "interest of the consumer" can only be assessed with reference to the moment when the controversy takes place;  

3) General principles or rules are not tantamount to supplementary or default rules which apply when the parties have not made specific provisions. As these rules do not equally express the legislator's view as to what would make a reasonable balancing of interests in a specific constellation, the application of general principles by a national court cannot be considered to enjoy the same "presumption of fairness" as default rules and hence cannot be used to replace unfair terms; they can thus not be used to supplement the contract in order to prevent its invalidity. 

Back in Poland, the Dziubaks' legal team seems to have taken this judgement as a victory:
Source: twitter
This appears slightly puzzling from a legal point of view: in fact, by indicating that no replacement by means of general principles can take place, the Court seems to have indicated that either the unfair terms are maintained or the contract (and other similar contracts) must be invalidated - would this not be getting many consumers "stuck" with unfair terms if they do not have the money to return all the outstanding capital immediately?

The concrete circumstances may however be of importance - since in 2015 the Swiss franc underwent a major appreciation against (the Euro and, as a consequence, other European currencies such as) the Zloty, which had already depreciated significantly in 2008-2009, many consumers have paid very high instalments which were supposed to mainly cover interests. If the original contracts are invalid, however, it could be possible to claim that only the capital sum is due - and then a settlement of accounts may counterintuitively play in favour of quite a few consumers. Furthermore, it could be that the decision will trigger a wave of settlements or renegotiation, which again may turn out as a gain for Polish lenders.

As far as other consumers are concerned, however, the decision looks like a mixed bag - first, the deference to national rules of contract law may mean quite diverging levels of protection across Member States; second, the Court's resolve to prevent all sort of gap filling interventions when no supplementary rules are readily at hand may actually have a chilling effect on consumers who may not want to start proceedings if the result is that they have to choose between an invalid contract and the original unfair term. On the bright side, the prospective of courts starting to replace unfair terms with equally unfair customs seems to have been washed away. Congratulations to Ms Dziubak and her lawyer's daytime drinking improv!