Thursday, 28 February 2013

Ex officio unfairness vs audi alteram partem - CJEU in Banif Plus Bank (C-472/11)

28 February: CJEU judgment in case Banif Plus Bank (C-472/11)

In the given case the CJEU was asked to further interpret articles 6 and 7 of the Unfair Terms Directive by a Hungarian court. 

The dispute between the parties arose upon a conclusion of a credit agreement by Mr Csipai with Banif Plus Bank in 2006, which was to expire on 15 June 2012. One of the standard contract terms stated that in case the contract was terminated earlier due to consumer's breach of contractual obligations, the bank was allowed to claim not only the sum total of all outstanding installments, but also default interest, costs. The installments payable included not only the capital amount but also interest on the transaction and an insurance fee. When the consumer stopped paying his installments in February 2008, the bank terminated the contract and demanded payment of all sums mentioned in the contract. The Hungarian court who presided over the case informed the parties that he thought that the contractual provision was unfair and he asked the parties to comment on the matter. Not surprisingly, the consumer submitted that the bank's claims are excessive and that he only recognizes the claim with regards to the capital sum.

The Hungarian court asked the CJEU whether a national court which finds of its own motion that there is an unfair term in a contract could inform the parties about the grounds for invalidity of the term and to ask them to submit a statement in that regard. (Par. 17) The CJEU replies that for the effective protection of consumers against an unfair contract term the national court has to evaluate the unfairness of its own motion and does not need to wait for the consumer to ask for declaration of invalidity of that term. (Par. 28) However, to properly implement the EU law, the national court needs to make sure that the other party to the contract is given a proper possibility to defend itself (respecting the general principle of audi alteram partem), especially since the court resolves the dispute "on a ground that is has identified of its own motion". (Par. 29) This: "(...) also implies a right for the parties to be apprised of pleas in law raised by the court of its own motion, on which it intends to base its decision, and to discuss them". (Par. 30) This all means that if the court finds of its own motion a contract term unfair, he needs to inform both parties of its assessment and ask them to submit their opinion on the subject, allowing each of them also an "opportunity to challenge the vies of the other party". (Par. 31) This would also allow the consumer to express his free and informed consent to the contested term, if upon being informed of a possibility of its invalidity he decided to not have it disregarded. (Par. 35) Additionally, the CJEU decided that the "national court must, in order to determine whether the contractual term on which the claim brought before it is based may be unfair, take account of all of the other terms of the contract". (Par. 41)

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