Unfair core terms? AG Wahl's opinion in C-26/13 (Kásler)

A very interesting opinion has been delivered today in the evergreen field of unfair contract terms by AG Wahl. The case, Árpád Kásler and Hajnalka Káslerné Rábai v OTP Jelzálogbank Zrt (C-26/13), concerns a credit practice which is fairly common in European countries with a more volatile currency, namely a credit contract in which the amount of the total sum to be returned as well as that of each individual installment were calculated in a foreign currency - the Swiss Franc. 

These kinds of contracts usually allow credit institutes to charge consumers lower interests than would be the case if the contract were managed entirely in the local currency. They are therefore not devoid of benefits for consumers. At the same time, they undoubtedly introduce an element of complexity into transactions which, in terms of consumer protection, are in themselves very sensitive. 

In the case at hand, the foreign currency transaction was made even more complicated by the fact that two different rates were applied: while the total outstanding amount was calculated on the basis of the rate the bank applied when buying Swiss Francs, the installments were based on the sale rate. The two rates can be considerably different, the sale "price" being as a rule higher.

Two Hungarian courts subsequently invested with the case found that the term allowing the bank to use the sale rate, while it was not providing any real exchange services, represented an unfair unilateral advantage. Those courts saw no reasonable justification underlying the use of different rates when determining the outstanding amount and the installments. Also, the appellate court was skeptical as to the transparency of the term.

The referring court, finally, asked a set of questions:

1) whether the term was to be considered as exempted from scrutiny under unfair terms legislation's "core terms" exemption;

2) whether, in case the term was actually exempted, the court could still apply a transparency test - in spite of the fact that the Hungarian legislator did not provide that core terms must be drafted in a clear intelligible way; and, were this question to be answered in the positive, whether factors beyond the mere linguistic formulation of the term could be taken into account in the "transparency" test;

3) whether, in case the term was actually found unfair, the national court would have to leave the ensuing lacuna unfilled, or could apply supplementary legal provisions to determine the amounts due. 

The Advocate General Wahl, after a lengthy analysis, reached the following conclusions:

1) that the clause is part of the contract's main object, thus in principle exempted from scrutiny on substantive grounds; if, however, the clause were not considered as part of the object, the adoption of different exchange rates could not be considered as a price whose adequacy vis à vis the service rendered cannot be taken into account when scrutinising a term's fairness;

2) that harmonious interpretation of EU law requires the transparency requirement to be read in the unfairness test even when there is no national provision to the purpose; and that respect of such requirement should not be exclusively measured on the basis of mere linguistic elements, but considering whether, in the context of the case, the consumer was in a position to assess the rights and obligations arising from the contract;

3) that the Court's previous case-law does not forbid replacing the term by a supplementary provision of the relevant national law, especially when the contract would be likely incapable to continue in existence were the lacuna not filled.

It will be interesting to see whether the Court will follow the AG in this case. In particular, while the AG's understanding of transparency seems in line with the court's most recent case law (and in particular with RWE v Verbraucherzentrale), the CJEU might be more cautious with regard to the potential of harmonious interpretation in this context. In other terms, even assuming that the Directive requires Member States to include a sanction for intransparency (besides contra proferentem interpretation), it is not at all obvious that this requirement could be given effect by judges between private parties, absent national legislation to the purpose.

On the other side, if one wanted to take seriously the difference between core "price" terms and terms which merely determine how a price is to be calculated, there might be room to argue that the term is not exempted from substantive scrutiny after all. This certainly is one interesting case. Although the Court did not consider it a good reason to put the case on a "speed-track", it is quite obvious that a "consumer-friendly" decision might have a considerable impact on some credit markets.