Friday, 13 February 2015

Unfair contract (terms), split jurisdiction: not a problem, ECJ says (C-567/13)

 Yesterday, with its decision in Baczó and Vizsnyiczai (C-567/13), the Court of Justice might have given a signal that its important series of pro-consumer decisions in the field of procedural law has come to an halt.

The ECJ, in essence, had to decide where the two claimants had to seek the annulment of the arbitration clause contained in a contract that they actually intended to challenge in its entirety.

In 2007, Ms Baczó and Mr Vizsnyiczai concluded a mortgage loan agreement containing an arbitration clause. Later, they asked a local court, competent for this kind of action, to declare the contract invalid. A different local court then suggested that they should also demand that the arbitration term be declared invalid- and so they did. At that point, the court where they had lodged their original request referred the case to the county court: under Hungarian law, only these courts are competent to decide on unfair contract terms. 

The claimants challenged the decision to involve the higher court, which then raised a request for preliminary ruling. The referring court asks the ECJ to assess the exclusive competence of county courts, which effectively gives rise to split jurisdiction on the validity of a consumer contract and of specific terms contained therein. 

The referring court mentions some elements which suggest the rule might be dubious from the point of view of consumer protection:
- seizing the higher court might entail higher costs for the consumer;
- if the consumer brings the suit, she has to bring the case before the county court- if, however, the other party brings proceedings against her, the consumer can rely on the unfairness of a contract terms also before the local court- difference which, the court suggests, seems rather unreasonable.

The ECJ did not, in principle, give a final answer as to whether the rule is in line with EU law. 
However, it gave quite detailed guidelines.

The rule has to be assessed in the framework of Member States' procedural autonomy. In this context, the benchmark is the so called "equivalence and effectiveness" test. The ECJ seems to have no problem with the equivalence prong: the fact that unfair terms claims have to be brought by a court different than the one competent to decide on the invalidity of of contractual terms in general does not breach the principle of equivalence if it is not unfavourable to consumers. This assessment (para 46), in turn, practically gives the Court's answer to the effectiveness question too: 
"the designation of [county] courts, which are less numerous and hierarchically superior to the local courts, may facilitate a more homogeneous and specialised administration of justice in cases concerning the rules arising from Directive 93/13."
This, it seems, should automatically bring an advantage to consumers. The Court follows, as to this, the Hungarian Government's submission that the County court judges' professional experience ensures more effective consumer protection (para 58).

Other considerations, of course, also matter in the effectiveness test. In particular, procedural rules pursue public interests that cannot be thwarted to suit the specific interests of private parties (see para 51); thus, the standard to be applied is that the rules organising remedies must nor make the exercise of individual rights impossible of excessively difficult. To this respect, the existence of legal aid mechanisms should also be considered. 

Although the ECJ concludes that the rule is valid unless declining the local court's jurisdiction "gives rise to procedural difficulties that would make the exercise [of the consumer's rights] excessively difficult", it clearly indicates that it doesn't think any such difficulties are likely to arise. 

Among the elements of criticism (that for instance include the fact that the Court considers that, after all, the consumer does not need to be present at all stages  during the proceedings...), it is interesting to notice that the ECJ based several decisive passages of its decision on its previous statements in a case concerning actions brought by consumer associations, without really explaining why it considers them applicable to individual actions too. 

Not a brilliant start of 2015 for Hungarian consumers...

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