Dear readers,
you may have noticed this already if your social media feed looks anything like mine: the CJEU has issued a decision on the transparency of lawyers' fee under Directive 93/13, which is all but sure to make us talk in the coming times. While the most remarkable element in the decision concerns the application of transparency to a new - and potentially quite ripe for expansion! - set of circumstances, the decision also further testifies to the CJEU's struggle to deal with its own strict approach to the consequences of unfairness under the Directive.
So, to start with the facts: the case arose between a Lithuanian consumer and their lawyer and concerned several contracts concluded between the two. Each of the contracts included a relatively unsophisticated remuneration clause, according to which the client stood to pay 100 EUR per hour of work by the lawyer.
After several years and a series of partial payments, it appears that a dispute had arisen between lawyer and client as to the amount of the overall fee - with the former asking for roughly double, in total, of what the client had paid until then. This controversy led to a court case, during which successive Lithuanian courts found the remuneration term unfair for its failure to provide the consumer sufficient clarity on the likely significance of their financial commitment. To make things worse for the lawyer, Lithuanian law (article 6.2284(6) of the Civil Code) has implemented the transparency requirement "the German way", that is by specifying that terms can be deemed unfair for the sole fact that they are not transparent. The Lithuanian supreme court, thus, turned to the CJEU to know, in particular: a) whether indeed a term only indicating an hourly fee should be considered as lacking transparency; b) whether indeed they should follow the letter of Lithuanian law and consider that the term should be invalidated; c) what the consequences should be in such case, given the fact that the contract would obviously not stand without the unfair term. [other questions need not be addressed here]
As to the first question, which is also the most interesting, the Court [para 41] ]had to acknowledge that identifying and indicating with certainty what the final cost of legal services will be poses serious hurdles and cannot be expected of lawyers (interesting to think: what other professions could this apply to and how?); at the same time, it concludes, there can be several ways for the professional to provide the consumer, before concluding the contract, ways to estimate future expenses or anyway know how they can expect to be able to keep them under their purview. A mere indication of an hourly fee, without information as to the rough expected amount of hours to be invested or as to ways in which the consumer will be kept informed of the hours worked and fees due, does not comply with the transparency requirement. This is, according to the Court, necessary in order to allow the consumer to take a prudent decision. [paras 44-45]
As to the second question, it should surprise no-one that indeed, opting for a higher level of consumer protection is expressly allowed under the Directive and hence – while the Directive itself does not require terms lacking transparency to be declared unfair, it certainly allows for this consequence when so established under national law. [see paras 51-52]. This means that the court did not elaborate, in this case, on how courts in systems that do notautomatically connect lack of transparency and unfairness would have to go and investigate whether the term caused a significant imbalance, contrary to good faith, under the Directive’s article 3.
As to the third question, finally, the Court reiterated its standpoints articulated in a vast (if complex) body of case-law: an unfair contract must be disapplied; when a contract cannot survive without the unfair term, the concerned court must consider whether the contract’s ocverall invalidity would cause a significant disadvantage for the consumer. Only in that case, the term can be replaced by “a supplementary provision of national law or a provision of national law applied by mutual agreement of the parties to those contracts. ”The provision in question, however, must be “intended to apply specifically to contracts concluded between a seller or supplier and a consumer and […] not so general in scope that its application would be tantamount to allowing the national court, in essence, to set, on the basis of its own estimate, the remuneration due for the services provided” [para 63]. Otherwise, the court says, it is ultimately to be accepted that the contract may be invalidated, even though that may entail some “legal uncertainty” – which I understand to open to an action for unjustified enrichment? In the case at hand, it appears that the national court may be able to identify a suitable provision, which leads me to close with an appeal to our Lithuanian readers: please keep an eye on this and let us know what the final bill was!
Trivia and curiosity aside, it seems to me (but I may be biased as I have argued it elsewhere) that the decision marks a new step towards transparency as determinacy or at least some constraint on uncertainty and arbitrariness. This move is enabled in particular by the Court’s relatively nonchalant use of parameters originally articulated in the specific context of variation clauses (Invitel, RWE, foreign currency loans etc) outside of their original context – see for instance para 37 in the decision, where the court recalls how transparency entails that the contract (in context) must set out transparently “the specific functioning of the mechanism to which the relevant term relate” – which in those old cases were all variation mechanisms, not at hand in this case.
This my first take of course – I must admit to not having checked AG Szpunar’s opinion yet, so there may be more to be said as to the first answer has come about, also in particular with reference to this last point. To be continued!
