On
30 May 2024, the CJEU delivered C-176/23 UG v Raiffeisen Bank SA an
important judgment that is highly relevant today and covers an important and
not frequently adjudicated question - the issue of the mandatory terms
exception in Article 1(2) and the way it applies in the highly regulated
environment of a consumer loan contract. Based on the 'contractual terms which
reflect mandatory statutory or regulatory provisions ... shall not be subject
to the provisions of this Directive.’
In this case, the consumer entered into a variable-rate credit agreement with Raiffeisen Bank, indexed to the Swiss franc. Based on the Romanian mandatory legislation OUG No. 50/2010, the term relating to the determination of the variable rate had to be amended so that it was linked to an objective index increased by a margin fixed for the entire duration of the agreement. Unsatisfied with the new interest rate, the consumer sued the bank, alleging that the term was unfair.
The first legal question before the CJEU was whether the term could be assessed for fairness, given that it was inserted into the contract as required by mandatory legislation. Given that the term was not a copy-paste of a legislative provision, but rather an action based on the legislation, the CJEU addressed whether the term reflected mandatory rules. In answering the question, the CJEU ruled that, in this situation, the term can be assessed for fairness because the legislation was not overly prescriptive and left the bank a degree of discretion to determine the variable interest rate. In the words of the CJEU, the ‘legislation merely establishes a general framework for fixing the interest rate for that agreement, while leaving a margin of discretion to that seller or supplier as regards both the choice of reference index for that rate and the size of the fixed margin that can be added to the latter.’ This approach was confirmed by the CJEU in its latest case on the matter C-471/24 PKO BP (see our report here).
The second question raised a question of whether such an amended term is not assessable for fairness under the general test of fairness in Article 3(1) even if it has been inserted into the contract without a negotiation with the consumer? The CJEU provided an expected answer to this question, confirming that this is the case, given that the entire UCTD, including the test of fairness, is designed to protect against unfair individually non-negotiated terms, and some terms are exempted from the security of fairness, against that default provision. Although the second question is somewhat unusual and, at first glance, seems redundant, it raises an interesting question about the hierarchy among the provisions of the UCTD. Indirectly, the CJEU here seems to confirm the natural reading of the UCTD that Article 1(2) prevails over Article 3(1), in the sense that the term must first be within the scope of the UCTD to be assessable for fairness. Conversely, if a term is exempted from fairness security by virtue of Article 1(2), this cannot be remedied by Article 3(1).
Overall, the judgment provides an important contribution to EU consumer law and to the interpretation of the relationship of legislative interventions imposing mandatory rules on the contracting parties and the UCTD. These are relevant in the post-2008 environment, which incentivises legislative intervention in matters that would previously have been left to the parties (see more on this relationship here).
