Hague court upholds a municipal ban on fossil fuel ads: implications for EU (consumer) law

The climate malaise has invited many new regulatory measures in recent years to fight against greenwashing, with advertising bans being particularly noteworthy. In September 2024, The Hague passed a municipal law banning fossil fuel-related advertising in public spaces like billboards and bus shelters (Art. 2:97(7) City Ordinance). The ban outlaws ‘advertising for products and services related to fossil fuels, including air travel, plane tickets, grey energy contracts, gas contracts, cruise holidays or cars with fossil fuel or hybrid engines’ (Art. 1:1(x)). The ANVR – the Dutch trade association for travel agencies – and the travel company TUI filed summary proceedings against the ban. On 25 April 2025, the District Court of The Hague upheld the ban. It thoroughly assessed the measure’s compatibility with the Unfair Commercial Practices Directive (UCPD), EU free movements and fundamental rights (freedom of expression and the freedom to conduct a business).

This ruling is the first time a court reviewed and upheld a municipal ban of this nature, making it a noteworthy legal development for EU (consumer) lawyers in light of the burgeoning regulatory initiatives. Besides the Hague ban, Amsterdam has similarly banned fossil advertising since 2021, while France has introduced a national ban in 2022. The UN Secretary-General, António Guterres, has even called for a global ban on all fossil fuel advertising. Apart from fossil advertising, several Dutch cities, including Haarlem as the world’s first, have banned meat advertising, and France has outlawed advertising for ultra-fast fashion. Building on the Hague decision, this post summarises the legal arguments in favour of the legality of similar advertising bans under EU law.

 

The Court’s Ruling

Compatibility with UCPD (paras 5.11-5.12): According to ANVR and TUI, the UCPD, as a maximum harmonisation instrument, prohibits Dutch law from providing a higher level of protection and thus renders the fossil ads ban incompatible. Referring to the Commission’s UCPD Guidelines, the Hague Court clarified that the UCPD ‘does not cover national rules intended to protect interests which are not of an economic nature’ and thus ‘does not affect the possibility of Member States to set rules regulating commercial practices for reasons of health, safety or environmental protection’. According to the municipality of The Hague, the ban is not intended to protect the economic interests of consumers but aims to prevent the negative effects of climate change and to protect the health of residents and visitors of the city. Therefore, the ban is not contrary to the UCPD.

Compatibility with the free movement of goods (Art. 34 TFEU, paras 5.13-5.15): Following the CJEU’s Keck jurisprudence, national advertising restrictions are only assessed under Art. 34 TFEU, which prohibits discriminatory measures on imported goods. According to the Hague Court, the ban applies indistinctly to Dutch and international market participants, and ANVR and TUI did not demonstrate otherwise. Even if the ban constitutes a restriction under Art. 34, such a restriction can still be justified under Art. 36 TFEU for the protection of health and the environment. The municipality has sufficiently substantiated that the ban is suitable and necessary for achieving said objectives by encouraging residents and visitors to make more sustainable choices and reducing the use of fossil fuels. The measure also remains proportionate, as advertising through other media, such as television and newspapers, is still possible.

Compatibility with the freedom of expression (Art. 10 ECHR and Art. 11 of the Charter, paras 5.16-5.19): Art. 10 ECHR codifies the freedom of expression but allows for restrictions that ‘are prescribed by law and are necessary in a democratic society’. Following the ECtHR case law, the Hague Court referred to the existence of ‘a pressing social need’ to assess whether the ban’s restriction on freedom of speech can be justified. The Court invoked some similar arguments to those under Art. 36 and concluded that the ban complies with Art. 10 ECHR: The advertising ban is relevant for the protection of health and the environment, and advertising for the plaintiffs’ other products or through other media remains possible. In addition, Art. 11 of the Charter does not provide more extensive protection. The municipality also contended that the Charter does not apply as the dispute measure does not concern the implementation of EU law, which the Court agreed. (In a separate section (paras 5.8-5.10), the Court also discussed the freedom of expression under Art. 7 of the Dutch Constitution, but the national provision does not protect ‘commercial advertising’.)

Compatibility with the freedom to conduct a business (Art. 16 of the Charter, paras 5.20-5.21): While the Hague Court stated that the Charter does not apply, for the sake of argument, Art. 16 of the Charter still would not invalidate the advertising ban. The violation of Art. 16 should only be assessed in light of the analysis under Art. 34 TFEU, and a separate assessment is unnecessary.

This analysis should be read in light of the Hague Court’s assessment on the municipality’s competence (paras 5.6-5.7). The Court confirms that the municipality of The Hague is competent to act against climate change and promote public health by setting rules within its boundaries. It is deemed untenable to argue that flying less does not have a direct positive impact on air quality within The Hague. The Court pointed out that reducing flying, ‘in combination with other environmental measures taken by the municipality’, can decrease CO2 emissions. This is not altered by the fact that the contribution of the municipality may be small on a national or global scale. ‘Every little bit helps, and the municipality wants to do its bit’.

The Hague Court also assessed the compatibility of the ban with the general principles of good administration (paras 5.22-5.34), including the principles of lex certa, proportionality, equality and the obligation to state reasons. However, none of these principles are violated.

 

Comments

While scholars have presented convincing arguments that bans on advertising for carbon-intensive products do not violate EU law (see Kaupa; Venzke and Ankersmit; Van de Berg and Eckes), the Hague Court’s decision sets a positive precedent for similar action, especially at the local and municipal levels. The fact that the Hague Court did not even feel the need to ask for a preliminary ruling from the EU Court also indicates the ban’s clear legality under the EU legal framework.

Here are some main lessons from this case. From the perspective of EU secondary law, the UCPD does not pose a legal obstacle insofar as the ban is framed as exclusively for health and the environment, and not for consumer protection. The reference to consumer protection, even as a co-objective for a mixed-purpose measure, will invoke the fully harmonised UCPD, which, despite the recent amendment to upscale its relevance for combating greenwashing, does not square with a comprehensive ban. While this construction nonetheless allows national and local authorities to introduce an advertising ban, it is regrettable that the UCPD views consumer protection of economic interest in such a narrow sense. A more enduring solution would simply be to amend the UCPD (either its harmonisation scope or its objectives) or to interpret its objectives in a more long-term, environmentally friendlier way (for example, in conjunction with Art. 11 TFEU).

Moreover, the Hague Court did not discuss the Audiovisual Media Services Directive (AMSD), which was previously invoked in another case heard by the Dutch Advertising Code Committee. Art. 9(1)(c)(IV) AMSD prohibits advertisements encouraging ‘behaviour grossly prejudicial to the protection of the environment’. The Dutch Advertising Code Committee rejected the reading that this provision justifies bans on fossil advertising, which was based on an artificial distinction between advertisements and the (environmentally harmful) products being advertised. But it has been argued that the AMSD provision not only allows but also demands bans like that of The Hague. Moreover, the fact that the EU legislature has already undertaken a balancing exercise when enacting secondary law, ie weighing the tension between an advertising ban and free speech, provides more concrete guidance for the judicial assessment.

From the perspective of EU primary law, the Hague Court informed us of a twofold legal strategy. First, regarding provisions like Art. 34 TFEU and Art. 16 of the Charter, a comprehensive and non-discriminatory ban simply invokes no violation. While not discussed by the Hague Court, neither is an advertising ban liable for infringing upon property rights (Art. 1 of Protocol 1 ECHR, Art. 17 of the Charter): a contractual right to use advertising spaces can hardly be qualified as a proprietary interest, and its decrease in economic value hardly amounts to an infringement.

Second, even if a restriction of fundamental rights or freedoms is found, such as the freedom of expression, there are almost always exceptions available for such a restriction to be justified for the legitimate aim of public or general interest. This should include the protection of health and the environment (as well as broadly defined consumer protection), given the urgency of climate change (as we trail behind the Paris Agreement goals) and that the ECtHR has interpreted Art. 8 ECHR as encompassing the protection against climate change.

Next, the justification usually concerns a three-step assessment of suitability, necessity and proportionality. We can draw some general lines of argument from the Hague decision. (A lot can also be learnt from the advertising restrictions on alcohol and tobacco.)

• First, an advertising ban is suitable for pursuing the aims of health and environmental protection. In light of the significant carbon impact of private consumption, the IPCC Report has highlighted the urgent need for changes in consumption patterns to achieve climate neutrality. To this end, advertising and other commercial communications play a crucial part in shaping consumer choices and normalising undesirable consumption behaviour. As such, as the Hague Court correctly pointed out, advertising bans can encourage consumers to make more sustainable choices and reduce carbon emissions.
• Second, an advertising ban is also necessary. Here, it is more difficult to generalise the analysis as it usually pertains to the scope and essence of each restricted right or freedom. But the Hague Court helpfully reminded us that the fact that banning fossil advertising within a municipality’s boundaries is insufficient for curbing climate change does not render the measure unsuitable or unnecessary. The necessity of the advertising ban must thus be viewed as part of a broader policy mix in the climate transition.
• Third, regarding proportionality in a strict sense, it is again related to the specific restricted right. This case concerns a ban at a municipal level on advertising in public spaces. Its restrictive scope means that the proportionality test is not hard to fulfil. For bans at the national or EU level, the proportionality test may be more challenging. One approach is through comparison with feasible alternatives. For example, the proposed Green Claims Directive requires ex-ante verification for all explicit environmental claims prior to market access. By comparison, a ban targeting advertising for fossil fuel and other carbon-intensive products should be considered less restrictive and thus proportionate.

 

Overall, the Hague Court’s decision is a positive message for the legal battlefield against climate change. It brings legal clarity and paves the way for further – necessary but insufficient – action against greenwashing and unsustainable market practices.

CJEU in Kirschstein: the scope of UCPD is broad, but not infinite

Earlier today the Court of Justice delivered its judgment in a very interesting case C-393/17 Kirschstein. As reported in our earlier post on the opinion of Advocate-General, the case concerned the application of the Unfair Commercial Practices and the Services Directives in the sector of higher education. In the judgment issued today the Court agreed with the Advocate-General that the national requirement, according to which only accredited higher education establishments may award certain degrees, does not contradict the analysed directives. The part of Court's reasoning on the UCPD, however, clearly deviates from the arguments of AG Bobek. 

Facts of the case

The defendants were running a higher education institution which organised study programmes, upon the completion of which master's degrees were awarded, despite the lack of an accreditation. The Public Prosecution Service considered this practice to be in breach of Belgian law and initiated legal proceedings. The defendants argued that national legislation criminalising the act of conferring ‘master’s’ degrees, without having obtained the authorisation required for that purpose, was contrary to Directives 2005/29 and 2006/123.

Unfair Commercial Practices Directive

The questions referred by the national court are framed very generally and it is not entirely clear which part of the UCPD is considered to potentially preclude the contested national rules. The most likely argument seems to relate to the UCPD's black list. Indeed, from Plus Warenhandelsgesellschaft onwards, the Court of Justice has consistently found that national prohibitions, which pursue the objectives relating to consumer protection and are not included in the Annex I to the Directive, do not comply with the UCPD.  

The Court, however, did not even get to that stage and focused on the UCPD scope. It recalled the definition of a commercial practice, covering any act, omission, course of conduct or representation, commercial communication including advertising and marketing, by a trader, directly connected with the promotion, sale or supply of a product (including services) to consumers (Article 2(d)). However, unlike Advocate-General, who focused on the question whether the provision of higher education qualifies as a service or not, the Court directed its attention towards the aspects of service provision, which fall within the scope of the UCPD. More specifically, according to the Court, a distinction must be made between commercial practices which are closely linked to a commercial transaction involving a product (promotion and sale or supply) and the product (service) itself (para. 42). As a result, a national rule which aims to determine which operators are authorised to provide a service in a commercial transaction, without directly regulating the practices which that operator may subsequently implement to promote or "dispose of the sales of that service", does not qualify as a commercial practice within the meaning of Directive 2005/29 (para. 45). By "disposing of the sales of services" the Court appears to mean "putting into practice the marketing of a service" (following the Dutch version), i.e. the act of supplying the service as such. From this it follows that the UCPD does not apply to national legislation at issue in the main proceedings.

Services Directive

The second part of the judgment, one involving the interpretation of Services Directive, appears to be more aligned with the Advocate-General's opinion (even though again no references are made to the opinion). Similarly to the AG, the Court found that educational services in question can be regarded as neither non-economic services of general interest (Article 2(2)(a)), nor activities which are connected with the exercise of official authority (Article 2(2)(i)), and thus cannot be excluded en bloc from the scope of Directive 2006/123. It then went on to assess whether the authorisation scheme established by national law was compatible with requirements set out in Articles 9 and 10 of Services Directive. According to the Court the analysed framework did not seem to have a discriminatory nature, was justified by an overriding reason relating to the public interest (ensuring a high level of higher education and protecting the recipients of services) and pursued that objective with appropriate means, thus complied with Article 9 of the Directive. As regards Article 10, the Court established that the preliminary reference did not contain sufficient information about the conditions of the authorisation scheme and left the relevant assessment to the national court. 

Concluding thought

Case C-393/17 Kirschstein shows that services in higher education sector are not, by their very nature, excluded from the scope of either UCPD, or Services Directive. However, the judgment delivered today also underlines that not all national rules restricting the provisions of services must be analysed under UCPD. When it comes to the conditions imposed on the service as such - here: determination of the operators authorised to provide such a service - it is Services Directive that provides the relevant benchmark, not the UCPD. In making that distinction the Court put a limit to the overly expansive interpretation of the consequences of the UCPD's black list and brought the focus of the discussion back where it belongs.

AG opinion in Wind Tre: aggressive practices require active conduct

On the 31^st of May the AG Campos Sánchez-Bordona's opinion in the Wind Tre cases (C‑54/17 and C‑55/17) was published. This is the first case where the meaning of aggressive commercial practices is discussed, making it highly important. Before Wind Tre the only ECJ case on aggressive practice was Purely Creative (C-428/11), in which one of the blacklisted practices was contested, without invoking art. 8-9 of the Unfair Commercial Practices Directive (UCPD, Directive 2005/29/EC).

In the Wind Tre case the issue of the relationship between sectoral legislation, such as the Universal Service Directive (Directive 2002/22/EC), as lex specialis to the UCPD and the general rules of the UCPD is discussed.

Facts of the case

The dispute concerned the marketing of mobile phones in Italy. The mobile phones came with SIM cards which had answering and internet services pre-installed, of which fact consumers had not been informed. It is important to note that there was no complaint as to the cost of these services or the information provided about their function, the complaint was about telecom companies omitting to inform consumers that these services were pre-installed.

The same practice was used by two companies, Wind Tre and Vodafone Italia, and the Italian Market Authority (Autorità Garante della Concorrenza e del Mercato, hereafter AGCM) imposed fines on the two companies for engaging in an aggressive practice. The telecom companies challenged that decision in court, claiming that the AGCM lacked competency to impose fines stating that the telecommunications authority (Autorità per la Garanzie nelle Comunicazioni, hereafter: AGCom) was responsible instead. This argument was based on art. 3(4) UCPD stating that in case of a conflict between the UCPD and other sectoral rules on unfair commercial practices, the latter will prevail and apply.

The case reached all the way to the Council of State (Consiglio di Stato) which ruled in favour of the competence of the AGCM stating that the practice was aggressive within the meaning of the Italian Consumer Code (transposing the UCPD). It argued that even though sectoral legislation of the telecommunications sector was also breached, the case in question presented a ‘progressive harmful conduct’, which gave rise to a more serious infringement, thus making the application of the Consumer code, instead of the sectoral legislation, appropriate. (para 25)

Questions

     The Italian court referred 7 questions, which the AG Campos Sánchez-Bordona, with the agreement of all parties, summed up into the following two groups (para 32).

1.  Can the conduct of the telephone operators be classified as an ‘unsolicited supply' (as per point 29 of Annex I of the UCPD) or an aggressive commercial practice?
2. According to art. 3(4) UCPD should the UCPD cede to other EU rules, and, if so, to national provisions enacted in implementation of those rules?

The first group of questions refers is of a substantive nature as to whether the practice in question can be characterised as aggressive according to the UCPD; either using the blacklist of the UCPD, or by using art. 8-9 UCPD.

The second group of questions refers to the relationship between the UCPD and other EU sectoral legislation as lex specialis.

AG's Opinion

In answering the first question, AG Campos Sánchez-Bordona provides us with what has been the most detailed analysis of the elements of aggressive commercial practices by the Court to this day. 

Inertia Selling

He begins to first examine whether the practice in question can be caught by the blacklist, and specifically point 29 forbidding inertia selling. According to the AG, there are two conditions to satisfy simultaneously: 1) unsolicited supply and 2) unlawful demand of payment (para 44).

From the facts it can be established that the phone operator had not properly informed consumers on the pre-installed services on the sim card, meaning that consumers could use them without configuring them. AG Campos Sánchez-Bordona examines whether this supply, of which consumers were not informed of, qualifies as ‘unsolicited supply’. In his opinion ‘unsolicited’ means more than not being provided with essential information on a service, it means that the consumer was not aware of its existence (para 48).

The AG finds that a consumer (and not the average consumer) has no reason to expect that services have been preinstalled, if he has not been informed thereof and which he has to opt out of by using a process which he is likely to be unaware of (para 53).

Hence, whilst in this case unsolicited supply is possible, the AG does not find the same for the demand for payment. In his opinion not any demand for payment could fulfil the conditions of point 29, but it needs to be an undue request for payment. The referring court specifies that there was no complaint as to the cost of the services or the information about them, only about the lack of information about the pre-installation.

AG Campos Sánchez-Bordona argues further that the average consumer could expect that the SIM card purchased would be able to provide him with services about the costs of which he has been informed. 
It is worth noting that the AG makes reference to the average consumer in the context of the blacklist, where the average consumer test is not meant to apply. This goes to show that the blacklist does not offer the legal certainty promised.

Based on the above reasoning, point 29 of Annex I of the UCPD on inertia selling is not applicable. The next step is to examine whether the practice can be caught by art. 8-9 UCPD.

Aggressive Practices

The focus is on the practice in question being one of omission of information.

AG Campos Sánchez-Bordona looks to the factors of art. 9 UCPD to determine what would qualify as a practice using the notions of: harassment, coercion or undue influence. Out of art. 9 UCPD the AG deduces that harassment and coercion cannot be applied in this case as they require ‘active conduct, which is not present in the case of an omission of information’ (para 64).

It is not clear how the AG reaches that conclusion, as the factors of art. 9 UCPD apply for all three categories of harassment, coercion and undue influence without distinction. Also, even the omission of information requires an active choice of the trader to omit that information, so one could argue that active conduct is not entirely absent.

The AG continues to examine solely whether the practice can be caught under the concept of undue influence. Undue influence is the only one defined in UCPD in its art. 2(j), unlike harassment and coercion.

Undue influence refers to exploitation of a position of power which significantly limits the ability of the consumer to make an informed decision. The AG differentiates between two different kinds of positions of power (para 67):

1. Exploitation of a position of power which allows the trader to infringe the consumer’s freedom when it comes to buying a product.
2. Position of power held by a trader who, following the conclusion of the contract, may claim from the consumer the consideration which the latter undertook to provide on signing the contract.

Consequently, the AG defines a position of power in undue influence as both applying in pre-sale and post-sale conditions. What is to be noted is the focus on the fact of the conclusion of a contract, of consideration of the terms, that is the use of contract law terms through which aggressive practices seem to be defined. However, aggressive practices are broader than that, to the extent that they cover all transactional decisions of the consumer and are not limited to the decisions to enter into a contract.

The opinion explains that the aim of prohibiting aggressive practises is, in essence, protecting the freedom of contract, as consumers should be bound only by obligations that they freely entered into. So the criterion is whether the omission of information about the pre-installation impaired the freedom of choice of the consumer to the extent, where he accepted contractual obligations he would not have otherwise (para70).

AG Campos Sánchez-Bordona found the practice not to be aggressive, as according to him, the practice was not sufficient to impair the freedom of the consumer to such an extent that he would not have entered the contract. The AG does not elaborate on how he reached that conclusion or what is the standard against which it is weighed. This view of aggressive practices appears to raise the standard, making it more difficult to show that impairment of the freedom of choice of the consumer is indeed significant enough.

Lex specialis

Given the answer to the first two questions, there was no reason to examine the rest, on the conflict of law, yet the AG did submit his observations.

In these he makes the accurate observation that the UCPD is not designed to fill the gaps that sectoral legislation leaves; instead it offers its own stand-alone system of protection which exists in parallel with the sectoral legislation (para 94). This sets the tone also for art. 3(4) UCPD that should be interpreted strictly as focus should be on maintaining a high level of protection. Therefore, art. 3(4) UCPD is better conceptualised as regulating conflict between provisions and not systems of sectoral legislation (para 111). In this case, it means that the existence of sectoral legislation that covers aspects of unfair commercial practices does not preclude the application of the UCPD.

AG Campos Sánchez-Bordona didn’t find a conflict in this case between the UCPD and the Universal Service Directive, but rather the need for them to be applied jointly (para 129). The Universal Service Directive regulates the information requirements, which are crucial for determining whether there was unsolicited supply as per point 29 of the Annex I of the UCPD.

Conclusion

This is an intriguing case, as it is the first of its kind for aggressive practices in the UCPD. It reveals contrasting interpretation of the UCPD notions and objectives between the Member States and AG Campos Sánchez-Bordona. Italian authorities viewed aggressive practices as a tool for penalising the abuse of power by the trader. The AG on the other hand interpreted the same provisions focusing on protecting consumers' contractual freedom, especially as applied to the decision to enter into a contract. It remains to be seen what the Court will decide and this blog will follow the developments with great anticipation.

When does an online seller become "a trader"? AG Szpunar in Kamenova

Last Thursday the Advocate-General Szpunar delivered an opinion in case C-105/17 Kamenova, in which the Court of Justice was asked to provide interpretation of Article 2(b) and (d) of Directive 2005/29/WE on unfair business-to-consumer commercial practices (UCPD) in the context of a sale of goods via an online platform. The provisions included in the preliminary reference contain definitions of the very basic concepts used throughout the UCPD and in the European consumer law more generally. The broader relevance of the guidance to be provided has been recognised by the Advocate-General who decided to extend the the scope of the questions referred to also cover a provision of Directive 2011/83/EU on consumer rights (CRD).

Facts of the case

The defendant was offering her goods via olx.bg

The request for a preliminary ruling was submitted by a Bulgarian court adjudicating a dispute between Ms. Kamenova and the national consumer protection authority concerning a potential breach of consumer law by the former. More specifically, Ms. Kamenova, who had been engaged in the sale of goods via an online platform, and had published eight different listings at the same time, did not provide information required by the Bulgarian act on consumer rights, which implemented Directive 2011/83/EU into national law. The defendant argued that, when offering used goods via olx.bg, she was not acting in a professional capacity and, consequently, her activities remained outside the scope of that act. The consumer protection authority held an opposite view and insisted that, by acting in breach of the act on consumer rights, Kamenova engaged in an unfair business-to-consumer commercial practice.

"Trader" in the UCPD and in CRD: a uniform interpretation?

Before addressing the crux of the case, AG Szpunar considered it necessary to establish whether the notion of a trader used for purposes of Directives 2005/29/WE and 2011/83/EU is to be construed in the same way. Indeed, as observed in the opinion, the wording of respective provisions is almost identical. The AG did not stop here, however, but observed that further factors had to be considered. These included, in particular, the level of harmonisation provided by respective Directives, which, in turn, should be assessed by reference to the wording, meaning and purpose of the interpreted acts. The AG eventually responded in the affirmative, finding that both Directives aimed to fulfil the same objectives, namely to contribute to the functioning of the internal market and to ensure a high level of consumer prtoection, and that both of them established a full level of harmonisation. To ensure coherent application of the two sets of rules, according to the AG, the notion of the trader used in the UCPD and the CRD had to be interpreted uniformly.

The threshold for becoming a "trader"

The subsequent part of the opinion concerns the substantive interpretation of the trader's notion as provided in the two legal acts. In this respect, Article 2(b) of the UCPD (and similarly Article 2(2) of the CRD) defines the notion of a trader as "any natural or legal person who, in commercial practices covered by this Directive, is acting for purposes relating to his trade, business, craft or profession and anyone acting in the name of or on behalf of a trader". The opinion of the AG provides for some useful points of reference in that regard. Most notably, it does not only list the criteria to be considered in the analysis of one's activity, but also points to the deeper normative rationale of the analysed provisions - namely the weaker position of the consumer resulting in the trader's comparative advantage. 

As discussed in paragraph 51 of the opinion, assessment of the purpose of the seller's activity should depend, among others, on questions whether:

• the sale was made as part of an organised activity and with a profit-seeking motive;
• the sale was subject to a specific timeline and frequency;
• the seller had a legal status which allowed him to conduct trading activity and to what extent online sale was linked to such activity;
• the seller was a VAT taxpayer;
• the seller was acting in the name or on behalf of another trader or through any other person acting in his name or on his behalf and obtained remuneration or a share in profit in this connection;
• the seller had purchased new or used goods for pursposes of their resale, as a result of which his activity became organised, frequent or concurrent to his professional activity;
• the level of profit generated from the sale confirms that the transaction belonged to the seller's trading activity;
• all products offered for sale by the trader were of the same type and value, in particular, whether the offer concerned a limited number of products.

In formulating the aforementioned list the AG relied, among others, on the submissions of the German government and of the European Commission. The involvement of these two actors in the proceedings is not surprising - German courts have been called upon multiple times to decide on similar cases and the Commission tried to come up with a similar list in its 2016 communication on collaborative economy. According to the AG, the criteria mentioned above are neither exhaustive, nor exclusive, meaning that fulfilling one or more of them does not, in itself, determine whether a seller should be qualified as a trader. The relevant assessment should be made on a case-by-case basis, taking into account the normative rationale mentioned above. With respect to the analysed case, the AG expressed scepticism whether publication of eight listings on an online platform could be qualified as an activity of the "trader" and, consequently, a "business-to-consumer commercial practice". Which factors the AG found decisive for reaching this conclusion is not clear, which may be a point of criticism addressed at her otherwise helpful guidance. Another possible takeaway from the analysed case is that national legislators may want to think twice before establishing strict thresholds between professional and non-professional activity. As for now, it remains to be seen whether the Court of Justice will follow the opinion of its advisor and how specific the Court's judgment will be. Most likely, a case-by-case assessment - first undertaken by the sellers themselves and then verified by the courts, enjoying a wide marging of appreciation - will remain the norm for the future. This would be a rather conventional way of striking the balance between certainty and flexibility with no special treatment being granted to the digital economy. Such an assessment is also substantiated by the amendments to the CRD proposed recently by the Commission, which generally leave the allocation of responsibility for establishing the status of the contracting parties unaffected. As mentioned in our previous post (see: New Deal for Consumers...), new provisions would impose an obligation on online marketplaces to provide information whether the third party offering the goods, services or digital content is a trader or not, on the basis of the declaration of that third party. Bolder measures proposed in the literature, aimed at levaraging the potential of data collected by the operators of online platforms, as for now remain off the table.

AG Opinion in Bankia: UCPD is not applicable in mortgage enforcement proceedings

Introduction

On the 20^th of March, AG Wahl published his opinion on the Bankia case. The case revolves around the application of Directive 2005/29/EC (The Unfair Commercial Practices Directive) to mortgage enforcement proceedings in Spain. The case is added to the growing case law of the application of consumer law to contracts and illuminates the aim and field of application of the UCPD according to the AG.

Facts of the case

The debtors, Juan Carlos Marí Merino, Juan Pérez Gavilán, María de la Concepción Marí Merino took out a loan, secured by a mortgage in 2006 with the following terms: 166.000 € capital, 25 years repayment and the value of the mortgage was set at 195.900€. In 2009, the loan capital was increased and the repayment term extended. Finally, in 2013, as the debtors were falling behind with payments for more than a year and their outstanding debt had reached 102.750 € there was a final modification of the loan terms. The repayment period was extended to 40 years and the mortgage asset was re-evaluated at 56.689 €, a value far lower than the 2006 one, due to the housing market crisis in Spain.

As the debtors continued to default on payments, the bank initiated mortgage enforcement proceedings in 2015. The bank requested an order for payment and if the debtors were unable to pay the mortgaged asset would be auctioned with a starting price of 57.684,90 €. The starting price for the auction was calculated according to the 2013 re-evaluation and the lower price meant it was unlikely the proceeds from the auction would suffice to cover the amount owed.

The debtors objected to the enforcement proceedings on two grounds. Firstly, arguing for the existence of unfair terms in their contract, as the aim of the modification of the loan terms was to get them to agree to a decreased evaluation of their property. Secondly, that according to the Spanish Code of Good Banking Practice they could be discharged of their debt due to their financial situation. Finally, they also asked for the enforcement proceedings to be stayed.

Questions

The following questions were referred to the Court:

(      1)    Must Directive 2005/29 be interpreted as meaning that national legislation such as that currently regulating Spanish mortgage enforcement — Article 695 et seq. in conjunction with Article 552(1) of the [Law of Civil Procedure] — which does not provide for the review by the courts, of their own motion or at the request of one of the parties, of unfair commercial practices, is contrary to Article 11 of that directive because that national legislation hinders or prevents review by the courts of contracts or acts which may contain unfair commercial practices?

(     2)    Must Directive 2005/29 be interpreted as meaning that national legislation such as the Spanish law which does not ensure actual compliance with the code of conduct if the party seeking enforcement of a debt decides not to apply that code (Articles 5 and 6 of Royal Decree-Law No 6 of 9 March 2012, read in conjunction with Article 15 thereof) is contrary to Article 11 of that directive?

(     3)    Must Article 11 of Directive 2005/29 be interpreted as precluding Spanish national legislation which does not allow a consumer, during mortgage enforcement proceedings, to request compliance with a code of conduct, in particular as regards the giving of a property in payment and extinguishment of the debt — Point 3 of the Annex to Royal Decree-Law No 6 of 9 March 2012, Code of Good [Banking] Practice?’

The novelty of the case revolves around whether the UCPD can be applied to halt mortgage enforcement proceedings, in a similar way as the Unfair Contract Terms directive has been applied in the past. The the significance of the Opinion is on the enforcement of the UCPD as per art. 11 UCPD and whether it grants remedies to individual consumers.

Answer to question 1

AG Wahl provides a lengthy answer to the first question. He recognises the main tension of EU consumer law between a high level of consumer protection and encouraging cross-border trade as well as the broad scope of the UCPD (para 35, 38) According to art.11 (1) UCPD, Member States must ensure that ‘adequate and effective means’ exist for the enforcement of the Directive. Is effectiveness of enforcement achieved when unfair commercial practices cannot be reviewed in the context of mortgage enforcement proceedings? The Opinion points out that the UCPD does not provide a right to a contractual remedy for consumers against unfair commercial practices, instead focus is on providing penalties for traders. The Spanish law provides for declaratory proceedings to establish the existence of unfair commercial practices. The next step is to establish whether to satisfy the effectiveness test, declaratory procedure is not enough, and there is also the need to allow for mortgage enforcement proceedings to be stayed.

In the well-known Aziz case it was held that precluding the review of an unfair contract term in mortgage enforcement proceedings was contrary to EU law. The referring court and the Commission wish to draw a parallel between Aziz and Bankia arguing that the same reasoning should be followed and precluding consideration of unfair commercial practices in mortgage enforcement proceedings should be found contrary to EU law.(para 30) Yet, the AG is of another opinion, differentiating between Directive 93/13 (The Unfair Contract Terms Directive) and the UCPD. According to the Opinion, Directive 93/13 does offer a remedy to individual consumers, while Directive 2005/29 only provides for penalties for the trader and therefore cannot prevent the enforcement of the mortgage. Therefore, the lack of suspensory effect of the declaratory proceedings does not influence the effectiveness of the enforcement of the UCPD. (para 61) The AG allows for one exception, in the case where the unfairness of a commercial practice may play a role in assessing the unfairness of a contract term. However, as was found in Pereničová and Perenic, the unfair practice is only a factor for assessing the unfairness of a term. (para 64)

Consequently, the answer to the first question was that national legislation which does not provide for the review of unfair commercial practices during mortgage enforcement proceedings is not contrary to the UCPD.

Answer to questions 2 and 3

The second and third questions focus on codes of conduct and whether a code of conduct can be enforced using the UCPD. According to the AG Opinion, codes of conduct offer an additional means of control to that of the UCPD, and non-compliance with a code of conduct does not automatically amount to an unfair practice. (paras 74-75) In any case, same as for question 1, the AG found that any consequences from the breach of the code of conduct would be for the trader as the UCPD does not offer any individual contractual remedy for the consumer (para77).

Therefore, the answer to the second and third question was the national legislation which does not provide consumers with an individual contractual remedy in the case of breach of code of conduct, is not contrary to the UCPD.

Conclusion

The AG opinion may at first fight appear as one that reduces the level of protection for consumers; as consumers who are at risk of losing their homes as a result of mortgage enforcement proceedings cannot rely on the UCPD in the same way they can rely on the Unfair Contract Terms Directive. Yet the AG opinion accurately reflects the current state of the UCPD and as highlighted by the AG the main issue of the debtors was the re-evaluation of the property rather than the existence of an unfair practice (para 59). This does not mean that it would not be appropriate for consumers to have individual remedies against unfair practices, but rather that this is not the case at the moment. This issue has been highlighted in the Consumer and Marketing Law Fitness Check where one of the suggestions has been to amend the UCPD in order to provide contractual remedies for consumers. It remains to be seen whether the ECJ will follow the AG Opinion or whether they will decide that the UCPD should be considered in the context of mortgage enforcement proceedings, or whether a legislative intervention is the only way to resolve this problem.