Isn't it ironic: AG Tanchev proposes penalty Spain for failure to transpose Mortgage Credit Directive, just as new Law has been approved

The European Commission has brought infringement proceedings against Spain for failure to transpose the Mortgage Credit Directive (2014/17/EU) in time, and asked the EU Court of Justice to impose a daily penalty payment of EUR 105 991,60. The deadline for transposition was 21 March 2016, which was extended by the Commission until 18 January 2017. The new Law on Credit Agreements for Immovable Property (Ley de contratos de crédito inmobiliario) was only approved by the Spanish Parliament on 21 February 2019. Until it enters into force, consumers in Spain are unable to rely on the rights afforded to them under the Directive.

The Spanish government does not dispute that it missed the deadline. However, it argues that the penalty is disproportionate.

First, there was an unusual situation relating to difficulties in forming a government between December 2015 and October 2016. There was a political deadlock after the inconclusive election results of December 2015, which led to new elections being held in June 2016. The second election results were also inconclusive; attempts to form a government continued until the end of October 2016. After the financial crisis, consumer protection in the mortgage credit market had become a controversial issue in Spain, as we can testify by reference to the many preliminary rulings pertaining to Spain discussed on this blog. The new Law was approved only two months before the upcoming elections in April 2019.

Secondly, the Spanish government disputes that the lack of transposition may have adverse effects for competition in the mortgage credit market, and asserts that certain national measures had already been adopted that regulate aspects covered by the Directive.

In his Opinion in C-569/17, Advocate-General Tanchev rejects these arguments. EU Member States cannot invoke provisions, practices or situations existing in their internal legal system, such as elections or an interim government, in order to justify a failure to comply with their obligations under EU law, including the time limits laid down in a directive (point 36).

Moreover, Tanchev is unconvinced that the national measures that had already been adopted meet the requirements of the Directive (point 82). The effects of the failure to transpose the Directive on public and private interests is significant in the Spanish context, in light of problems in the Spanish mortgage sector (point 86). In this respect, Tanchev refers to the numerous preliminary references to the CJEU from Spanish courts. Thus, he concludes, the impact of non-transposition is serious.

AG Tanchev rejects the Commission's view that the penalty payment should be calculated from 22 March 2016 to the date of the start of the infringement proceedings: 27 April 2017. According to Tanchev, the duration of the infringement is assessed from the expiry of the extended deadline, i.e. 18 January 2017 (point 89). This means the period between December 2015 and October 2016 should not matter in any case (point 90). Still, the duration of the infringement is about 24 months, which may be considered a significant period of time.

The penalty payment must be decided according to the degree of persuasion needed in order for the Member State to alter its conduct and bring the established infringement to an end (point 80). Therefore, Tanchev proposes that the CJEU should order Spain to pay the daily payment as proposed by the Commission, with effect from the date of delivery of the judgment. At the date of the hearing, the new Law had not been approved yet. If the CJEU follows Tanchev's Opinion, Spain will no longer need to be persuaded and thus, not have to pay the penalty as soon as it notifies the Commission. Isn't the timing a bit ironic?

Belgian improper implementation of Unfair Commercial Practices Directive - AG Cruz Villalón in Commission v. Belgium (C-421/12)

26 November 2013: AG Cruz Villalón opinion in case Commission v. Belgium (C-421/12)

AG Cruz Villalón was busy in the last couple of days since he also issued an opinion today in the EU case against Belgium, in which it was claimed that Belgium did not properly implement Unfair Commercial Practices Directive. In general, the AG supports all three claims made by the Commission against Belgium. 

First, while the UCP Directive is applicable to all traders, regardless of their legal status or the sphere of their commercial activity, Belgium decided to exclude certain professions from the application scope of its national law implementing the Directive, namely: representatives of liberal professions, dentists and physiotherapists (only misleading and comparative advertisement is prohibited in Belgium with respect to these professions).

Second, while the UCP Directive intends to fully harmonize unfair commercial practices in Europe, Belgium sets consumer protection level higher with respect to informing consumers about discounted prices. Namely, prices may be marked as discounted only if their price is lower than the lowest price that has been set by the same trader on them in the given month. Since the Directive does not blacklist a commercial practice that would inform consumers about discounted prices in other circumstances than mentioned in the national law, the national law may not do that either.

Third, the UCP Directive does not prohibit certain commercial practices as unfair that have been declared as unfair and prohibited in Belgian law: many forms of off-premises sales and travelling trading (the value of the off-premises sale may not be higher than 250 euro per consumer; health products, health plants or products made thereof, medical devices, lenses, metals, jewels, pearls, weapons and ammunition may not be sold off-premises). Since these prohibitions have not existed in Belgian law prior to the adoption of the Directive they should not fall within the scope of national provisions that could remain upheld in the transitional period by national legislators.

Compliance required

Italy was asked to comply with EU rules granting certain rights to rail passengers. At the moment, there are no enforcement authorities nor sanctions for violations of passengers rights established in Italian law, which means that whoever travels by train in Italy may not be able to claim their rights when things get... derailed.

Luxembourg was given two months to take measures to comply with the requirement to deliver proper market analyses to European Commission. Such analyses allow to see whether the given market sector (offering products and services to consumers within the electronic communications sector) is competitive enough, etc.

See more: November infringements package

Naughty Member States

Last week the European Commission again let us know which countries infringe existing European consumer protection rules and what it was going to do about this. The relevant infringements concerned:

• Poland: hindering EU consumers in participating in judicial proceedings taking place in Poland, infringing the Regulation on the service of documents (1393/2007) in cross-border cases. Namely, Polish law requires EU citizens to appoint a representative in Poland for the service of documents in civil and commercial proceedings in Poland. If a representative is not appointed, the documents are deposited at court and deemed as having been served. This means that EU citizens may even not known that documents have been deposited at court against them. EU sees it as an indirect discrimination on the grounds of nationality and gives Poland two months to adjust its law.
•  Denmark: endangering consumer health by allowing the sale of snus (oral tobacco, consumed without chewing or smoking by placing between the gum and the lip) in loose portions. The sale of snus is banned in Europe with exception of Sweden. Denmark has two months to ban this sort of sale.
• Poland (again): not adhering to the European common framework regulating the way airport charges are set. Poland failed to implement common rules on airport charges, which brings economic harm not only to airlines who may be asked to pay more for taking-off and landing in Poland but also passengers, who would ultimately be charged with these costs. EC referred Poland to the CJEU for missing the implementation deadline of 15 March 2011. Daily penalty may be imposed on Poland until the EU rules are adopted.
• Slovenia and Poland (again): not fully transposing the EU internal energy market rules (Electricity Directive and Gas Directive). A proper implementation of these EU rules was supposed to guarantee a secure energy supply at affordable prices to consumers. Both countries are referred to the CJEU at the moment and face daily penalties until they adjust their legislation.