Traveling in style

The review of the Package Travel Directive is a bit of a crusade for the European Commission, well, at least it seems as if from the moment the works on it began till its completion you could travel by foot from the UK or France to Palestine... The current rest-stop in this journey are the ongoing debates in the European Parliament. The Internal Market Committee approved new rules last week and a plenary vote is scheduled in March. Of course, the new Directive will still need to be approved by the Member States, which will only be able to take place after the elections in May.

Additionally to the rules described by us previously (Package travel 2.0) the MEPs lowered the Commission's threshold for when consumers should be given a choice to opt out from a contract when there is a price increase - from 10% to 8% price increase. More over, any price reduction of more than 3% will need to be passed to the customer, pursuant to the draft. Organisers will not be allowed to change flight times significantly once the sale has been conducted. In case of unforeseen circumstances preventing travellers from returning home on time, they would need to be provided accommodation or paid equivalent thereof for five nights (up to 125 EUR per night). Commission proposed only three nights accommodation at the maximum of 100 EUR per night. (MEPs vote to beef up consumer rights) Just like with the ongoing revision of air passengers rights it looks as if the MEPs are indeed trying to grant travellers with as much protection as they can only negotiate into the new provisions.

Unfair core terms? AG Wahl's opinion in C-26/13 (Kásler)

A very interesting opinion has been delivered today in the evergreen field of unfair contract terms by AG Wahl. The case, Árpád Kásler and Hajnalka Káslerné Rábai v OTP Jelzálogbank Zrt (C-26/13), concerns a credit practice which is fairly common in European countries with a more volatile currency, namely a credit contract in which the amount of the total sum to be returned as well as that of each individual installment were calculated in a foreign currency - the Swiss Franc. 

These kinds of contracts usually allow credit institutes to charge consumers lower interests than would be the case if the contract were managed entirely in the local currency. They are therefore not devoid of benefits for consumers. At the same time, they undoubtedly introduce an element of complexity into transactions which, in terms of consumer protection, are in themselves very sensitive. 

In the case at hand, the foreign currency transaction was made even more complicated by the fact that two different rates were applied: while the total outstanding amount was calculated on the basis of the rate the bank applied when buying Swiss Francs, the installments were based on the sale rate. The two rates can be considerably different, the sale "price" being as a rule higher.

Two Hungarian courts subsequently invested with the case found that the term allowing the bank to use the sale rate, while it was not providing any real exchange services, represented an unfair unilateral advantage. Those courts saw no reasonable justification underlying the use of different rates when determining the outstanding amount and the installments. Also, the appellate court was skeptical as to the transparency of the term.

The referring court, finally, asked a set of questions:

1) whether the term was to be considered as exempted from scrutiny under unfair terms legislation's "core terms" exemption;

2) whether, in case the term was actually exempted, the court could still apply a transparency test - in spite of the fact that the Hungarian legislator did not provide that core terms must be drafted in a clear intelligible way; and, were this question to be answered in the positive, whether factors beyond the mere linguistic formulation of the term could be taken into account in the "transparency" test;

3) whether, in case the term was actually found unfair, the national court would have to leave the ensuing lacuna unfilled, or could apply supplementary legal provisions to determine the amounts due. 

The Advocate General Wahl, after a lengthy analysis, reached the following conclusions:

1) that the clause is part of the contract's main object, thus in principle exempted from scrutiny on substantive grounds; if, however, the clause were not considered as part of the object, the adoption of different exchange rates could not be considered as a price whose adequacy vis à vis the service rendered cannot be taken into account when scrutinising a term's fairness;

2) that harmonious interpretation of EU law requires the transparency requirement to be read in the unfairness test even when there is no national provision to the purpose; and that respect of such requirement should not be exclusively measured on the basis of mere linguistic elements, but considering whether, in the context of the case, the consumer was in a position to assess the rights and obligations arising from the contract;

3) that the Court's previous case-law does not forbid replacing the term by a supplementary provision of the relevant national law, especially when the contract would be likely incapable to continue in existence were the lacuna not filled.

It will be interesting to see whether the Court will follow the AG in this case. In particular, while the AG's understanding of transparency seems in line with the court's most recent case law (and in particular with RWE v Verbraucherzentrale), the CJEU might be more cautious with regard to the potential of harmonious interpretation in this context. In other terms, even assuming that the Directive requires Member States to include a sanction for intransparency (besides contra proferentem interpretation), it is not at all obvious that this requirement could be given effect by judges between private parties, absent national legislation to the purpose.

On the other side, if one wanted to take seriously the difference between core "price" terms and terms which merely determine how a price is to be calculated, there might be room to argue that the term is not exempted from substantive scrutiny after all. This certainly is one interesting case. Although the Court did not consider it a good reason to put the case on a "speed-track", it is quite obvious that a "consumer-friendly" decision might have a considerable impact on some credit markets.

Measuring progress in the construction sector

Last week the European Economic and Social Committee announced that its Single Market Observatory is conducting a survey on the implementation of the Services Directive in the construction sector. The results of this survey are to be made public in April this year. The Services Directive is relatively new (from 2006) and it will be interesting to see what issues are there with its application in practice and whether it changed the relations between services providers and its recipients in the construction sector.

Payments secured

Yesterday it was announced that the European Central Bank supports the new European directive on payment services in the internal market. (see our previous post: Paying your dues - a new package on Payment Services and BEUC's opinion thereon: Money, money, money...) The legal opinion of the ECB will be published shortly in the Official Journal of the European Union, but in the meantime the press release makes it clear that the ECB supports the broadening of the services' list to include payment initiation services (where a third party provider initiates a payment at the request of the payer, e.g. in online purchases) and account information services (providing consolidated information on different accounts, also in different banks, to allow better overview of the client's financial situation). The ECB suggests some improvements that could enhance the security of these new services and boost competition on the market. One of the developments that are encouraged is the creation of a common European standard for safe authentication of consumers. (ECB supports new European directive for electronic payments)

Music makes the EU come together

Last week, 4 February, the European Parliament also approved the new Directive on collective management of copyright and related rights and multi-territorial licensing - that are supposed to allow for easier streaming of music across the EU, exempting online music providers from having to apply for a license in every country they play music. Since only one of 500 licensed digital music services is available in all EU member states, these new rules may make this market more attractive for smaller competitors. (Licence to thrill...) This provided the online music provider will obtain a license from a collective management organisation representing authors' rights across borders. To facilitate this process national collective management organisations will be able to request other organisations to represent their repertoire (under the same conditions as applicable to their own repertoires) in countries for which they were not authorised to issue such licenses. The artists will need to be guaranteed their royalties not later than nine months from the end of the financial year in which the rights revenue was collected. Since the Directive was already informally agreed with the Council, the following Council's vote should just be a formality. (Copyright: cross-border licences for online music services)

Fly me to the EU

Last week, on 5th of February, the European Parliament has voted on European Commission's proposals to strengthen air passenger rights. As we have mentioned previously the European Parliament introduces more passengers-friendly rules (European Parliament intends to strengthen air passengers' rights) by, e.g., allowing them to claim compensation when the flight is delayed for more than 3 hours (while Commission insists that only a higher threshold, like the suggested 5 hours delay, will provide incentives to airlines to actually pay out compensations). The Parliament also differs from the European Commission in its evaluation of what should constitute 'extraordinary circumstances' which would release the airlines from their obligation to pay compensation (e.g. the Parliament would prefer to exempt technical failures almost completely from this definition). While the Commission wanted to limit passengers assistance rights to providing them with 3 nights of accommodation in extraordinary circumstances, the Parliament suggests raising the limit to 5 nights. Moreover, the EP argues that the airlines should be obliged to take out insurance in case of insolvency, while the Commission considers it to be a disproportionately burdensome measure in comparison with the small number of insolvencies of airlines in past years. In June the Transport Council will meet to further discuss the revision of air passengers rights. It is likely that these rules will only be further negotiated after the new elections. (European Parliament votes on air passenger rights)

The Italian Torpedo: on staying proceedings in exclusive jurisdiction cases - AG Jääskinen in case Weber (C-438/12)

30 January 2014: opinion of AG Jääskinen in case Weber (C-438/12)

Two elderly sisters Weber, Irmengard and Mechthilde, were in a dispute over a piece of land they both partially owned in Germany. In 1971 through a notary act a preemptive right to purchase this lad was entered into a land register for I. Weber. In October 2009 through a notary act M. Weber sold her part of the land (4/10 thereof) to a company, of which her son, domiciled in Italy, is one of managers. She had a right to withdraw from that transaction until 28 March 2010. I. Weber was informed by a notary about this and through a letter of December 2009 she decided to use her pre-emptive right to purchase that land. Two sister signed an agreement in February 2010 and on 2 March 2010 I. Weber paid M. Weber the agreed purchase price. On 15 March 2010 Mechthilde withdrew from the first contract. On 29 March 2010 a case was started in a court in Milan against two sisters in which the Italian company claimed that the pre-emptive right was unlawfully used and that their purchase contract should be recognized as valid. In reply, in July 2010, Irmengard started a case in front of a German court asking them to order Mechthilde to register the change in the ownership of the land in the land register. As you may imagine, one of the matters that arose was as to what courts had jurisdiction etc. and what a German court should do taking into account the fact that an Italian court was seized first - therefore, the issue referred to the CJEU concerned interpretation of the Regulation No 44/2001.

Since this matter even if it concerns a dispute between private persons, relates to immovable property and, therefore, is not strictly a consumer law case we will keep the discussion of the issue short and mention only the primary question related to the CJEU. The AG Jääskinen advises in this case the CJEU to take the view that Art. 22 (1) of the Regulation that gives exclusive jurisdiction over matters related to immovable property to courts of the country in which that property is located encompasses matters related to establishing whether a pre-emptive right to purchase the land was rightfully executed (no surprise here). The AG follows this statement by interpreting Art. 27 (1) as obliging the court last seised to check whether they have exclusive jurisdiction based on Art. 22 (1) which would mean that the court first seised would not have jurisdiction and its judgments would not be recognized on the basis of Art. 35 (1). Current Art. 27 seems rather to oblige the court last seised to await the result of the jurisdiction check by the court first seised and to honor its decisions, but the AG argues that it's formulation "any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established" suggests that in case of exclusive jurisdiction, where the court first seised will never be able to establish its jurisdiction there is no obligation to stay the proceedings for the court last seised. The AG thinks also that the national court should not need to take into account what law will be applicable in the given case or whether the procedure in another Member State would take a long time in deciding whether to stay its proceedings on the basis of Art. 28 (1) of the Regulation, but it should take into account in this test whether the claimant's right to effective legal protection is observed.

Teaching Consumer Law in a virtual world - Conference announcement

Anyone interested in consumer law and teaching it should save the following date: May 30-31. The bi-annual conference "Teaching Consumer Law" takes place in Santa Fe, New Mexico this year and the programme and the speakers' list look wonderful. The theme this year is consumers in a virtual world.

Mortgage credit directive adopted by the Council

Towards the end of last year, we had announced that the European Parliament had approved the proposed Mortgage Credit Directive, leaving it up to the Council to have its final say. A few days ago, the Concil approved the Directive, which seeks to enhance both consumer information and sustainable lending practices.

Although the Directive has been approved with no discussion, three countries have abstained and other governments have asked to add some critical remarks to the meeting's minutes.

Airlines may freely determine checked-in luggage costs - AG Bot in Vueling Airlines (C-487/12)

After two weeks of holidays with limited internet access I have a bit of a catching up to do with the recent consumer law developments. I hope that our readers stayed up to date during my absence, but just in case this week posts will gradually aim at updating also your knowledge thereof. Starting with some CJEU developments...

23 January 2014: opinion of AG Bot in case Vueling Airlines (C-487/12)

Spanish law prohibits air carriers from charging for checking in passengers' baggage as an optional price supplement ("The carrier is required to carry passengers’ baggage with them, subject to weight limits, irrespective of the number of items, and size limits established by regulation, as part of the price of the ticket."). The CJEU was asked whether such a national provision was compatible with Art. 22 Regulation No. 1008/2008 which states that: "(...) Community air carriers and, on the basis of reciprocity, air carriers of third countries shall freely set air fares and air rates for intra-Community air services.". The issue arose due to Vueling adding a surcharge of EUR 40 to the base price of airlines tickets (EUR 241.48) bought by Ms Villegas when she checked in two pieces of luggage online. AG Bot considers Spanish law to be contrary to EU law on this matter.

AG Bot acknowledges that this question arose due to the increased operation on the air carriers market of low-cost carriers. Vueling, as one of them, offers its customers to conclude carriage contracts on various, customized conditions - in the basic option consumers would travel at the lowest price but any checked in baggage would have to be paid extra, while upgraded options are more expensive but cover travel with one checked in baggage within the ticket's price. (Par. 18-21) The question is whether consumer protection does not require the final price given to consumers to include all likely to be made costs, like the cost of the checked-in luggage? Or whether it should be left to the airlines to regulate their price structures as they want. 

AG Bot reminds that the EU legislatures was meant to liberalise the airline market and allow them complete freedom in setting 'air fares'. (Par. 33-34) Consumer protection interests only required that consumers were clearly and in detail informed about the service provided within the price, in order to facilitate comparison of various offers. (Par. 37) AG Bot argues that checked-in baggage requires processing, sorting, storing and delivery thereof by the airlines - costs of which services should be able to be redressed separately from a consumer. (Par. 49-50) Offering an optional price supplement for processing checked-in baggage is seen as also allowing the airlines to offer consumers such prices that are proportional to the services they requested. (Par. 53) If that freedom was not granted to the airlines, then consumers would be faced with having to pay raised ticket prices even if they were willing to travel only with a hand luggage. (Par. 58) Since hand-baggage remains the sole responsibility of consumers and forms part of their personal dignity (as their most precious and indispensable items), the airlines have to refrain from charging for carry-on baggage though. (Par. 54-55) 

AG Bot mentions that if the Court is of a different view as to the payment for checked-in baggage: "This would require the Court to define, for the 28 Member States of the European Union, the size and maximum allowed weight of baggage, taking into account the safety requirements for the type of aircraft likely to be used. It is clear, however, that such a decision aimed at defining the technical rules for checking in baggage goes beyond the powers and remit of the Court. ". (Par. 57) Quite a discouragement for the Court to take a different opinion in the case...

On the one hand the argument of consumers being able to pay less if they decide to travel with hand luggage only is sound and entices to see the cost of checked-in luggage as not forming part of the ticket price. On the other hand, it is hard to talk about ticket prices transparency if certain airlines would include checked-in luggage price in the base ticket price and some others would not do so - since the comparison websites do not always clearly indicate these differences. Maybe the cost of the checked-in luggage should be excluded from the calculation of ticket price for all airlines?