Update: Air passenger rights

In the busy past academic year we might have missed to report important consumer news. We will try to update the blog with the relevant references in the coming weeks, starting with this short update on air passenger rights.

Order in KLM Royal Dutch Airlines (C-367/20)

On 12 November 2020 the CJEU issued an order in this case asking for the clarification of some provisions of Regulation No 261/2004. The facts of the case concerned passenger travelling from outside of the EU to the EU via connecting flights (NYC-Amsterdam-Hamburg). The first connecting flight was operated by a non-Community air carrier under a code-share agreement, whilst the second one was operated by KLM (Community air carrier). The first flight was delayed to the extent that the final destination was reached with a delay of more than 3 hours. 

The main point of this order was that in case of connecting flights covered by a single reservation, if at least one of the connecting flights was operated by a Community air carrier, the connecting flights as a whole should be perceived as operated by a Community air carrier - and they fall, therefore, within the scope of the Regulation, pursuant to its Art. 3(1)(b) (para 23). As such, the long delay in reaching the final destination, which occurred as a result of events taking place during the first flight, could entitle the passenger to claim compensation under provisions of the Regulation. This claim could be made against the operator of the second flight, the Community air carrier involved in the performance of the connecting flights, despite them not being the cause of the delay.

Update on the revision of Regulation No 261/2004

This Regulation has been in the process of being revised since 2013, but the Council was at a stalemate in its discussion on it, partially due to the dispute between Spain and the UK as to the position of the airport in Gibraltar. Before the Covid-19 pandemic hit, the works in the Council moved forward - between November 2019 and March 2020. Then other issues took priority, but the revision of this measure is listed by the Commission on its priority list of its work programme for 2021 (See more on the EP website dedicated to this issue).

Vaccination Passports

Travelling during Covid-19 pandemic has been problematic and is meant to be facilitated nowadays by the use of vaccination passports. Notwithstanding various problems associated with the use of these passports (related to privacy, equal treatment, etc - see e.g. a paper by Ana Beduschi 'Covid-19 health status certificates: Key considerations for data privacy and human rights'), the technical process of not only putting them in place but also national passports being recognised in other countries (the ultimate goal for the travel industry) still is somewhat wonky. Just today The Independent reported on the British NHS Covid vaccine passports not being recognised in all of the Member States at the moment - e.g. Hungary, Italy and Latvia are mentioned as problematic. This apparently follows on the EU not having yet linked the UK's certification scheme to the EU one (although this has now been done for Swiss and Turkish schemes). See further: UK's NHS Covid Passport Still Not Recognised in Parts of Europe.

'Vulnerability across disciplines' conference - call for papers

Defining vulnerability has been a foundational element of understanding consumer law. The SLS funded online conference ‘Vulnerability across disciplines’ brings together a variety (e.g. law, economics, health) of academics/professionals to identify how other disciplines understand vulnerability and whether there is any possibility of a broader approach to vulnerability. The conference is due to take place on the 7^th and 8^th of October this year and the call for papers is open until the 1^st September 2021. Click on the photo below to find out more about the conference and how to submit your papers.

 

EU Justice Scoreboard 2021

Today, 8^th of July, the EU Commission released the 2021 EU Justice Scoreboard (here). The Scoreboard is a comparative information tool, and it presents an annual overview of indicators measuring the efficiency, quality, and independence of justice systems in the EU.

According to the Scoreboard, ‘[a]n efficient justice system manages its caseload and backlog of cases, and delivers its decisions without undue delay’. The report presents data on the efficiency of consumer law litigation. In particular, the report shows data on the average length of judicial review cases against decisions of consumer protection authorities applying EU law (regarding the enforcement of the Unfair Terms Directive, the Consumer Sales Directive, the Unfair Commercial Practices Directive, and the Consumer Rights Directive). The data allows for a comparison between 2013, 2016, 2018, and 2019. The most recent data (2019) shows that the Member States where consumer litigation takes the longest are Cyprus (around 1800 days, approximately 5 years), Greece (around 1700 days, approximately 4,5 years); and Poland (around 900 days, approximately 2,5 years). On the other hand, the Member States where consumer litigation is the fastest are Hungary (around 100 days, or 3,3 months), Lithuania (around 150 days, or 5 months), and Romania (around 160 days, or 5,3 months). Even though these results are not representative of all EU Member States (for example, Germany, Luxembourg, and Austria were not included in the study because consumer authorities do not have the power to decide on consumer law infringements), one of the conclusions to take is the stark difference in the length of enforcement of consumer rights within the EU. Nevertheless, several represented Member States achieved faster procedures than when compared to 2016 (with the exceptions of, for example, Slovenia and Poland).

Additionally, the report presents data on the length of proceedings by consumer authorities, including decisions declaring infringements of substantive rules, interim measures, and cease and desist orders (regarding the same Directives). The data presented also covers 2013, 2016, 2018, and 2019. In 2019, among the Member States where consumer authorities take the longest to decide, there is Poland (around 600 days, or approximately 1,6 years), Greece (around 350 days, or 1 year), and Slovakia (around 200 days, or approximately 6,6 months). It is interesting to note the parallel with the length of court procedures presented above. On the other hand, among the Member States where consumer authorities are fastest to decide, there is Romania (around 20 days), Estonia (around 20 days), and Slovenia (around 20 days).

It is also noteworthy that, when measuring the quality of justice systems, the Scoreboard shows data on legal aid in consumer claims of 6 000 euros. It is worrying that, in 2020, several Member States (including France, Slovakia, and Romania) may not consider people with an income below the poverty threshold as eligible for any type of legal aid (partial or total). The Scoreboard includes many more interesting insights, and it is definitely worth a read.

AG De La Tour on Volvo and others (C‑30/20): Article 7(2) of Brussels I establishes international and domestic jurisdiction in cases of tort harms and anticompetitive practices

Case C-30/20 (AG’s Opinion here) concerns the interpretation of Article 7(2) of Regulation (EU) No 1215/2012 (Brussels I), which states that a person can be sued in the place where the harmful event occurred (regarding tort, delict or quasi-delict harms).

Between 2004 and 2009, RH (the claimant) purchased five trucks from Volvo for its road transport business. In 2016, the Commission found that there was a cartel between fifteen truck manufacturers, including AB Volvo, Volvo Lastvagnar AB and Volvo Group Trucks Central Europe GmbH concerning medium trucks and heavy trucks (in the period between 1997-2011). RH sued the Volvo group in Spain, even though three of the four sued companies are based outside of Spain. The Volvo companies contested the international jurisdiction of Spanish courts, and argued that Article 7 refers to the place where the ‘event giving rise to the damage occurred’, which would be the place where the cartel was formed. The referring court questioned whether Article 7 of Brussels I refers solely to international jurisdiction or also to domestic jurisdiction, especially considering existing national case law determining that this rule does not determine the territorial domestic jurisdiction of a court in private competition actions. In this sense, the referring court asked the CJEU whether Article 7(2) of Brussels I should be interpreted as imposing only international jurisdiction in matters relating to tort, delict or quasi-delict, and whether the domestic court with jurisdiction should be determined by national civil procedure rules, or if, on the other hand, Article 7(2) also determines domestic territorial jurisdiction without the need to refer to domestic regulation.

AG De La Tour considered that Article 7(2) does not only impose international jurisdiction, but also determines domestic jurisdiction. The Advocate General analyzed the literal, systematic and teleological element of interpretation. When comparing Article 4(1) of the Brussels I Regulation with Article 7(2), the Advocate General stated that, while the former refers to ‘the courts’ of the Member State where the persons sued are domiciled, the latter refers to ‘the courts for the place’. This difference in wording seems to point towards different jurisdiction scopes. Additionally, since Article 7(2) is a special jurisdiction rule, AG De La Tour reminded that these rules are meant to protect a weak party, and, in that sense, these special rules have a nature of derogation. Finally, these special rules are meant to allow the party to choose the courts of a Member State based on the place with which the dispute has a particular connection, as well as to facilitate the sound administration of justice.

In addition, AG De La Tour considered that this analysis should be supplemented by further details as to the place where the alleged damage occurred, as well as to the specific designation of the court having special jurisdiction. In this sense, the Advocate General differentiated the current case from related cases (such as Tibor-Trans, where the CJEU determined that ‘where the market affected by the anticompetitive conduct is in the Member State on whose territory the alleged damage is purported to have occurred, that Member State must be regarded as the place where the damage occurred for the purposes of applying Article 7(2)’). The Advocate General concludes that, in the relevant related cases, the justification of the connecting factor adopted by the CJEU indicates that the ‘distinctive feature of competition litigation was taken into consideration in concrete terms’ (para 66). 

AG De La Tour also stated that the determination of the place where the damage occurred operated by the CJEU in Tibor Trans is not sufficient to specify the exact location of the court having territorial jurisdiction, which constitutes a source of legal uncertainty (para 70). The AG considered, therefore, that the CJEU should complement the answer given in Tibor Trans, particularly by taking into account ‘the number of proceedings which could be brought due to the extent of the cartel at issue’. In particular, the Advocate General noted that it is necessary to consider that, especially in the vehicle sales and transport sector, the place where the market (affected by the cartel) leads to additional costs is not necessarily the place where the goods were purchased (para 79).

For these reasons, the Advocate General calls for the CJEU to clarify the criteria for identifying the relevant court when interpreting the expression ‘place where the harmful event occurred’ (Article 7(2) Brussels I Regulation), and for the CJEU to draw a parallel with case Verein für Konsumenteninformation, where the CJEU held that ‘the place where the damage occurred is that where the vehicle in question was purchased’. The Advocate General also highlighted that it is important to assess the meaning of ‘purchase’ because, in the context of these proceedings, RH concluded leasing agreements, under which it became the owner of the trucks. This assessment should be done from an economic perspective, because the claim for compensation is based on competition law (para 86). AG De La Tour then interprets it as meaning ‘the place where [the] transaction was concluded’, understood in a wide sense as the place where the agreement was reached (and not where the price was paid) (para 88). Therefore, according to the Advocate General, the criterion of ‘the place where the transaction was concluded’ is sufficient to identify the court ‘objectively best placed to analyse the constituent elements of the defendant’s liability’. In this case, that means the place where the trucks were purchased by RH.

However, the Advocate General also highlighted that, to protect the objective of providing easier access to evidence, two criteria for establishing the location of damage can coexist (para 108). In that case, AG De La Tour also proposes that ‘if the place where the damage occurred does not correspond to that where the injured party carries on business, the action may be brought before the court in whose jurisdiction the injured party is established’ (para 110).

Finally, the Advocate General also considered that, despite the fact that Article 7(2) of the Brussels I Regulation determines territorial jurisdiction at both an international and domestic level, the CJEU should interpret it as allowing Member States to centralize the jurisdiction in certain specialized courts (para 130).

Sanctions for breaching national rules on consumer credit: the CJEU in C-303/20

Earlier this month the CJEU delivered another judgment on the interpretation of Directive 2008/48/EC on Consumer Credit Agreements. In C-303/20 Ultimo Portfolio Investment SA v KM the CJEU was asked to interpret Art. 23 of the Directive, according to which, penalties for breach of national rules on consumer credit must be effective, proportionate, and dissuasive.

The facts

The consumer, KM concluded a consumer credit agreement with Aasa Polska, from which agreement the debt was assigned to the claimant, Ultimo Portfolio Investment. Although the monthly installments for this loan were only around 88 EUR (408 PLN), it transpired that at the time when the contract was concluded, the consumer was heavily indebted, having 23 loans, and her husband independently extra 24 active loans! These together totaled approximately 98 840 EUR (457 830 PLN) amounting to a monthly figure of approx. 2 153 EUR (2300 PLN). At the time, KN was employed with a net salary of approx. 500 EUR (2300 PLN) and her husband was out of work, with no disposable income.

Unsurprisingly, the consumer was unable to honour her payment obligations, and following the default, the claimant brought an action in front of the competent Polish court. The defendant consumer however alleged that before the loan was approved, the lender did not ask any questions to enquire about her financial situation: her outstanding debts, her disposable income, or the debts of her household. Since the claimant was unable to provide proof to the contrary, the court tackled the issue of sanctions, questioning whether the Polish rules correctly implemented Art. 23 of the Directive. In particular, the referring court specified that the Polish Code of Minor Offences only imposes a fine for breaching responsible lending obligations, and this fine is time-barred and only affects the natural persons within the credit institutions such as the director of the company or the credit intermediary.  

The legal question

The referring court effectively asked whether Art. 23 of the Directive must be interpreted to mean that in determining the effectiveness, proportionality, and dissuasiveness of the penalties courts could only take into account provision(s) of the national law specially adopted to implement Art. 23 of the Directive?

The ruling

The CJEU ruled that in interpreting Art. 23 of the Directive, national courts must take into account not only the special national provisions that are adopted to transpose the Directive but also the other provisions of the relevant law that should be interpreted in the light of the working and objectives of the Directive.

In its reasoning to CJEU acknowledged that the low amount of the penalty or that facts that it only applies to natural persons may be indicative of its shortcomings. Referring to its earlier case law it reiterated, penalities to be effective and dissuasive they must deprive the economic benefit of the infringement and must have a positive effect on the consumer in question.

However, the CJEU reminded that under Art. 288 TEFU, directives are legal instruments that are result-oriented, while binding on the result to be achieved they leave discretion to the Member States in the form and method of implementation. Consequently, transposition does not necessarily require legislative action. The existence of general principles and general rules may render a legislative action superfluous. It follows, that in order to determine whether a national law adequately implemented the obligations resulting from the given directive, it is important to take into account not only the legislation specifically adopted for the purposes of transposing the directive but also 'all the available and applicable legal rules.' National courts must therefore consider the whole body of rules of national law and interpret them in the light of the wording and purpose of the Directive in order to achieve the outcome that is consistent with the objectives pursued by the Directive.

In the present case, the court highlighted that Polish law benefits from a range of civil penalties in addition to those in the Code of Minor Offences. Importantly, the CJEU also highlighted that the case at hand would benefit from the penalty applicable for using unfair terms. Namely, Directive 1993/13/EC on unfair contract terms was implemented in Polish law to render excessive charges not binding on consumers (see our report on Profi Credit Polska).

Our evaluation

This judgment provided an important contribution to our understanding of European consumer credit law. It suggests a holistic or we could call a 'contextual approach' to interpreting the fairly vague and general provision on penalties in Art. 23 of the Directive, giving it a more concrete content in a national context. The important message is that in determining whether the sanction meets the requirements of the Directive, national courts must take into account all available sanctions under the applicable national rules, and the CJEU seems to suggest that if more than one sanction is applicable, national courts should weigh them up according to the criteria provided in Art. 23. The judgment also gives useful hints on how to interpret what is effective and dissuasive in the case at hand, and it could be read in connection with other judgments that tackled the aspect of proportionality of sanctions (see our report on Home Credit Slovakia).

One-stop-shop mechanism of the GDPR clarified by the Court of Justice (case C-645/19 Facebook Ireland)

Last week the Court of Justice delivered an important judgment in case C-645/19 Facebook Ireland. The case offered an opportunity to clarify procedural aspects of the General Data Protection Regulation 2016/679. In particular, it involved topical problems related to the one-stop-shop mechanism provided for in case of cross-border data processing. The GDPR assigns the role of a "lead authority" in this context to the supervisory authority of the main establishment or of the single establishment of the relevant controller or processor. Since many digital companies undertaking large-scale data processing in the EU have their main establishments in Ireland, it is the Irish Data Protection Commissioner that appears to be a lead authority in respective cases. Over past years, however, the authority has come under strong criticism for failing to effectively act on complaints brought before it and particulars of the one-stop-shop mechanism have been a subject of debate (see e.g. our previous posts €50m fine imposed on Google..., Further updates on consumer protection..., BEUC files complaints against Tik Tok). In case C-645/19 Facebook Ireland, the Court addressed some of the issues raised, clarifying when authorities of other Member States are competent to exercise their powers.

 

Facts of the case

 

The background of the case was primarily procedural. The Belgian authority brought a case before a Belgian court against Facebook Ireland, Facebook Inc. and Facebook Belgium, with the aim to bring an end to the collection of information on the internet browsing behaviour of Facebook users and non-users by means of cookies, social plug-ins, pixels, etc. The court of first instance considered itself competent to give a ruling and confirmed the alleged infringements. The trader brought an appeal against the judgment and a question was raised whether the Belgian supervisory authority had the required standing and interest to bring proceedings in the first place, and if so, in relation to which violations (e.g. committed by Facebook Inc., Facebook Belgium, and/or Facebook Ireland; before and/or after 25 May 2018, that is the date on which the GDPR and its one-stop-shop mechanism became applicable). 

Judgment of the Court

  

Since the judgment is rather technical, the present post does not aspire to provide its comprehensive overview. An interested reader is rather advised to consult the judgment directly. In this post we will rather pick up on selected points, partly in a different order from the one adopted by the Court.

 

Firstly, the Court engaged with the argument put forward by the platform operator that the legal action concerning the facts precedings 25 May 2018 was inadmissible, given that the previously applicable provisions of Belgian law were repealed following the entry into force of the GDPR. The Court addressed this problem from the perspective of EU law, finding that a supervisory authority which brought an action related to cross-border processing taking place before 25 May 2018 may continue to pursue such an action on the basis of the previously applicable Directive 95/46 (para. 105). Put differently, the one-stop-shop mechanism established in the GDPR does not stand in way of the proceedings by different DPAs in relation to violations preceding the GDPR's date of application. The Court, however, did not engage with the interpretation of previously applicable Directive 95/46, and the question whether its provisions on supervisory authorities could be deemed to have direct effect. By contrast, such an effect was confirmed in relation to the relevant provisions of the GDPR (para. 113).

Arguably, the most interesting part of the judgment concerns the one-stop-shop mechanism itself (the first question). This is where the judgment gets particularly technical, the reasoning is intertwined with extensive references to GDPR provisions and appears to often change direction. Ultimately, para. 71 and the following deserve particular attention. Here the Court finds that the exercise of the power by a non-lead authority to bring actions before the courts of its state cannot be ruled out in the following situations. Firstly, this is the case when the mutual assistance of the lead supervisory authority had been sought under Article 61 of the GDPR and the lead authority did not provide the other authority with the requested information. Secondly, under Article 64(2) of the GDPR, a supervisory authority may request that any matter that is of general application or that produces effects in more than one Member State be examined by the European Data Protection Board with a view to obtaining an opinion, in particular where a competent supervisory authority does not comply with the obligations for mutual assistance imposed on it by Article 61 of the GDPR. Following the relevant procedure (that is, if the EDPB approves), the supervisory authority should be able to exercise the power conferred on it by Article 58(5) of the GDPR and take the necessary measures to ensure compliance with the GDPR.

The remaining part of the judgment involved the potential additional prerequisites for the exercise of the power by a national authority other than lead authority in the above described cases; specifically, whether the actions of such non-lead DPAs should be limited to the controllers having a main establishment or another establishment on their territory. The Court looked at this problem from a twofold perspective and opted for a reading that does not significantly restrict the powers of such non-lead authorities (paras. 84 and 96). Put differently, it remains theoretically possible that a non-lead Belgian authority initiates or engages in legal proceedings against a company like Facebook Inc.

 

Editorial content: paid for? - AG Szpunar in Peek & Cloppenburg (C-371/20)

Let us look at another, more recent, case concerning activities of newspapers. On June 24 AG Szpunar delivered an opinion in the case Peek & Cloppenburg (C-371/20), which looked into practices of Grazia magazine and a possibility of an unfair commercial practice, as defined in Point 11 of Annex I to the Unfair Commercial Practices Directive (UCPD). 

Point 11 of Annex I to UCPD specifically prohibits the use of editorial content in the media to promote products, when a trader paid for the promotion without clarifying this fact in the content/images/sounds. A consumer should be able to easily identify any paid for/advertorial content.

Peek & Cloppenburg Düsseldorf (P&C Düsseldorf) company arranged with the Grazia fashion magazine to publish a double-page article inviting Grazia's readers to an exclusive shopping event called 'GRAZIA StyleNight by Peek & Cloppenburg'. This has been published under the title 'reader offer'. Their competitors - Peek & Cloppenburg Hamburg - claimed that there was an infringement of the prohibition resulting from Point 11 of Annex I UCPD (and as we all know, as long as consumers' interests are exposed to harm alongside the interests of the trader's competitors, UCPD framework may be used by competitors, too - para 33).

In preliminary remarks AG Szpunar first considers the character of the above-described commercial practice. He decides that it qualifies as a commercial practice as the trader - P&C Düsseldorf - initiated the practice and used it to promote its sales (para 22). The fact that they cooperated in organising this activity with the magazine and that magazine could benefit from the activity, as well, does not impact that assessment (para 23). AG Szpunar mentions further that it could be possible for the claim to be raised against both operators, as well as Grazia magazine would qualify as a trader, as well (para 24).

Question 1 - nature of payment

First, AG Szpunar considers whether the payment made by a trader for a promotional editorial content could be non-monetary. As literal interpretation does not provide a clear answer (para 45), AG Szpunar looks at systematic, teleological and historical interpretation next. From the point of protecting consumers against deceptive commercial practices (unidentified advertorial content), it should not matter in what form a trader paid for the editorial content. The possibility of consumer's harm is not influenced by the form of the payment (paras 49-50). Further, if it were possible to pay with non-monetary assets, it would be easy to circumvent the protection of the UCPD framework (para 60) and the scope of the prohibition in Point 11 of Annex I UCPD would be significantly restricted (para 58). The preparatory version of the Annex actually referred to payments or 'other reciprocal arrangement' (para 62) and AG Szpunar does not consider its removal from the final text as opposing a broad interpretation of payment (paras 64-66).

Question 2 - is a non-monetary payment consideration for the advertorial?

In the case at hand P&C Düsseldorf made available to Grazia magazine the rights to use images of its stores in the promotional content, which is what AG Szpunar perceives as the non-monetary payment that qualifies as consideration in the case (paras 73-74). It does not matter here, what was the percentage of the costs of publishing the editorial content that was paid for by a trader vs by a media operator as Annex I UCPD does not require any equivalence (para 75).

AG Szpunar then proceeds to consider whether a definite link between a benefit and promotion that needs to be found needs to be direct or could be indirect. It seems that there is some scope for flexibility in this assessment (para 78). Interestingly, AG Szpunar draws attention to the fact that the notion of 'editorial content' has not yet been interpreted by the CJEU (para 84), which is something for the national court to keep in mind.

One of the interesting elements of this opinion is that it promotes a broad understanding of the notion of 'payment' in the interpretation of yet another provision of European consumer law. Moreover, we should remember current debates on the misleading character of many promotional online activities, where the promotional/advertorial character thereof is not clearly identified (e.g. think of practices of digital influencers). Despite the possibly narrow scope of Point 11 Annex I UCPD (which scope will depend on the interpretation of the notion of 'editorial content'), this opinion and the forthcoming judgment may play a significant role in shaping the response to other promotional practices that could harm consumers.

No strict liability for injuries resulting from published wrong health advice - CJEU in Krone (C-65/20)

In our previous post (What's the worst that could happen?...) we have commented on the opinion of AG Hogan in the case Krone (C-65/20). The case concerned an incorrect health advice having been published in a newspaper, which led to a consumer's injury. The national court asked the CJEU whether Product Liability Directive was applicable in this case.

CJEU confirms on June 10 the assessment of AG Hogan that a printed copy of a newspaper providing consumers with an inaccurate health advice, which, if followed, could lead to a consumer's injury, should not be perceived as a 'defective product'. This means that the strict liability of Product Liability Directive does not apply in this case to the newspaper (their publishers, printers or even author of the health advice - para 39). Provision of a health advice is considered as a service by the CJEU, which is excluded from the scope of the PLD (para 32). Incorporation of the advice into a product - a physical copy of a newspaper - does not change this assessment, as 'the defective nature of a product is determined on the basis of certain characteristics inherent to the product itself...' (para 35). Here, the newspaper is only a medium for the provision of the service - health advice - which means that the service does not impact the inherent characteristics of the printed newspaper (para 36).

No, Escobedo Cortés does not imply that double interest rates must be secured for traders (but nice try, Prima banka Slovensko)

Earlier this week the Court of Justice delivered a brief, yet noteworthy judgment in case C-192/20 Prima banka Slovensko. The case seems fairly stratightforward and the Court, in fact, proceeded to the judgment without a written opinion from the Advocate General. The judgment, nonetheless, provides a useful clarification of where Directive 93/13/EEC on unfair terms in consumer contracts (UCTD) and the associated CJEU case law do not reach. 

Facts of the case

The case involed a Slovak consumer, who concluded a loan agreement with a local bank for the amount of EUR 5 700 at an interest rate of 7.90%. Several months from the conclusion of the contract, the consumer began to default on his/her payments. After appox. 4 months of non-payment, the bank declared the early termination of the term of the loan and demanded the immediate repayment of outstanding ammount along with a default interest as well as an ordinary interest. 

The court hearing the case in first instance upheld the bank's action in part. Specifically, the court considered the claim for default interest to be valid, but dismissed the claim for ordinary interest, on the ground that Slovak law did not allow such accumulation. Indeed, national law appears to have posed certain limits on what creditors can claim in the event of consumer's default and the claims put forward by the bank arguably exceeded those limits. 

Here is where the case get interesting. In the appeal, the bank decided to invoke the previous judgment of the CJEU in joined cases C-96/16 and C-94/97 Banco Santander and Escobedo Cortés (see our earlier comment here). Specifically, the bank argued that the judgment required national legislation to ensure that a borrower who has failed to fulfil his/her contractual obligations should pay not only default interest but also ordinary interest.

Judgment of the Court

The grounds of the judgment essentialy consist of two parts. First, the Court considered the main legal questions in the case at hand. For the Court, these were actually linked not to the provisions of Articles 6(1) and 7(1) of the UCTD, referenced by the national court, but rather to the Directive's scope. Second,  doubts about the consequences of Escobedo Cortés were addressed.

In respect of the Directive's scope, the Court referred to Article 1(2) of the UCTD, which provides that contract terms which reflect mandatory statutory or regulatory provisions shall not be subject to the provisions of the Directive. This may not be immediately inntuitive, since controversy in the case at hand was rather that the terms did not reflect national provisions. The well-established reasoning of the Court in respect of Article 1(2), however, turned out to be useful to make a more general point: that it is not the goal of the UCTD to analyse the content of national mandatory statutory or regulatory provisions, which parties can incorportate into their contracts. It is presumed that national legislature has struck a balance between all of the rights and obligations of the parties to certain contracts, and the UCTD does not intend to interfere with that balance (para. 32). This has to be distinguished from the national provisions relating to the control of unfair terms, whose compliance with the UCTD can be investigated. In the case at hand, however, the contested provisions did not appear to relate to the review of unfair terms and were therefore excluded from the scope of the UCTD (para. 35). Therefore, the Court did not even have to recall that the UCTD is a minimum harmonisation directive.

While this would have sufficed to provide the refering court with useful guidance (that the UCTD was not applicable to the national provisions in question), the Court went on to dispell some doubts related to its previous judgment in Escobedo Cortés. The Court reiterated the context of that case: that it involved an assessment whether national case law that did not prevent the accumulation of interest rates complied with the UCTD. The Court considered that it did; however, it did not follow from that judgment that an accumulation of interests rates must always be ensured under national law (para. 41). It would indeed be rather odd if a directive that seeks to eliminate unfair terms from consumer contracts were to produce such a result.

Towards an EU financial competence framework: will it work?

Following a recent study of FISMA on the development of a financial competence framework for the EU, in April 2021 the EU Commission (DG FISMA) and the OECD International Network on Financial Education announced that they will jointly develop the framework for the EU. The project is part of the EU capital markets union action plan (on which we reported here) where the commission promised to raise trust in EU capital markets by improving financial literacy.

The study defines a financial competence framework for individuals as 'a document outlining key areas of competence pertaining to personal finance (for instance; planning a budget, investing, borrowing and preparing for retirement), and within these categories, specific levels of proficiency.' The study starts from the premise that financial literacy is very important for one's financial wellbeing and is becoming increasingly essential for our everyday lives, especially following the current pandemic that resulted in less intermediation and financial advice. Needless to say, the European levels of financial literacy remain low and show variations between the Member States and groups of the population. Although there are  existing financial competence frameworks that cover key areas such as budgeting and planning, payments and spending, borrowing, as well as risk management and investing, there are considerable differences among each other and a number of Member States do not have any. 

The EU financial competence framework will cover the knowledge/awareness, skills/behaviours and confidence/attitudes/motivation that individuals need to develop and display in order to support their financial well-being throughout their lives. It will be similar for instance to existing language proficiency frameworks that start with a basic A1 level and ends with a C2 level. 

It will be made available for voluntary uptake in the EU by public authorities, private bodies, and civil society to develop policies and educational tools and to assess their effectiveness: It could also provide a basis for public authorities and private bodies to design learning materials and tools for educational purposes for youth and adults. In particular, these could support the inclusion of financial education in curricula in schools, universities, and vocational education institutions in Member States and inform the design of teacher training. The framework could also underpin the setup of awareness-raising campaigns or financial education centres (public or private), and could support the development, implementation and update of national financial literacy strategies. 

The initiative certainly sounds very interesting and perhaps necessary. There are many questions around how and whether the initiative will work, given that the current efforts resulted that on average, adults have major gaps in understanding basic financial concepts. Therefore, in taking these initiatives one must not forget that financial education and financial literacy should not be replacing a high level of consumer protection.