Vacancy for a PhD candidate (European consumer law)

Any (recent) graduate or a student who is about to graduate, with an interest in research and in European consumer law, should consider applying for a PhD position at the University of Amsterdam, within a bigger project "The ABC of Online Disclosure Duties: Towards Better Informed Consumers". See here for more details.

The deadline for application is 26 February 2016.

Refugees among the most vulnerable consumers in Europe

German consumer associations have started reacting to the special demands of refugees that act as arguably particularly unexperienced consumers with extensive cultural and language barriers: for helpful information regarding German law see: link.

Updated European Legislation on small claims to come

At the end of last year a regulation updating both the European Small Claims Procedure and the European Order for Payment Procedure was enacted: see link.

As the key amendment the threshold for small claims will be lifted from 2.000 EUR to 5.000 EUR. This remains below the initially suggested 10.000 EUR, however might still benefit SMEs and obviously an increased number of cross-boarder consumer complaints. In addition, possibilities of oral hearing and taking of evidence were enhanced. 

The changes are to be rendered effective by July 2017.

Quick update: VW

The Foundation "Volkswagen Car Claim" that was established in the Netherlands on the initiative of the Austrian consumer association VKI (Verein für Konsumenteninformation) has collected a total of 60.000 European consumers as of now. This sum is claimed to be far less than the total amount of people who were potentially harmed. Given that there are no legal options to claim collective damage in Germany and Austria, also many German and Austrian consumers have joined this claim. As an important element of the Dutch Collective Settlement Act the respondent - VW - needs to deliberately join the negotiations though.

This international case renders the differences between European and American means of collective redress once more very obvious. The different threat values of the respective legal means (or the lack thereof) may result in very different treatments of consumers (see for one assessment: here).

A look into the future: What does 2016 hold for consumer law?

There is no doubt that 2015 was quite a busy year for the European institutions. In the light of considerable social, economical and political challenges faced by the EU these days, the European Commission under the presidency of Jean-Claude Juncker proclaimed that it would carefully choose its priorities and focus on feasible initiatives. While it is still too early to predict whether this approach will go beyond mere declarations, an overall policy stance can already be inferred from first two work programmes published under rather high-sounding titles: A New Start and No time for business as usual. Key objectives within ten priority areas have been defined and measures to be taken in order to reach them were announced. But what does this actually mean for consumers?

From the consumer law perspective three areas deserve particular attention:

• Measures designed to create a connected Digital Single Market
• Initiatives aimed to further deepen the internal market
• EU international trade policy, especially the Transatlantic Trade and Investment Partnership (TTIP), which is currently being negotiated by the EU and the USA

As we have already reported, first three legislative proposals implementing the Digital Single Market were presented on 9 December 2015. The first one deals with a fully novel issue of digital content (e.g. streaming music, purchasing e-books), while the second one builds upon the existing regulatory framework for online sales of goods. Both measures are seeking to fully harmonise several core aspects of online business-to-consumer sales of tangible goods and supply of digital content, including rules on pre-contractual information duties, consumer’s right to withdraw from the contract, conformity of goods and digital content as well as relevant remedies. Furthermore, a proposal for a regulation on ensuring the cross-border portability of online content services in the internal market was adopted.

In 2016 the Commission will surely try to further proceed with these measures. Its new approach to the European law-making shall ensure that the Digital Single Market strategy does not share the fate of the Common European Sales Law. Efforts are made to secure a common understanding with the European Parliament and the Council on key initiatives already at an early stage. Despite public concerns about the impact of such arrangements on the democratic process, an inter-institutional Agreement on Better Law-making has recently been finalised. Time will tell whether this approach will produce the desired results. In any case, it seems unlikely that the flagship measures implementing the Digital Single Market, which are by no means uncontroversial, will come into force in the nearest months. Also the Dutch Presidency in the Council seems to be taking a ‘wait and see’ attitude to this issue.

2016 will therefore rather be a time of intense discussions, public consultations and further legislative proposals. We may, among other things, expect a proposal aimed to bring an end to unjustified geo-blocking as well as other forms of discrimination on the basis of residence or nationality. Detailed information on the envisaged copyright reform should be presented shortly. Of particular interest are also measures, which have already been adopted in the previous years – such as Regulation 524/2013 on online dispute resolution for consumer disputes – or those at an advanced stage of adoption. It is worth noting that the European ODR platform has lately become operational and will be made available to consumers and traders on 15 February. While a faster and easier, Internet-based mechanism of resolving disputes between consumers and traders sounds like a good idea, much still needs to be done to ensure its reliability and promote its use among both parties to the contract. Furthermore, in the following months we will almost certainly witness a long-awaited reform of EU data protection law. Following the agreement reached in trilogue last month, it appears very likely that the final texts of General Data Protection Regulation and Data Protection Directive will be formally adopted in the first quarter of 2016.

From the consumer law perspective, particular attention should also be paid to the Commission’s Regulatory Fitness and Performance programme (REFIT), i.e. a systematic analysis whether the existing regulatory framework is fit for its purpose. According to the recently published roadmap, a substantial part of EU consumer law will be subject to evaluation within next 18 months, namely:

• Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market (Unfair Commercial Practices Directive);
• Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees (Sales and Guarantees Directive);
• Directive 93/13/EEC on unfair terms in consumer contracts (Unfair Contract Terms Directive).
• Directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers (Price Indication Directive);
• Directive 2006/114/EC concerning misleading and comparative advertising (Misleading and Comparative Advertising Directive);
• Directive 2009/22/EC on injunctions for the protection of consumers' interests (Injunctions Directive).

Additionally, Consumer Rights Directive 2011/83/EU and Regulation 2006/2004 on consumer protection cooperation are also expected to undergo separate evaluations in the coming months. During the first semester of 2016 public consultations on application of consumer legislation in Member States will be launched, which might well be a spark for another heated debate, reminiscent of the time when the Common European Sales Law was still on the agenda.

Without doubt 2016 will be a very exciting year in consumer law. Like every year, we will keep you posted about the most significant developments, so stay tuned!

Consumer financial services: share your experience and have your voice heard by the Commission!

In December 2015 the European Commission launched a three month consultation on how to create a stronger European market for retain financial services (bank accounts, payments, loans, credit cards, mortgages, insurance products). The Commission aims to identify the barriers consumers face when they wish to access financial services across borders and find way to remove these barriers in order to improve product choice and pricing for every European consumer.

As part of this consultation the Commission seeks to hear your voice!

You can share and discuss your ideas on the measures that could be taken to improve consumer access to financial services with director Mario Nava and his team in charge for EU legislation on consumer financial services during a live online discussion. The live chat will take place on Tuesday 26 January 2016, from 15:00 to 16:30 CET. Submit your questions and/or register for the chat here.

The other option is to share your personal experience of being unable to access financial services in another EU country by recording and sharing a short video. See the instructions here.

Collective actions may not replace individual ones - opinion AG Szpunar C-381/14, C-385/14 (Sales Sinués)

14 January 2015: AG Szpunar's opinion in joined cases C-381/14 and C-385/14 (Sales Sinués)

AG Szpunar published today his opinion in a new Spanish set of cases concerning unfair contract terms in consumer credit contracts. While Spanish consumers are trying to invalidate some terms in their credit contracts, based on their unfairness, Spanish banks asked for the stay of these individual proceedings, since there are also collective proceedings ongoing in Spain on the same issue (Par 17-18). Spanish Code of Civil Procedure seems to demand that individual proceedings were stayed in such cases and that the outcome of collective proceedings will be decisive for an individual case, without the consumer being able to dissociate herself from the collective action. Spanish courts are unsure whether these provisions of national law are compliant with consumer protection standards set in the Unfair Contract Terms Directive 93/13 since, among other things, at the moment of the referral the collective proceedings have been ongoing for four years and no date has yet been fixed for the hearing (Par. 21)

AG Szpunar in its opinion stresses that the literal interpretation of the Spanish Code of Civil Procedure provides a possibility for national courts to stay proceedings, and not an obligation to do so (Par. 29, 60), which opinion is shared by the Spanish Government and the Commission (Par. 34). However, Spanish courts appear to differently interpret this provision, including, as giving precedence to collective proceedings, which mandates the stay of individual proceedings (Par. 31-33). AG Szpunar concurs with the Commission's point of view that individual and collective actions against unfairness serve different purposes and collective actions are just "a complementary means of guaranteeing" consumer protection (Par. 53-54). This follows also from the abstract test used in collective proceedings, not allowing to include careful examination of all circumstances of an individual case (Par. 55). As such, Member States need, first, to guarantee a possibility to raise an individual claim of unfairness (Par. 56). Following on these arguments, AG Szpunar concludes that "it is therefore clear ... that, under Directive 93/13, the relationship between collective actions for an injunction and the specific terms by which consumers are bound must be one that is favourable to the consumer, not one which poses an obstacle to individual actions or replaces individual actions by collective actions for an injunction" (Par. 59). He evaluates thus the Spanish procedural rules, unsurprisingly, as potentially breaching the principle of effectiveness if they oblige national courts to stay individual proceedings when parallel collective proceedings are being conducted, with consumer not being able to dissociate herself from the collective action (Par. 67 and further).  "... if ... it is to be presumed that Directive 93/13 confers individual in personam rights on which it must be possible to rely in the context of individual legal actions and that collective actions for an injunction are complementary to, and different and distinct from individual actions, then there is no justification for the mandatory or automatic staying of individual actions until such time as a final judgement is delivered in collective proceedings" (Par. 68). Another important point raised is that the outcome of both procedures may differ, due to the need to take consumer's contractual individual circumstances into account in individual actions: "Accordingly, a consumer who decides to act in his individual capacity should not be directly affected by a judgement delivered in collective proceedings, even though the court hearing his individual action will obviously take that judgement into account." (Par. 72). Concluding, if the consumer would choose to follow collective way of enforcing her rights - its her choice, but the choice needs to be left open to the consumer to dissociate herself from the actions of a consumer organisation and to raise her individual claims separately (Par. 74).

No administrative fines for misbehaving airlines - opinion AG Bot in C-145/15, C-146/15 (Ruijssenaars and Jansen)

14 January 2016: AG Bot in joined cases C-145/15, C-146/15 (Ruijssenaars and Jansen)

As we all know, Regulation No 261/2004 on air passenger rights has been a subject of controversy for quite some time - with airlines exploring any unclarity and gap in it, in order to refuse to pay out compensation to passengers. Today, AG Bot gave an opinion concerning the interpretation of Article 16 of this Regulation - obliging Member States to create an effective enforcement of its provisions - stating that the national enforcement body does not have competence to place administrative fines on airlines, in order to force them to pay out individual compensation due to their passengers.

A few passengers of flights with Royal Air Maroc and with KLM, whose flights were respectively either cancelled or delayed by 26 hours, demanded compensation on the basis of Art. 7 of the Regulation 261/2004. Since, unsurprisingly, the airlines refused to pay it, the passengers asked the secretary of the State (staatssecretaris) to place administrative fines on the airlines to force them to apply the rules of the Regulation. The secretary of the State refused to do so and during the appeal as to his decision, the Dutch courts referred the case to the CJEU, asking whether the secretary of the State has the competence to issue such administrative fines. This, considering that the legal relationship between the airlines and the passengers is of civil law character, and thus civil law measures should apply (Par. 15).

Pursuant to Article 16 of the Regulation, the Member States need to make sure that its provisions are enforced and should indicate a national body, which would supervise this enforcement. AG Bot considers that the literal interpretation of the text of this provision does not lead to the conclusion that the national body supervising the enforcement of the Regulation has an obligation to use administrative fines, when the airlines refuse to pay compensation to the passengers (Par. 24). Recital 22 of the Regulation is invoked since it states that "the supervision should not affect the rights of passengers and air carriers to seek legal redress from courts under procedures of national law". (Par. 26) This should suggest that in case the airlines refuses to pay compensations, passengers should go to national courts to demand enforcement of their compensation rights instead of asking the secretary of the state to place an administrative fine on the airlines (Par. 35). AG Bot considers that the obligations of the national body laid down in Article 16 of the Regulation are, thus, more of a collective nature and do not stretch to cover compensation for breach of individual rights of passengers (Par. 28). However, it may remain in the discretion of the Member State to allow the national body to also react to individual passenger complaints, and either act as a mediator or as an advisory body, and, generally, allow out-of-court dispute resolution (Par. 32). This does not diminish consumer protection, since consumer's access to judicial justice remains a possibility (Par. 35).

While this interpretation of Article 16 of the Regulation is not surprising, during ongoing works on the new text of this legal act, the European legislator could consider giving some more teeth to the enforcement bodies, to restrict airlines' ignorance of the Regulation's rules.

Foreign currency exchange transactions connected to foreign currency denominated loans are not investments

Judgment of the CJEU in C-312/14 Banif Plus Bank Zrt. v Márton Lantos and Mártonné Lantos delivered on 3 December 2015 

The Hungarian District Court of Ráckeve (Ráckevei Járásbíróság) in  referred an interesting question to the CJEU: can the foreign currency exchange transaction be legally separated from the underlying foreign currency denominated loan, and if so, what are the implications for the consumer?

As we have reported earlier, AG Jääskinen first of all considered that the reference for preliminary ruling is inadmissible. However, should the CJEU decide to proceed on the merits of the case, AG Jääskinen was of the opinion that the CJEU should answer the question negatively. The AG disagreed with the referring national court that the foreign currency exchange can be legally separated from the underlying loan contract and be considered a separate, derivative contract, a forward currency transaction. 

The CJEU did consider the request for preliminary ruling admissible (see paras. 35-42), and following AG Jääskinen's opinion, ruled that foreign currency exchange transactions connected to foreign currency denominated loans are not 'investment services or activities' within the meaning of Art. 4(1)(2) of MiFID (para. 76). Consequently, consumers of foreign currency loans are not considered to be investors and do not enjoy the protection guaranteed by Art. 19 MiFID (para. 75).

First, the CJEU rejected that the transaction in question is an investment service or activity listed in section A Annex I of MiFID, because it is incidental to the granting and repayment of the loan (para. 55), and serves no other purpose than to perform the credit contract.

Second, the CJEU rejected the argument that the transaction falls within the scope of 'dealing on own account' under Section A(3) of Annex I MIFID, because this means trading proprietary capital that results in contracts for one or more financial instruments (paras. 58-59). In the present case however the transaction did not result in concluding a contract for a financial instrument. Instead, it served to secure the granting and the repayment of the loan (para. 60-61). 

Third, according to the CJEU, the transaction cannot be considered to fall under Section B of Annex I MIFID, under which a grant of  loan or credit may constitute an ancillary service, because this includes only loans granted for the purpose of concluding one or more contracts for financial instruments, and this was not the case here (para. 63-68).

Finally, the CJEU rejected the argument that the foreign currency exchange transaction falls under any financial instrument listed in Section C of Annex I MIFID, particularly futures. Futures, such as forward currency transactions, are a type of derivative where two parties undertake to buy or to sell, on a subsequent date, an underlying asset at a price fixed at the time of contract conclusion (para. 69). The transaction in question however does not serves the purpose of a sale of a financial asset at a price which is fixed at the time of contract conclusion. In fact, according to the CJEU, there is no distinction between the loan agreement and the future currency sales transaction, since the latter serves the performance of the loan contract, that is, the payment of the capital and the scheduled repayments (paras. 70-71). In addition, the value of the currency (that is to be taken into account for the calculation of repayments) is not fixed in advance.It is rather determined on the basis of the sales price of the currency on the date of each monthly installment (para. 74).

Consequently, 'clauses of such a loan agreement relating to currency conversion accordingly do not constitute a financial instrument distinct from the operation which is the object of the agreement, but merely a term of the agreement which is an inseparable part of the performance.' (para. 72). This also means that in foreign currency denominated credit contracts consumers may be protected by Directive 1993/13 on unfair contract terms and by on Directive 2008/48 on consumer credit (paras. 48-49), but not by MiFID.

As we can see, the CJEU did conduct a more thorough analysis than AG Jääskinen (perhaps it also had more information to rely on), but it arrived to the same conclusion. The CJEU thoroughly analyzed whether the foreign currency transaction meets the requirements of MiFID and did some unpacking whether elements for a forward currency contract are met. It is now clear that foreign currency exchange transactions are not separate contracts for financial instruments, and consumers do not enjoy the protection MiFID guarantees for investors. The question is whether this is detrimental for consumers given that they do enjoy protection under Directive 1993/13 (allows for challenge of fairness of foreign currency exchange clauses) and Directive 2008/48 (provides for information requirements). 

German Parliament passes Act on consumer ADR

The German Parliament has passed its respective Act – Verbraucherstreitbeilegungsgesetz (VSBG) – implementing the requirements of the ADR-Directive with a slight implementation delay on 3 December 2015. Please access the relevant documents here.

In the next step the Act still needs to be approved by the Federal Council (Bundesrat). It is expected to enter into force by April.

Importantly, Germany is stricter than the Directive when it comes to forbidding ADR bodies that are close to traders or trade associations (§ 1(2) VSBG). It is in line with the Directive when it comes to such requirements as low/now costs for consumers (§ 23 VSGB stipulates the few instances in which consumers may be charged a fee). Consumers do not have to contract a lawyer to represent them before an ADR body. Where no special board exists, there will be a general board to collect the remaining cases (§ 29 VSBG). With the view to financing emphasis is put on the trader side. It is acknowledged that the outcome of an ADR procedure may differ from that of a court judgment ( § 16(1) III. VSBG). 

German small claims procedures in the civil courts are generally said to be working rather well compared with other European countries. The two systems can, therefore, be regarded as competitors. It remains to be seen how successful consumer ADR enforcement will be in Germany. As of now there is only a scattered ADR landscape. With the implementation it will be overarching: For every consumer problem access to an ADR is now guaranteed.