Effective consumer protection in light of Article 47 EUCFR: Opinion of AG Kokott (C-503/15 Margarit Panicello)

Yesterday, Advocate General Kokott presented her opinion in yet another case on Spanish procedural law and the effective protection of consumers against unfair contract terms (Case C-503/15, Margarit Panicello). We have reported on this blog on earlier cases, most notably Banco Español de Crédito, Sánchez Morcillo and Finanmadrid. 

The present case stands out, because of the explicit reference to Article 47 of the EU Charter of Fundamental Rights in the request for a preliminary ruling. The 'referring court' (one of the questions at issue is whether the Secretario Judicial - court registrar - can actually be regarded as a court or tribunal for the purposes of Article 267 TFEU) has asked the EU Court of Justice whether certain procedural rules are incompatible with Article 47, in that they preclude the possibility of judicial review. In Spain, there is a special procedure (jura de cuentas) available to lawyers for the recovery of unpaid fees that are owed to them by their clients. Unpaid fees could be a sign of a soured relationship, and lawyers would rather not litigate against their clients; for them, jura de cuentas is a preferably 'evitable' (avoidable) evil. AG Kokott's opinion makes clear why it might be an 'evitable' evil in light of EU law as well.

To relieve the judiciary, the exclusive competence to deal with the jura de cuentas procedure has been transferred to the Secretarios Judiciales. The procedure is optional; lawyers can still choose to initiate court proceedings. The applicable procedural rules preclude the Secretario Judicial to examine ex officio whether the contracts between lawyers and their clients (natural persons), on the basis of which recovery of unpaid fees is claimed, contained possible unfair terms or unfair commercial practices. AG Kokott's conclusion that those rules are incompatible with Directive 93/13/EEC (on unfair terms in consumer contracts) is perhaps not very surprising, against the background of the CJEU's case law. The opinion is more interesting from the perspective of Article 47 of the Charter, which safeguards the right to effective judicial protection against violations of the rights and freedoms guaranteed by EU law. 

In the case of Finanmadrid, the referring court had made a similar reference to the Charter, but the CJEU avoided answering the question related to Article 47 (click here for some reflections on this case). In yesterday's opinion, AG Kokott explicitly adopts the reference to Article 47 of the Charter. And rightly so, because the procedural rules at issue do not only impede the (full) effectiveness of Directive 93/13/EEC, they may also constitute an intolerable interference with "the right to an effective remedy before a tribunal" enshrined in Article 47. As AG Kokott observes (para. 114), when provisions of national law fall within the scope of EU law, it must be assessed whether they are compatible with EU fundamental rights (click here for a further analysis of Case 617/10, Åkerberg Fransson). Moreover, the CJEU has held in Sánchez Morcillo (para. 35) that: 

"the obligation for the Member States to ensure the effectiveness of the rights that the parties derive from Directive 93/13 against the use of unfair clauses implies a requirement of judicial protection, also guaranteed by Article 47 of the Charter, that is binding on the national court (see, to that effect, judgment in Banif Plus Bank, C‑472/11, EU:C:2013:88, paragraph 29). That protection must be assured both as regards the designation of courts having jurisdiction to hear and determine actions based on EU law and as regards the definition of detailed procedural rules relating to such actions (see, to that effect, the judgment in Alassini and Others, C‑317/08 to C‑320/08, EU:C:2010:146, paragraph 49)."

According to AG Kokott, several elements of the jura de cuentas procedure are problematic in light of the required level of consumer protection. These elements are partly considered with respect to the question whether the request for a preliminary ruling is admissible. They are nevertheless relevant for a substantive assessment of the Spanish procedural rules (cf. paras. 104-105 and 115-117). 

• The first element is the 'reversal of the dispute' or 'shift of initiative' to the client/consumer, who needs to oppose the claim before the proceedings become contradictory (para. 41). Only then, the case will be more closely examined on the merits (paras. 44-47). 
• Secondly, the decision of the Secretario Judicial is non-appealable and immediately enforceable, even though it does not obtain res judiciata force (paras. 48-50 and 91). In AG Kokott's view, enforcement of the decision is equated - by the Spanish legislator! - with the enforcement of judicial decisions, just like judgments given in preliminary relief proceedings (paras. 51-60). This means that there is neither an obligation for the Secretario Judicial to ex officio examine possible unfair terms, nor an opportunity for the client/consumer to raise a defence that would suspend the enforcement proceedings. 
• Thirdly, the jura de cuentas procedure concerns a legal dispute (paras. 83-86) and has a mandatory, binding character, even though it is optional for lawyers (paras. 87-88). 
• Fourthly, even if an ex officio examination of unfair terms would be possible at the enforcement stage, that would not be sufficient, for reasons of both process efficiency and the effectiveness of EU law (paras. 133-136). A decision would still be given and the client/consumer would receive a demand to pay, exercising pressure. Therefore, there is a risk that payment would take place without enforcement proceedings being necessary. 
• Fifthly, filing opposition against enforcement cannot be compared to having the opportunity to oppose the claim before a decision is given (para. 136). Such an opposition would not suspend the proceedings, and would thus pave the way to the payment of potentially unfair claims (para. 137). 

Although these elements are not listed as such by AG Kokott, they directly support her conclusion that the procedural rules at issue are contrary to Article 47 of the Charter as well as Directive 93/13/EEC (read in conjunction with Directive 2005/29/EC concerning unfair business-to-consumer commercial practices). All these elements resonate with the right to effective judicial protection, which includes - inter alia - the right to an effective, proportionate and dissuasive remedy, respect for the rights of the defence, the right to be heard and the principle of equality of arms. The opinion demonstrates that Article 47 of the Charter can provide a framework for the assessment of procedural rules that govern legal disputes falling within the scope of EU law, in this case: a dispute about a contract possibly containing unfair terms (and unfair commercial practices). If and to what extent Article 47 and the principle of effectiveness or the 'full effect' of EU law overlap, remains to be seen. In this respect, the 'referring court' makes a distinction between judicial review in general (question 1) and ex officio examination under Directive 93/13/EEC (question 2). AG Kokott does not separate the notion of judicial review and Article 47 of the Charter from the context of Directive 93/13/EEC, probably because Article 47 has an accessory character: it always requires a connecting link with a substantive provision of EU law. That does not mean that Article 47 does not have anything to contribute. AG Kokott seems to recognise this in her opinion. 

The question of admissibility has not been addressed in this blog. However, AG Kokott's views as regards the independence of the Secretario Judicial (paras. 71-81) are worth reading. It is interesting to note that the Spanish government has argued that the Secretario Judicial cannot be considered as an 'externally' independent authority, which has sparked a discussion about the transfer of quasi-judicial competences away from the judiciary and the Rule of Law (cf. para. 86). If the CJEU follows AG Kokott's conclusion that the request should be declared admissible, it will be difficult to avoid a reference to Article 47, which is an expression of "the fact that the Union is a community based on the rule of law" (see the Explanations relating to the Charter of Fundamental Rights). 

Provision of information on a durable medium: AG Bobek on Case C‑375/15

Today, an interesting opinion by AG Michal Bobek has been published. It concerns more directly the field of e-banking, but also touches on a question of more general relevance to consumer law, namely when information can be said to have been "provided" to consumers and what constitutes a "durable medium" allowing prolonged accessibility of the information. 

In the case under review, a bank was using its e-banking mailbox as a tool to communicate changes in its terms and conditions to its customers. The question before the court of justice boiled down to whether this practice complied with the Payment Services Directive (Directive 2007/64/EC), which requires information on contractual changes to be timely provided to consumers on a durable medium. 

The AG starts with pointing out that, in his opinion, "providing" the information is a separate requirement than the "durable medium". 

The "durable medium" requirement has been the object of some discussion; the AG concludes that the most reasonable understanding of this requirement- not only in the context of this directive- is that it does not entail that information should be provided on a physical or "hardware" support, but that only two main characteristics should be guaranteed: 

1) accessibility for an appropriate amount of time; 

2) unaltered "reproducibility", which entails both the possibility to store the information for the consumer and the impossibility for the service provider to alter the contents of said information.

According to Bobek, it will be difficult for internal mailboxes to fulfill these requirements on their own merits- in other words, the mailbox can hardly be the "support" or durable medium on which information is provided. However, they can more easily be a transmission mechanism for the transmission of information on a durable medium- such as, we understand, a PDF file. 

On the other hand, even in case reasons would exist for the national court to consider the information as given on a durable medium, in itself the transmission via internal mailbox cannot be considered as "provision" of information. The information can, under the directive, only be considered to have been "made available" to the consumer. 

Provision of information, according to the AG, can be said to have been accomplished if a further alert is sent to the consumer through an instrument that he would more easily have regular access to- such as a personal email address or home mail. 

Although this seems to set the bar pretty high, the solution presented could still be seen as more lenient to service providers than the Court's precedent in Content Services, which had considered an email containing a link to a webpage not to represent "giving" of information under the Consumer Credit Directive (2008/48/EC). While the AG seems tempted to suggest that Content Services should be overturned or at least delimited, he mostly directs his efforts at distinguishing the two cases, by pointing out that the two directives (Payment Services and Consumer Credit) employ different language and also pursue different goals. Additionally, the AG observes that in a framework service contracts as the one at hand in the present case, the parties can agree that in general communication will take place via internal emails, thus in this case, once a consumer is alerted, "clicking several times or even typing a user name and passwords" are not actions which is unreasonable to require from a consumer to "receive" information sent to them (see para 82).

  

The opinion addresses several potentially contentious issues- which is confirmed by the fact that several governments (including the Italian and Polish governments) and the Commission intervened in the procedure. 

PS On a side, the opinion also touches on the question of whether the right to be provided information (in a certain way) can be waived by means of consent to standard terms. In this case, the question is not addressed by means of the Unfair Terms Directive- however, the court case stemmed from an injunction by a consumer association which sought to prevent the bank's continued use of a term by which the consumers agreed to information concerning contractual changes being provided in the way discussed. The Commission claimed this was a valid term, the AG disagrees.

AG opinion in Vanderborght (C-339/15): Belgian prohibition of all ads for dental care is EU law-proof.

Last Thursday, AG Bot has delivered his opinion in case C-339/15, a Belgian case concerning the prohibition, in that country, of any form of advertisement relating to dental care.

The national court which has submitted the preliminary ruling request doubts the compatibility of these- quite old- Belgian provisions with primary and secondary EU law- with headings ranging from internal market freedoms to the Unfair Commercial Practices Directive, to the so-called "E-commerce" Directive.

An interesting question that the Court may need to address is whether a similar prohibition can fall under the exception carved out into the UCPD for "health and safety aspects of products", the regulation of which is left unaffected by the directive.

According to AG Bot, the provision does fall under that exception. Looking at the Directive's recitals, the AG observed that under recital 9 makes clear that Member States would "be able to retain or introduce restrictions and prohibitions of commercial practices on grounds of the protection of the health of the consumers". In his view, this observation is reinforced by the fact that according to the commission's guielines on the implementation of the UCPD, all measures adopted by the Member States tgat aim at protecting interests which are not of an economic nature fall outside the scope of the Directive (para 37).  For this reason, the Directive does not apply. 

The e-commerce directive is in principle applicable (para 49), Under article 3 of that Directive, in principle information society services (such as, in this case, online advertising by a professional) are subject to the law of the MS in which the service provider is established. In the case at hand, the professional concerned was located in Belgium- thus the directive sets no obstacles to the applicability of Belgian law.  

According to the Directive's article 8, professionals must be able to give clients information on their activities through the internet; however, in the case of regulated professions, they can only do so provided they comply with the (national) deontological rules of the profession. According to AG Bot, legislation such as that as issue in the main proceesings must "be interpreted as clearly playing a role in ensuring compliance with the rules of deontology regulating the profession of dentist" (para 67). Thus, the AG thinks the restrictions set out by Belgian law may be justified by reasons associated with the compliance with the deontological rules of the profession of dentist. 

In particular, AG Bot explains in the following section assessing the rules' compatibility with treaty law, the protection of public health is such that even quite far-reaching measures, su as the ones discussed in the case, can satisfy the requirement of proportionality (see para 100 and ff). This is both due to the crucial interest that healthcare has for citizens and to the pervasiveness of information asymmetries in this field, which make trust an indespensable element. 

Advertisement of healthcare services and products, according to the AG, is capable of undermining consumer trust. The need to preserve trust is such that negative integration is not desirable and the Union has at several points felt the need to legislate in order to facilitate mobility of providers (para 114).

In any case, the prohibition cannot be unlimited since providers must be able to let the public know of their existence.  This condition, according to the AG, is satisfied as long as a sufficiently detailed publicly available directory exists, "free from enticements or incentives", where names, contact details and areas of expertise are indicated (para 118).

The AG, it seems, considers the disruptive potential of advertisement on patient's trust a given, and bases large parts of his analysis on this fact- it remains to see whether the Court will agree. 

Shared economy regulation -discussion during European Law Institute annual conference

Hans Schulte-Noelke, Fryderyk Zoll, Christoph Busch and Samuel Laurinkari (representative of eBay) were presenting the discussion draft of a Directive on online intermediary platforms, as well as more generally discussing shared economy concerns at the ELI conference. The full draft of the proposed Directive can be found in the latest issue of EuCML!

Computers sold exclusively with pre-installed software not unfair - CJEU in Deroo-Blanquart (C-310/15)

The CJEU is back from its holidays and today a first consumer law case has been resolved. Mr Deroo-Blanquart purchased a Sony laptop in France that, unsurprisingly, came with pre-installed Windows software and various applications. During the first use of the computer, more unusually, the consumer refused to sign the EULA (End-user licence agreement), displayed on the computer screen. Subsequently, and exceptionally, the consumer requested Sony to reimburse him for part of the purchase price of the laptop that would correspond to the cost of the pre-installed software, that he would never use. Sony claimed in return that the pre-installed software and the laptop 'form part of a single and non-separable offer', thus no discount was possible. Sony offered, however, to cancel the sale and to reimburse the consumer for the purchase price (549 Euro) upon return of the purchased laptop. While it might not have been a bad deal, it is likely that it would not satisfy the consumer since he would not easily be able to purchase a laptop without pre-installed software elsewhere. It doesn't come as a surprise then that Mr Deroo-Blanquart rejected this offer and started proceedings claiming payment of 450 Euro for the pre-installed software, as well as 2500 Euro damage suffered as a result of unfair commercial practices. His claims were dismissed by the district court and court of appeals, but the Cour de cassation decided to stay proceedings and turned to the CJEU with the following questions.

1. Is it a misleading commercial practice when a combined offer of sale of a computer with a pre-installed software does not specify the cost of each individual component, when listing each item of pre-installed software? (Art. 5 & 7 UCPD)

2. Is it an unfair commercial practice when a combined offer of sale of a computer with a pre-installed software leaves the consumer only two choices: to accept the software or to cancel (not engage in) the whole sale? (Art. 5 UCPD)

3. Is it an unfair commercial practice when a manufacturer offers only combined offers of sale of a computer with a pre-installed software, without allowing consumers to obtain a computer which is not equipped with pre-installed software?

The CJEU considered the last two questions together and came to the conclusion that on its own it is not an unfair commercial practice pursuant to Art. 5 UCPD if the manufacturer offers for sale a computer with a pre-installed software without any option for the consumer to purchase the same computer model without this software. However, it is for the national court to decide whether this practice was also pursuant to the requirements of professional diligence and did not materially distort or was likely to distort the economic behaviour of the average consumer with regard to the product.

As combined offers are not included in the list of prohibited commercial practices that is included in the Annex to the UCPD, unfairness of such practices could only be evaluated on the basis of general clauses. The requirements for unfairness are thus that the practice has to be contrary to professional diligence and materially distort average consumer's behaviour. While the CJEU leaves it to the national court to assert whether these requirements have been met, it states that:

"it is clear from the order for reference that, inter alia, the sale by Sony of computers with pre-installed software meets the expectations, as revealed by an analysis of the market concerned, of a significant proportion of consumers who prefer to purchase a computer already equipped and ready for immediate use, rather than to purchase a computer and software separately. Moreover, as is also apparent from the order for reference, prior to the purchase of the computer at issue in the main proceedings, Mr Deroo-Blanquart, as a consumer, was duly informed via Sony’s retailer of the existence of pre-installed software on that computer and the specific nature of each of those items of software. Finally, subsequent to the purchase, when using that computer for the first time, Sony offered Mr Deroo-Blanquart the possibility of either subscribing to the ‘end-user licence agreement’ in order to be able to use that software or cancelling the sale." (Par. 35)

Providing consumers with correct information on combined offers is perceived by the CJEU as satisfying the conditions of fairness (Par. 36). Moreover, since the consumer was offered a possibility to cancel the sale, it suggests that the commercial practice was an honest market practice, "the trader thereby demonstrating care towards the consumer". (Par. 37) The CJEU also hints at the commercial practice being unlikely to materially distort consumer's behaviour, as "the consumer has been duly informed, prior to the purchase, that the model of computer that is the subject matter of the sale was not marketed without pre-installed software and that he was therefore, in principle, free to choose another model of computer, or another brand, with similar technical specifications, sold without software or used with different software...". (Par. 41)

The CJEU also doesn't consider the lack of indication of individual prices of each software item as a misleading commercial practice. While the lack of overall price indication would constitute a misleading omission, as material information for the consumer would not be disclosed, the same reasoning does not apply to the components of this overall price. Especially, since the computer is not sold without the pre-installed software, the CJEU considered that it would not impact consumer's transactional decision-making, if he had price information on all individual software applications (Par. 48-51).

Generally, based on past case law, we could not expect the CJEU to consider combined offers to be unfair commercial practices under all circumstances. However, the CJEU seems to give very detailed guidance to national courts in this case, directing them to consider the combined offer under the given circumstances as a fair commercial practice. While an informed consumer has definitely more capability to assess the value of the transaction he is entering into, that does not necessarily give him as much market power as the trader has and may not prevent an unfair commercial practice from occurring. The Court mentions that this consumer could have decided to purchase a different computer, of a different brand, e.g., instead. This presumes the existence of certain market conditions, consumer's familiarity with them, as well as consumer's sharpness in exploitation of these. Is this the continuity of the average consumer's high benchmark or has it just been raised even higher?

CJEU in C-191/15: the law applicable to an action for an injunction and to the material assessment of contract terms is determined by different legal bases

Last Tuesday the Court of Justice also had its say on an extensive number of legal issues lying at the interface of consumer law, private international law and data protection. The judgment in case C-191/15 Verein für Konsumenteninformation v. Amazon EU shed some light on the following aspects:

• the law applicable to an action for an injunction concerning the use of unfair terms in consumer contracts;
• the law applicable to the assessment of a particular contractual term;
• unfairness of a choice of law clause provided for in general terms and conditions;
• the law governing the processing of personal data in the e-commerce context. 

Circumstances of the case

The dispute arouse around several contractual clauses imposed unilaterally by Amazon EU in contracts concluded via its website. An Austrian consumer organization, Verein für Konsumenteninformation (VKI), questioned the compliance of these clauses with the Austrian laws on unfair terms and brought an action for an injunction before a national court to prohibit their use. The courts, however, faced procedural difficulties in establishing the law applicable to the case. These were linked to the fact that the defendant only had its registered office in one Member State (here: Luxembourg), but concluded contracts with consumers from multiple countries (including Austria) – a situation not uncommon in the digital market. Furthermore, it was not clear whether the fact that an action for an injunction concerned the use of unfair terms in a contract could lead to a conclusion that the case itself referred to contractual obligations. This raised the fundamental question of whether the applicable law should be established according to Regulation 593/2008 on the law applicable to contractual obligations (Rome I) or Regulation 864/2007 concerning non-contractual obligations (Rome II).

Judgment of the Court

Law applicable to an action for an injunction may differ from the law applicable as the law of the contract

In its judgment the Court decided to separate a collective action for an injunction to prohibit the use of an allegedly unfair term from the assessment of the term itself, and concluded that in the former case the Rome II regulation should apply, while in the latter Rome I was decisive.

This finding is supported by the need to maintain systemic coherence – not only between the legal acts governing the applicable law (Rome I and Rome II regulations) and jurisdiction (Brussels I regulation, Brussels convention), but also between collective and individual actions.

It follows that, for both collective and individual actions for injunctions, the applicable law should in principle be established on the basis of Rome II, while the examination of the underlying contractual terms should be carried out according to the law designated as applicable based on Rome I.

While the interpretation of CJEU may indeed lead to a situation where the law applicable to an action for an injunction would be different from the law applicable to the contract itself, the analysed judgment highlighted two important safeguards in this respect.

First of all, the Court noted that the law applicable to non-contractual obligations, which arise from the use of unfair terms, should be established on the basis of Article 6(1) Rome II. According to this provision applicable law is the law of the country where competitive relations or the collective interests of consumers are, or are likely to be affected. The Court noted that – in the case of injunctions for the protection of consumers’ interests brought by consumer organisations – this would, in principle, be the law of consumers whose interests are represented by the claimant. This at least partially aligns with the law established for consumer contracts according to Article 6 Rome I regulation (i.e. regarding the protection granted by mandatory provisions of the law of consumer's country).

The Court also expressed criticism as to the possibility of bypassing the rule of Article 6(1) through a reference to Article 4(3) Rome II. The trader would therefore have a hard time trying to demonstrate “a manifestly closer connection” to the law of his country. What is more, the Court explicitly noted that a choice of law clause included in general terms and conditions did not have any effect in that regard.

In its judgment the CJEU also briefly addressed two other questions, relating to the issues indicated at the beginning of this post.

A choice of law clause that is not sufficiently detailed may be considered unfair

On the first point, the Court held – importantly – that a choice of law clause included in general terms and conditions can be considered unfair if it leads the consumer into error by giving him the impression that only the law of that Member State applies to the contract. From this it follows that the trader should inform the consumer – in plain and intelligible language – about the implications of Article 6(2) Rome I, i.e. the fact that the consumer cannot be deprived of the protection afforded to him by mandatory provisions of the law of his habitual residence.

Criteria for establishing the law governing the treatment of personal data: having an establishment in a Member State and processing data in the context of this establishment’s activities

The last question was raised - and answered - somewhat on the sidenote, but in fact touched upon an issue of great relevance from the data protection point of view, i.e. whether an online trader that concludes contracts with consumers resident in several Member States needs to comply with the data protection rules of all Member States to which its commercial activities are directed, or only the one in which its establishment is situated. Unfortunately, the CJEU did not go into much detail in its reply, but mainly recalled its previous case law on this matter, and repeated the criteria that need to be taken into account by national courts. It should be noted, though, that the Court shared the view of the Advocate-General and pointed out that “while the fact that the undertaking responsible for the data processing does not have a branch or subsidiary in a Member State does not preclude it from having an establishment there within the meaning of Article 4(1)(a) of Directive 95/46, such an establishment cannot exist merely because the undertaking’s website is accessible there”. Explicit reaffirmation of the recent judgment in Weltimmo case provides further clarity on the question of which national law applies to particular data processing operations. Finally, it seems that the CJEU's interpretation will remain valid under the General Data Protection Regulation, which includes a very similar wording (the data protection angle of the case is also specifically followed elsewhere).

Concluding remark

The judgment in case C-191/15 is certainly welcome as it gives more clarity on several important issues relating to three different areas of law, which have a direct impact on the e-commerce market. At the same time, it is only one step towards clarifying the application of Rome I and Rome II regulations to activities undertaken by the participants of the digital market. In the light of the continuous development of this sector and its regulatory environment (e.g. the recently proposed regulation on geo-blocking) further guidance might soon be needed. 

Océano meets Francovich (part II): CJEU judgment on State liability and unfair terms

presov.virtualne.sk

Today the EU Court of Justice rendered its judgment in Case C-168/15 (Tomášová; available here in several languages). We reported on this case earlier (see our blog post 'Oceano meets Francovich: AG Wahl on state liability and unfair contract terms'). It concerns the question of State liability for the violation of EU law by a national court.

Ms. Tomášová, a consumer from Slovakia, alleged that the district court of Prešov, in pending proceedings for the execution of an arbitral award, had failed to examine ex officio the potential unfairness of contract terms in consumer credit agreements between her and Pohotovost' s.r.o., which included an arbitration clause. She claimed damages from the Slovakian Republic, because the enforcement of the arbitral award against her was based on an unfair term. Now, two crucial details here are that - according to the Slovakian court seized of the matter, the same district court of Prešov - execution proceedings had not been terminated yet and Ms. Tomášová had not made use of the possibility to claim restitution of the unduly paid amounts. The district court asked the CJEU, in short, (i) whether State liability arises if not all legal remedies made available by the law of the Member State have been exhausted and (ii) whether there is a sufficiently clear and serious breach of Community law in the present case. In its preliminary reference, the district court emphasised "the absolute inactivity" of Ms. Tomášová in the arbitral procedure and the ensuing execution proceedings. It also asked the CJEU about the relationship of compensation for damages on the one hand and unjust enrichment on the other, probably because Ms. Tomášová held both the Slovakian Republic and Pohotovost' liable. 

AG Wahl: balance between effective protection of rights derived from EU law and State liability? 

Advocate-General Wahl concluded, perhaps unsurprisingly, that it follows from the CJEU's case law (in particular, Köbler, Traghetti del Mediterraneo and Târșia) that State liability is limited to infringements of EU law by national judicial authorities whose decisions cannot be remedied in a higher instance. Decisive is whether the court involved is the court in final instance which has given a final and binding decision, so that the violation of EU law can no longer be remedied. Then, State liability may arise. AG Wahl observed that in the present case, a legal remedy seemed to be available against the decision in the execution proceedings, in any case for the party seeking enforcement. In her turn, Ms. Tomášová could have tried to annul the arbitral award. Therefore, AG Wahl stated that it was not possible to establish with certainty that the court involved - the district court of Prešov - would be a court in final instance, as long as a final and binding decision had not been given in the main dispute about the execution of the arbitral award. In other words, Ms. Tomášová's action for damages was premature. In AG Wahl's view, consumers do not enjoy special protection in this respect. 

The balance between the effective protection of rights derived from EU law and State liability is nevertheless a delicate one. AG Wahl's reasoning to conclude that the breach of EU law in the present case was not sufficiently serious, another condition for State liability, is not entirely convincing. For example, he puts forward that the court involved in the execution proceedings does not have all factually and legally relevant information before it to perform an ex officio examination of contractual terms. It can be contested that, while such an examination at the enforcement stage may not be desirable, it may be the only way to ensure the effectiveness of the Unfair Contract Terms Directive; see also AG Szpunar's opinion in Case C-49/14 (Finanmadrid), para. 62: "[A]s an exception and for lack of a better solution, where national procedural rules make no provision for such a review at any earlier stage, the onus is on the court with responsibility for enforcement to ensure that it takes place in the last resort." 

CJEU: the court involved could not have known...

The CJEU begins the present judgment with restating its case law on State liability for the violation of EU law by national judicial authorities. It then moves on to reiterate that there is a sufficiently clear and serious breach of EU law when the court involved fails to apply the applicable law and the CJEU's existing case law on the matter. In this respect, the CJEU refers to, inter alia, its famous judgment in the Océano case. In addition, the CJEU had said in 2006 (Case C-168/05, Mostaza Claro) that "the nature and importance of the public interest underlying the protection which the Directive confers on consumers" justifies "the national court being required to assess of its own motion whether a contractual term is unfair, compensating in this way for the imbalance which exists between the consumer and the seller or supplier" (para. 38). However, it was not until 2009 that the CJEU acknowledged the obligation of the national court to examine of its own motion the unfairness of contractual terms of its own motion, where it has available to it the legal and factual elements necessary for that task (Case C-243/08, Pannon). In the present judgment, the CJEU is careful not to undermine its subsequent case law on this obligation, in particular Asturcom (2009) and Pohotovost' (2010 and 2014). 

Yet, the CJEU jumps a little too fast to the conclusion that the fact that the decisions at issue in the present case date from 15 and 16 December 2008 precludes a sufficiently serious breach. The application in the Asturcom case dates from 5 February 2008, and thus predates those decisions. The present case was brought before the district court of Prešov, which had to rule upon the enforcement of the arbitral award. Regardless of Ms. Tomášová's inactivity or passivity, it must have been obvious to the court that the arbitral procedure resulting in the arbitral award was based on an agreement including an arbitral clause. Arguably, the court could have known that it might be required, when hearing an action for the enforcement of an arbitral award made in the absence of the consumer, to examine of its own motion whether the arbitration agreement was unfair term to the detriment of the consumer. It could be argued that the court could at least have considered to request a preliminary ruling itself, especially if it is possibly the court in final instance (cf. paras. 26 and 41 of AG Wahl's opinion, referring to Article 267(3) TFEU). Apparently, the CJEU does not want to burn its fingers on assessing whether the court involved was indeed a court in final instance, perhaps because it was not obvious from the case file whether or not all legal remedies available at the national level had already been exhausted (cf. para. 25 of AG Wahl's opinion). 

Last but not least, the CJEU considers that the rules for the compensation of damage as a consequence of a violation of EU law are determined by national law, subject to the principles of equivalence and effectiveness. For Ms. Tomášová, all hope is not lost: if it is true that the execution proceedings have not been terminated yet and/or if she can still challenge the validity of the arbitral award, she might be able to get her money back - whether in the form of damages or restitution.

Debt collection agencies as credit intermediaries - opinion of AG Sharpston in Verein für Konsumenteninformation (C-127/15)

The wild wild West of the financial markets knows no boundaries to creativity... Inko is an Austrian debt collection company that helps banks and other consumer credit lenders to recover their payments from consumers defaulting on credit payments. In such circumstances, Inko approaches a consumer on the lender's behalf and gives them a choice of either paying the outstanding debt in full or entering into a repayment agreement. Consumers are given just 3 days to make their choice, i.e. to complete a pre-printed form (instalment agreement) and return it to Inko. Under the terms of this agreement consumers: acknowledge that the outstanding debt is due together with the costs for the default under the initial credit agreement; agree to the repayment plan in monthly instalments; and accept that the payments they make would first cover Inko's fees and only after the due credit amounts. Inko's fees are thus paid by defaulting consumers, as well as Inko receives the interest. 

Since Inko acts on behalf of the lenders, the repayment agreement is concluded between the lender and consumers. Inko claims thus that they have no (pre-)contractual duties towards consumers, such as information duties on the basis of the Consumer Credit Directive (Directive 2008/48). The Austrian Consumer Organisation (Verein für Konsumenteninformation) disagreed and started injunction proceedings against Inko.

Two questions that were referred to the ECJ in these proceedings pertain to the status of Inko under the CCD, i.e. whether they can be seen as a credit intermediary, and the status of an instalment agreement - whether it's a 'deferred payment, free of charge', as defined in Article 2(2)(j) of the CCD. The reason for the agreement to classify as a deferred payment free of charge could be that the fees and interest paid to Inko do not seem to exceed what consumers would need to pay to lenders under Austrian law due to being in default with credit payments.

AG Sharpston considers that Inko acted indeed as a credit intermediary (I) and consumers did not conclude agreements for a deferred payment free of charge (II), as defined by the CCD.  

Ad (I)

There are four requirements in the test for a credit intermediary, pursuant to Art. 3(f) of the CCD: natural or legal person (1) may not act as a creditor (2) while operating in the course of his trade, business or profession (3) and charging a fee for his services (4). (Par 25) The services to be provided should be related to presenting, offering credit agreements to consumers, or preparing or concluding them for them. (Par 26) All these conditions are satisfied in this case, when Inko presents instalment agreements to consumers on behalf of creditors in order to recover their outstanding debts for a fee. Moreover, the notion of the credit intermediary should be broadly interpreted to provide genuine consumer protection. Credit intermediaries are obliged to provide consumers with 19 items of mandatory pre-contractual information from Article 5 (1) CCD "in good time" before the agreement is binding. The AG assesses that:

"The three days indicated in Inko’s specimen agreement is inadequate to enable a borrower to assess his position. Where a borrower is confronted with the option of repaying the outstanding debt in full or completing the instalment agreement, it is unlikely that he has a genuine choice. If he could readily repay the outstanding amount (the less expensive option as his liability for further costs would be reduced), he would probably not be in default. Three days is also insufficient time for the borrower to compare the costs of agreeing to the instalment arrangement with alternative solutions offered by other lenders." (Par 28)

Provision of a high level of consumer protection that the CCD aims at requires that Inko provides pre-contractual information to consumers and in a timeframe longer than the three days offered, unless lenders would provide this information themselves. (Par 29) AG Sharpston continues that the principle of responsible lending also demands such an interpretation. (Par 30)

Ad (II)

AG Sharpston does not consider the instalment agreement as a deferred payment free of charge, pursuant to Article 2(2)(j) CCD. 'Free of charge' should be referred to the definition of a charge as a 'total cost of the credit to the consumer' in Article 3(g), which covers with its scope also recovery costs "incurred where a borrower is in default under the initial agreement, whether those costs are charged by the lender himself or by a debt collector acting on his behalf". (Par 41) It does, therefore, not matter that without the intermediation of Inko, consumers would need to likely pay the same costs to their lender for debt recovery. As long as debt recovery is not free of charge, it cannot be seen as a 'deferred payment free of charge' pursuant to AG Sharpston. (Par 46-51).

Monitoring the application of EU law - EC 2015 Annual Report

ec.europa.eu

The European Commission has published its 33rd Annual Report on monitoring the application of EU law (click here for the full report; see the press release here). The Commission, as "guardian of the Treaties", monitors the Member States' measures for the implementation and application of EU law to ensure that they comply with EU law. This Annual Report highlights the main developments in enforcement policy in 2015, and gives some facts and figures. 

As regards the acquis on consumer protection, the Commission reports that it has raised the implications of the Court of Justice's case law based on the principles of ex officio control by national courts, equivalence and effectiveness with individual Member States, in 'EU Pilot dialogues for non-compliance' and in infringement procedures (pp. 7-8). These mainly concerned the transposition of the Directive on alternative dispute resolution (see also p. 15) and the Consumer Rights Directive. In its press release, the Commission proudly refers to the online Single Market Scoreboard, which monitors the performance per Member State in a number of policy areas and governance tools. Taking all evaluated areas into account, Croatia, Cyprus, Estonia, Ireland and Slovakia performed best in 2015. 

In addition, the Annual Report mentions that the Commission received less complaints about potential breaches of EU law than in 2014 (p. 17). The three Member States against which the most complaints were filed were Italy, Spain and Germany. Many of those complaints were related to justice and consumers (p. 18). On its website, the Commission has published - among other things - National Factsheets for all Member States, containing graphs per country on EU Pilot files and infringement cases. These factsheet also refer to some key preliminary rulings of the Court of Justice per country. For example, for Spain, the Court's BBVA judgment of 29 October 2015 (reported by us here) is briefly summarised. 

Towards a true European Market for retail financial services- responses published

On 14 July 2016 the EU Commission has published the responses (those authorized for publication out of 428 responses received), including a very informative summary of responses (available here) in regard to the Green Paper on retail financial services.

The Green Paper is part of the comprehensive public consultation towards a 'true European market for retail financial services' that the EU Commission launched on 10  December 2015 (on which we have reported earlier). The Green Paper aims to explore the ways in which the EU market for retail financial services, i.e. insurance, loans, payments, current and savings accounts and other retail investments could be further opened up while maintaining an adequate level of consumer protection. It seeks to identify the barriers that consumers and firms face in making full use of the Single Market and the ways in which these barriers could be overcome, including the best use of technology.