Friday, 16 September 2016

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). I reproduce part of the summary I wrote for the blog 'Recent developments in Consumer Law' here, because it builds on a previous blog I have posted here

The case discussed in the present blog stands out, because of the explicit reference to Article 47 of the Charter 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. 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). 

Saturday, 6 August 2016

NGO Milieudefensie starts tort proceedings against Dutch State for bad policy on air quality

New tort case against Dutch State   
1 August 2016, the Dutch environmental NGO Milieudefensie initiated tort proceedings against the Dutch State because the Dutch State’s air quality policy would be insufficient. The Dutch State does not reach EU’s norms on air quality, let alone the even more stringent international norms formulated by the World Health Organization. Hard science reveals the causal link between air pollution and earlier deaths of people. The rights to health and to life are fundamental human rights. And, according to Milieudefensie, it is easy to improve air quality by taking some simple measures – for instance, by lowering the maximum speed limit on highways. In short, the Dutch State unnecessarily endangers the lives of its citizens and therefore violates its duty of care not to create a dangerous situation (“gevaarzetting”). The Dutch private law Court should therefore order the State to change its air quality policy, says Milieudefensie.

Echo of Urgenda case?          
This case reminds us of the Urgenda case decided somewhat more than a year ago. In the Urgenda case, the Court of First Instance in The Hague ordered the Dutch State to increase its CO2 reduction standards to mitigate climate change. It did so on the same tort-basis as invoked by Milieudefensie: the State did not reach its duty of care not to create a dangerous situation, leading to foreseeable damage, while such can relatively easily be prevented. The Court thereby gave effect to international and European climate agreements, reasoning that these shape the tort-based duty of care – even though these agreements are otherwise not directly applicable in the Dutch courtrooms.

Trias Politica concerns           
The Urgenda case led to a lot of controversy. Many commentators found the decision unacceptable in light of the trias politica ideal. This ideal (also known as the separation of powers doctrine) dictates that whereas the legislature may create the law, the judiciary should only apply the law. By ordering the State to change its climate change policy, the Court in Urgenda would have exceeded its discretion and entered the the other branches of government's realm of powers. Based on this argument, the Dutch State has filed an appeal in the Urgenda case.

The Milieudefensie case immediately met the same critique in popular media.[1] Apart from the question whether the critique is just with respect to the Urgenda case, it is certainly doubtful that it is with respect to this new case. That is, the European directive 2008/50/EC, invoked by Milieudefensie, is part and parcel of positive law in the Netherlands. By holding the Dutch State to its obligations flowing from this directive, the Court would do no more than applying existing law – even though this law has been made by the EU legislature rather than the Dutch legislature.

A substantive private law duty of care         
Still it remains to be seen whether the Court will follow Milieudefensie’s suggestion, to use this directive to give substance to the duty of care of the Dutch State, a duty that follows from Dutch tort law. And even more passionate is the question whether it will use the legally non-binding WHO guidelines as well, and to what extent it will rely on the fundamental rights invoked by Milieudefensie. To do so would fit the ongoing trend of the constitutionalization of private law in Europe. On the other hand, it is very well possible that the Dutch Court of Appeal will quash the Urgenda decision invoked as a precedent by Milieudefensie, which would lower Milieudefensie’s chances to success.

But even if the Urgenda decision remains intact – thus the possibility to color duties of care with non-binding or non-directly applicable international and European law – even then it is not sure that the Court in the Milieudefensie case will order the State to change its policy like it did in the Urgenda case. That is, in Dutch tort law there has to be a serious amount of damage to establish a tort. In Urgenda, there was consensus between the parties about the hazardous and serious consequences of climate change. Milieudefensie claims that people on average can live 9-13 months longer if air quality in the Netherlands is properly improved. Because this statement is based on scientific information issued by a governmental agency of the Netherlands, it is unlikely that the Dutch State will contradict it in courtroom. However, whether these statistics will also be considered tortuous ‘damage’ is not necessarily evident, given that policy – especially policy related to traffic situations – involves the acceptance of statistical chances to more or earlier deaths of people.

PhD research Laura Burgers
The subject of my PhD research is the democratic legitimacy of judicial law-making in European private law, with environmental liability as a case-study. In this project, I use political philosophy on deliberative democracy as a normative framework to assess the democratic legitimacy of judicial decisions on environmental liability in European private law.  In another blogpost, I will reveal more about this normative framework.

[1] Albert van der Wijk ‘Verontrustende trend’ Volkskrant 3 August 2016; ‘Milieudefensie gelooft niet in democratie’ De Telegraaf 3 August 2016

Wednesday, 13 July 2016

A victory for the banks? Opinion AG Mengozzi in high-profile cases on Spanish 'floor clauses'
This morning, Advocate-General Mengozzi presented his Opinion in three high-profile cases that have generated a lot of attention in Spain (Joined Cases C-154/15, C-307-15 and C-308/15 (Gutiérrez Naranjo v. Cajasur Banco, Palacios Martínez v. BBVA and Banco Popular Español v. Irles López). I reproduce the summary I wrote for the blog on 'Recent developments in European Consumer Law' here:

The cases discussed in this blog post go far beyond the parties' interests and are perceived as being part of an ongoing battle between "the banks" on the one hand and "the consumers" on the other. They originate from a disagreement between the Spanish Supreme Court (Tribunal Supremo) and lower courts about the required level of protection under the Unfair Contract Terms Directive (93/13/EEC). The subject matter of the three cases are the so-called cláusulas suelo (literally: 'floor clauses'), i.e. minimum interest rate clauses, used by banks in mortgage loan agreements. In Spanish media, today has already been called "D-Day" for cláusulas suelo. 

What are cláusulas sueloAG Mengozzi explains: "Those clauses allow a banking institution which grants a variable rate mortgage loan to impose a lower limit on the variable interest rate, so that even if the applicable interest rate [e.g. EURIBOR] is below a certain threshold (or 'floor'), the consumer will continue to pay minimum interest equivalent to that threshold." Such 'floor clauses' were common practice in Spain. In a judgment of 9 May 2013, the Tribunal Supremo declared cláusulas suelo to be unfair. In short, it found that those clauses were not transparent: consumers were unable to foresee the economic and legal burden the contract would place upon them.

The present cases concern the effects of this judgment, more specifically the question of retroactive effect. Under Spanish law, the general penalty for unfair terms is invalidity, which creates a right to full restitution. To what extent can consumers claim restitution of the amounts paid on the basis of 'floor clauses'? According to the Tribunal Supremo, such a refund is only due from the date of the judgment, 9 May 2013. It held that the temporal effects of its judgment could be limited under the principles of legal certainty, fairness and prohibition of unjust enrichment, because the banks had acted in good faith and there was a risk of serious economic difficulties (cf. the CJEU's judgment of 21 March 2013, C-92/11, RWE Vertrieb). However, lower courts have questioned the date from which the refund should begin. Is the Tribunal Supremo's limitation of the restitutory effects produced by an unfair - and therefore, under Spanish law, invalid or void - contract term compatible with the interpretation of "non-binding" in Article 6(1) of Directive 93/13? Should the refund of the amounts paid by the consumer on the basis of the unfair term arise only on the date of a court decision confirming the unfairness, or from the date the contract was concluded?

Advocate-General: Tribunal Supremo's approach is permissible 
AG Mengozzi first establishes that the Tribunal Supremo, by classifying 'floor clauses' as unfair terms in particular because of a lack of sufficient prior information, has not afforded a higher level of protection to consumers than that offered by Directive 93/13 and that thus, ascertaining the requested interpretation is relevant (paras. 43-50). He refers to the CJEU's case law (inter alia, its judgment of 30 April 2014, C-26/13, Kásler) to conclude that the requirement of transparency within the meaning of Article 4(2) of Directive 93/13 must be understood in a broad sense: not only should the relevant term be grammatically intelligible to the consumer, but the consumer should also be able to assess the economic consequences resulting from the application of that term, including the calculation of the repayments and interests.

As regards Article 6(1) of Directive 93/13, AG Mengozzi considers that the expression "non-binding" is neutral. He then moves on to say that the CJEU seems to have considered the invalidity of unfair terms not as the only way to satisfy the requirement that unfair terms are non-binding (para. 60). The CJEU has not decided that national courts must declare those terms invalid and create a corresponding right to restitutio in integrum (para. 64). From 9 May 2013, 'floor clauses' must cease to exist in the Spanish legal order: they must be eliminated from existing contracts and can no longer be included in new contracts. Therefore, the full effects of invalidity under Spanish law are guaranteed from 9 May 2013 and the effectiveness of Directive 93/13 is fully assured pro futuro. With regard to the prior period, AG Mengozzi observes that EU law harmonises neither the applicable penalties nor the circumstances in which a supreme court decides to limit the effects of its judgments. This means that the present situation falls within the national procedural autonomy of the Member States (para. 68). In AG Mengozzi's view, the Tribunal Supremo's approach - the temporal limitation - is permissible in the light of the principles of equivalence and effectiveness, provided that it remains quite exceptional (p. 73). While he disagrees with the alleged "innovative nature" of the judgment of 9 May 2013, AG Mengozzi points out that the Tribunal Supremo struck a balance between the protection of consumers and "the macroeconomic challenges to the already weakened banking system of a Member State" (para. 72). The safeguarding of legal certainty is "a concern shared by the EU legal order", "on account of the many legal situations which are potentially affected and which could undermine the stability of an economic sector" (para. 74).

A victory for the banks?
AG Mengozzi's consideration of "macroeconomic challenges" is in line with the Tribunal Supremo's argument that its judgment, without a restriction of the retroactive effect, would cause a risk of serious economic difficulties. It has been said that the risk for the Spanish banking sector is 3.500 million euros; no wonder that the AG's Opinion is perceived as a victory for the banks. Yet, the Opinion passes over a number of counter-arguments, brought forward on behalf of the consumers involved as well as by the referring courts.

First, it has been doubted whether the banks have actually acted in good faith.[1] As AG Mengozzi concludes, the judgment of 9 May 2013 was not really "innovative"; the CJEU's case law after that date is "nothing other than the logical continuation of a series of earlier judgments" (para. 49). Can it be said that the banks' "good faith" only ceased to exist on 9 May 2013? In addition, the banks themselves, who drafted and used the highly disputed 'floor clauses', were the cause of the lack of transparency making those clauses unfair. In this respect, AG Mengozzi's remark that the conditions governing the circumstances in which a supreme court may limit the effects of its own judgments fall within the scope of the Member States' national procedural autonomy (para. 80) is unsatisfactory, especially given the emphasis he puts at the same time on the balance struck by the Tribunal Supremo (paras. 72-74). If the Tribunal Supremo's reasoning is subjected to scrutiny in the light of the principle of effectiveness, the part on good faith could be more closely examined as well.

Secondly, the question has been raised whether the Tribunal Supremo's approach is contrary to the prohibition imposed on national courts of revising or altering the content of an unfair term (see, e.g., the CJEU's judgment of 14 June 2012, C-618/10, Banco Español de Crédito). AG Mengozzi does not answer this question directly. Perhaps limiting the effects of invalidity is not the same as varying the content of contract terms, the ratio behind this prohibition might nevertheless apply equally.[2] It is not entirely clear why the required "deterrent effect" (para. 71) should not date further back than 9 May 2013. One could argue that the banks are now rewarded for awaiting the Tribunal Supremo's judgment before changing their practice. In the words of Prof. Francisco de Elizalde (footnote [1]): "It could lead possible infringers to believe that the greater the damage, the more lenient the remedies."

Thirdly, AG Mengozzi appears to pay strikingly little attention to the position of consumers. Admittedly, achieving the balance sought by Directive 93/13 is not the same as favouring the consumer. But AG Mengozzi dismisses the plight of Spanish consumers too easily, where he says that a consumer who had concluded a loan agreement containing a 'floor clause' could simply repay one loan with another from a different banking institution, and that application of the 'floor clause' would not have led to a substantial change in the monthly amounts payable by consumers anyway (para. 73). He seems to overlook the economic risk mortgage loan agreements and 'floor clauses' pose to the consumer's household finances. His statement is all the more curious in relation to the finding of unfairness of those very same 'floor clauses'.

Finally, it is a pity that AG Mengozzi only spends one brief paragraph at the very end of his Opinion on the relationship between collective and individual actions (para. 81). In Case C-308/15, a specific question was asked by the referring court about the meaning of the right to effective judicial protection as enshrined in Article 47 of the EU Charter of Fundamental Rights in this respect (see para. 32). Not only does AG Mengozzi seem to deny the precedent effect of the Tribunal Supremo's judgments, he also does not seize the opportunity to propose a more systematic solution to the disparities between the Tribunal Supremo and lower courts (see also para. 23). He just presumes that the implementation by the lower courts is "likely to safeguard the principle of equality and the principle of economy of procedure" (para. 81), without even mentioning Article 47. Is this another missed opportunity? We will know when the CJEU renders its judgment in the cláusulas suelo saga. To be continued. 


[1] See further: Francisco de Elizalde, 'The Rain in Spain Does Not Stay in the Plain - Or How the Spanish Supreme Court Ruling of 25 March 2015, on Minimum Interest Rate Clauses, affects European Consumers', EuCML 5/2015, pp. 184-187; link.
[2] The Commission, for example, has argued that the declaration of an unfair term as invalid "is not compatible with a limitation of the effects of such invalidation, unless such limitation is necessary to preserve the principle of res judicata" (see EurActiv).

Wednesday, 6 July 2016

Researchers in Utopia? Benefits and dangers of case-law databases

Research on European law can without doubt benefit enormously from case-law databases, including the recently introduced European Case Law Identifier Search Engine (ECLI Search Engine, made available at the European e-justice Portal) and the Centre for Judicial Cooperation Database (CJC Database, available through the European University Institute Centre for Judicial Cooperation’s website).

ECLI Search Engine    
The ECLI Search Engine already comprises 4 million judicial decisions, coming from 8 EU Member States (Spain, France, the Netherlands, Germany, Austria, the Czech Republic, Slovakia, Slovenia and Finland), the Court of Justice of the EU, the European Court of Human Rights and the Board of Appeal of the European Patent Office. One can search this database on the basis of simple search terms, or on the basis of numerous criteria such as country of origin, judicial institution, date, field of law, reference to EU law, et cetera. This creates the great opportunity for both researchers and practitioners to search – only by pressing the enter button once – within the decisions of all these courts.

CJC Database
The CJC Database comprises a selection of judicial decisions, made by scholars and accompanied by case notes. The CJC works on several highly interesting topics: European judicial cooperation in the fundamental rights practice of national courts; General principles of EU law and development of judicial remedies and the interaction between international and domestic courts; Migration related judicial dialogue and legal issues. Thus, not only the outcomes of the CJC research project is promising, but also the possibilities its database will create for further research.

But be careful…         
Yet one should also be aware of the drawbacks that come with (the present version of) the ECLI Search Engine. It is, for instance, still far from complete. Moreover, references to EU law are not always made uniformly, which makes them hard to find even with this database. And available translations in English or French of judicial decisions are sometimes not included in the search engine. Experts have therefore suggested continuous amelioration on these points.[1] As for the CJC database, it should be used carefully, being conscious of the fact that it comprises only a selection of cases, made in course of a specific research project. 

More generally, researchers should be mindful of possible biases that come along with the use of databases. By searching for a specific law, one might exclude results that could be relevant for one’s type of research, e.g. because they have a similar subject-matter. And available key words might guide the researcher’s way of thinking, even sub-consciously. The same holds true for practitioners. Their search biases, leading to a limited, not necessarily representative set of cases, could have persuasive influence on new judicial decisions, which could eventually influence the way in which our positive law develops.

Digital possibilities     
But whilst carefully keeping in mind these dangers, legal researchers will mostly we very happy with the possibilities the 21st century offers. Those who are not so much at home in the digital world should not hesitate to ask for help when using databases. The whiz kids who created them included handy tools that some lawyers (including myself) are not immediately aware of, even when having read the manual. To search deeper within the obtained results using a smart search term, for example, can avoid a lot of unnecessary reading work.

[1] M. van Opijnen & B. Veenman ‘Jurisprudentie zoeken op Europese schaal’ NtER (2016) 4, 137-140