Tanchev AG in C‑208/18 Petruchová. On FOREX traders as ‘consumers’ for jurisdictional purposes.

Update 18 February 2020 see Matthias Lehmann’s additional analysis here, focusing on the distinction with MIFID rules.

Update 20 October 2019. The CJEU on 3 October agreed with its AG.

Tanchev AG Opined mid last month in C-208/18 Jana Petruchová v FIBO Group Holdings, essentially on the issue whether Article 17(1) Brussels Ia is to be interpreted as covering an individual who engages in trade on the international currency exchange market through a third party professionally engaged in that trade.

Or, as the AG himself puts it at 3, whether a natural person which engages in trade on the FOREX market must be regarded as a consumer or whether, by reason of the knowledge and expertise required to engage in that trade, of the complex and atypical nature of the contract at issue, and of the risks incurred, that person cannot be considered a consumer, so that he falls outside the scope of the section affording protection referred to above.

Under consideration is inter alia the impact of Rome I and of Directive 2004/39 – the relation in other words between applicable law and jurisdiction, and between substantive law and jurisdiction – see also my review of Pillar Securitisation here.

Ms Petruchová, residing in Ostrava (Czech Republic), and FIBO Group Holdings Ltd (‘FIBO’), a brokerage company established in Limassol (Republic of Cyprus), entered into a contract entitled ‘Terms of Business’ (‘the Framework Agreement’ – with choice of court for Cyprus). The purpose of the Framework Agreement was to enable Ms Petruchová to make transactions on the FOREX market by placing orders for the purchase and sale of the base currency, which FIBO would carry out through its online trading platform.

At 29, the AG suggests in my view correctly (Handbook p.106 2nd full para) that for choice of court under Article 19 B1a to be valid, it must allow the consumer to bring proceedings in courts in addition to those identified by Article 18.

Article 17(1) of the Brussels Ia Regulation applies if three conditions are met: first, a party to a contract is a consumer who is acting in a context which can be regarded as being outside his trade or profession; second, the contract between such a consumer and a professional has actually been concluded; and, third, such a contract falls within one of the categories referred to in Article 17(1)(a) to (c) of that regulation.

The question referred to the Court in the present case relates to the first condition. The AG refers in particular to C-269/95 Benincasa; and C-498/16 Schrems. At 46, referring to these cases: to determine whether a person must be regarded as a consumer, reference must be made to the nature and objective of the contract, not to the subjective situation of the person concerned. 

(at 40) ‘The question before the Court of Justice is whether a person who carries out transactions on the FOREX market may be denied the status of a consumer by reason of the knowledge and the expertise required to engage in such trades, the value of the transaction, the fact that the person is actively placing his own orders, the risks incurred on the FOREX market, and the number and frequency of the transactions carried out.’

In essence therefore, do the sophistication of the market and the intensity of the individual’s voluntary engagement with it, impact on their qualification as a consumer? The AG opines they do not, and I am minded to agree given CJEU authority, in my view most correspondingly C-218-12 Emrek – which the AG does not refer to. In that case the CJEU emphasised the objective charachter of the Pammer /Alpenhof criteria, decoupled from the consumer’s actual introduction to the business via word of mouth rather than the website.

The AG also refers to Schrems, where the Court held that the notion of a consumer is ‘distinct from the knowledge and information that the person concerned actually possesses’.

At 48 the AG finds additional support in Directive 93/13/EECon unfair terms in consumer contracts – although as we know e.g. from Pillar Securitisation, such support has now become less substantial.

At 51 the AG also emphasises the predictability of the Brussels regime – a classic interpretative tool which was bound to make an appearance. At 54 he adds that the risks involved in the conclusion of CfDs cannot preclude classification as a consumer. Quite the reverse: because of the risks, consumers need to be protected. At 59 he rejects [2014] EWHC 1085 (Comm) AMT Futures v Marzillier as relevant (national) precedent, although I do not think that either he or the Commission properly presented Popplewell J’s views on the issue. As I noted in my review at the time, ‘I do not think too much should be read in these examples – more so, the insistence that circumstances of the case do have an impact on the qualification as ‘consumer’.

At 69 on the issue of consumers, the AG concludes that ‘in order to determine whether a person who engages in trade on the FOREX market should be regarded as a consumer within the meaning of Article 17(1) of the Brussels Ia Regulation, no account should be taken of that person’s knowledge; of the value of the contract; of the fact that the person actively places his own orders; of the risks incurred; or of the number and frequency of the transactions.’

That leaves the questions

• whether A17(1) BIa should be interpreted in a manner consistent with Article 6 Rome I, given that financial instruments such as CfDs are excluded from the scope of the rules applicable to consumer contracts laid down in Article 6(1) and (2) of the Rome I Regulation). Suggested answer: No: per Kainz, and now also I would suggest, Pillar Securitisation; and
• whether account should be taken of the fact that the person is a retail client within the meaning of Directive 2004/39: for similar reasons: ditto answer.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.2.