Posts Tagged Consumer contracts
Pillar Securitisation v Hildur Arnadottir. Material EU consumer law does not dictate jurisdictional rules.
The CJEU held last week in C-694/17 Pillar Securitisation (v Hildur Arnadottir), on the Lugano Convention’s protected category of consumers. I have review of Szpunar AG’s Opinion here. The issues that are being interpreted are materially very similar as in Brussels I Recast hence both evidently have an impact on the Brussels I Recast Regulation, too (see in that respect also C‑467/16 Schlömp).
At stake in Pillar Securitisation is the meaning of ‘outside his trade or profession’ in the consumer title. The CJEU at 22 rephrases the case as meaning ‘in essence, whether Article 15 of the Lugano II Convention must be interpreted as meaning that, for the purposes of ascertaining whether a credit agreement is a credit agreement concluded by a ‘consumer’ within the meaning of Article 15, it must be determined whether the agreement falls within the scope of Directive 2008/48 in the sense that the total cost of credit in question does not exceed the ceiling set out in Article 2(2)(c) of that directive and whether it is relevant, in that regard, that the national law transposing that directive does not provide for a higher ceiling.’
The CJEU notes that Pillar Securitisation claims that Ms Arnadottir acted for professional purposes and is not covered by the definition of a ‘consumer’. However, the referring court has not referred any question to the Court on the purpose of the credit agreement concluded. On the contrary, as is clear from the wording of the question that it did refer, the referring court asks its question to the Court on the assumption that the contract at issue was concluded for a purpose that can be regarded as being outside Ms Arnadottir’s profession. In addition, in any event, the order for reference does not contain sufficient information in order for the Court to be capable, where relevant, of providing useful indications in that regard (not much help therefore to assist with the interpretation of issues such as in Ang v Reliantco, on which I shall be reporting next).
As I wrote in my review of the AG’s Opinion: the issue is how far does material EU law impact on its private international law rules. I referred in my review to the need to interpret Vapenik restrictively, and to Kainz in which the CJEU itself expressed caution viz the consistent interpretation between jurisdictional and other EU rules, including on applicable law and on substantive law.
I am pleased to note the Court itself makes the same observation, and emphatically so: at 35: ‘the need to ensure consistency between different instruments of EU law cannot, in any event, lead to the provisions of a regulation on jurisdiction being interpreted in a manner that is unconnected to the scheme and objectives pursued by that regulation.’ Subsequently establishing the very diffeent purposes of both sets of law, the CJEU rejects impact on one over the other (and also remarks that Pillar Securitisation’s reference to the Pocar report needs to be taken in context: prof Pocar referred to Directive 2008/48 by way of example only).
Conclusion: for the purposes of ascertaining whether a credit agreement is a credit agreement concluded by a ‘consumer’ within the meaning of Article 15, it must not be determined whether the agreement falls within the scope of Directive 2008/48 in the sense that the total cost of credit in question does not exceed the ceiling set out in Article 2(2)(c) of that directive, and it is irrelevant, in that regard, that the national law transposing that directive does not provide for a higher ceiling.
A good judgment.
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 220.127.116.11.
Bosworth (Arcadia Petroleum), and Pillar Securitisation v Hildur Arnadottir. Two AGs on protected categories (consumers, employees) in the Lugano Convention- therefore also Brussels I Recast.
Update 11 April 2019. The CJEU held today in Bosworth: no contract for employment. the AG’s Opinion and Gross J’s analysis confirmed.
Update 06 02 2018 I have inserted in the analysis below of Arcadia, a reference to De Bloos, in the context of the forumshopping considerations (I have also tidied up punctuation in that section).
Twice last week did the Lugano Convention’s protected categories title feature at the Court of Justice. On Tuesday, Szpunar AG opined in C-694/17 Pillar Securitisation v Hildur Arnadottir (consumer protection), and on Thursday Saugmansgaard ØE opined in C-603/17 Bosworth (Arcadia Petroleum) (employment contracts).
The issues that are being interpreted are materially very similar as in Brussels I Recast hence both evidently have an impact on the Brussels I Recast Regulation, too.
At stake in Pillar Securitisation (no English version of the Opinion at the time of writing) is the meaning of ‘outside his trade or profession’ in the consumer title. Advocate General Szpunar takes the case as a trigger to fine-tune the exact relationship between private international law such as was the case, he suggests, in Kainz and also in Vapenik.
I wrote in my review of Vapenik at the time: ‘I disagree though with the Court’s reference to substantive European consumer law, in particular the Directive on unfair terms in consumer contracts. Not because it is particularly harmful in the case at issue. Rather because I do not think conflict of laws should be too polluted with substantive law considerations. (See also my approval of Kainz).’
Ms Arnadottir’s case relates to the Kaupting reorganisation. Her personal loan exceeded one million € and therefore is not covered by Directive 2008/48 on credit agreements for consumers (maximum threshold there is 75K). Does that exclude her contract being covered by Lugano’s consumer Title?
The Directive’s core notion is ‘transaction’, as opposed to Lugano’s ‘contract’ (at 30 ff). And the Advocate-General of course has no option but to note the support given by the Court to consistent interpretation, in Vapenik. Yet at 42 ff he suggests a narrow reading of Vapenik, for a variety of reasons, including
- the presence, here, of Lugano States (not just EU Member States);
- the need for consistent interpretation between Lugano and Brussels (which does not support giving too much weight to EU secondary law outside the private international law sphere);
- and, most importantly, Kainz: a judgment, unlike Vapenik, which directly concerns Brussels I (and therefore also the link with Lugano). One of the implications which as I noted a the time I like a lot, is precisely its respect for the design and purpose of private international law rules as opposed to other rules of secondary law; and within PIL, the distinction between jurisdiction and applicable law.
At 52 ff Advocate General Szpunar rejects further arguments invoked by parties to suggest the consumer title of the jurisdictional rules should be aligned with secondary EU consumer law. His line of reasoning is solid, however: autonomous interpretation of EU private international law prevents automatic alignment between consumer law and PIL.
Should the CJEU follow its first Advocate General, which along Kainz I suggest it should, no doubt distinguishing will be suggested given the presence of Lugano parties in Pillar Securitisation – yet the emphasis on autonomous interpretation suggest a wider calling.
C‑603/17 Bosworth v Arcadia then was sent up to Luxembourg by the UK’s Supreme Court [UKSC 2016/0181, upon appeal from  EWCA Civ 818]. It concerns the employment Title of Lugano 2007. (Which only the other week featured at the High Court in Cunico v Daskalakis).
As helpfully summarised by Philip Croall, Samantha Trevan and Abigail Lovell, the issue is whether the English courts have jurisdiction over claims for conspiracy, breach of fiduciary duty, dishonest assistance and knowing receipt brought against former employees of certain of the claimant companies now domiciled in Switzerland. In the main proceedings, the referring court must therefore determine whether the courts of England and Wales have jurisdiction to rule on those claims or whether it is the courts of Switzerland, as courts of the domicile of the former directors implicated, that must hear all or part of the claims.
Gross J at the Court of Appeal had applied Holterman and Brogsitter, particularly in fact the Opinion of Jääskinen AG in Brogsitter – albeit with caution, for the AG’s Opinion was not adopted ‘wholesale’ by the CJEU (at 58, Court of Appeal). The mere fact that there is a contract of employment between parties is not sufficient to justify the application of the employment section of (here) the Lugano Convention. Gross J at 67: “do the conspiracy claims relate to the Appellants’ individual contracts of employment? Is there a material nexus between the conduct complained of and those contracts? Can the legal basis of these claims reasonably be regarded as a breach of those contracts so that it is indispensable to consider them in order to resolve the matter in dispute?”. Gross J had answered that whilst not every conspiracy would fall outside the relevant section, and those articles could not be circumvented simply by pleading a claim in conspiracy, in the circumstances of this case, however precisely the test was formulated, the answer was clearly “no”. Key to the alleged fraud lay in his view not in the appellants’ contracts of employment, but in their de facto roles as CEO and CFO of the Arcadia Group.
The facts behind the case are particularly complex, as are the various wrongdoings which the directors are accused of and there is little merit in my rehashing the extensive summary by the AG (the SC’s hearings leading to the referral lasted over a day and a half).
Saugmansgaard ØE essentially confirms Gross J’s analysis.
Company directors who carry out their duties in full autonomy are not bound to the company for which they perform those duties by an ‘individual contract of employment’ within the meaning of the employment section – there is no subordination (at 46). Note that like Szpunar SG, Saugmansgaard ØE too emphasises autonomous interpretation and no automatic colouring of one field of EU law by another: ‘the interpretation which the Court of Justice gives to a concept in one field of EU law cannot automatically be applied in a different field’ (at 49).
In the alternative (should the CJEU accept a relationship of employment), he opines that a claim made between parties to such a ‘contract’ and legally based in tort does fall within the scope of that section where the dispute arose in connection with the employment relationship. Secondly, he argues that an ‘employer’ within the meaning of the provisions of that section is not necessarily solely the person with whom the employee formally concluded a contract of employment (at 109). What the AG has in mind are group relations, where ‘an organic and economic link’ between two companies exists, one of whom sues even if the contract of employment is not directly with that company.
It is in this, subsidiary section, at 66 ff, that the AG revisits for the sake of completeness, the difference between ‘contract’ and ‘tort’ in EU pil. This is a section which among others will delight (and occupy) one of my PhD students, Michiel Poesen, who is writing his PhD on same. Michiel is chewing on the Opinion as we speak and no doubt will soon have relevant analysis of his own.
At 82 ff the AG points to the difficulties of the Brogsitter and other lines of cases. ‘(T)he case-law of the Court is ambiguous, to say the least, in so far as concerns the way in which Article 5(1) and Article 5(3) of the Brussels I Regulation and the Lugano II Convention are to be applied in cases where there are concurrent liabilities. It would be useful for the Court to clarify its position in this regard.’
At 83: it is preferable to adopt the logic resulting from [Kalfelis] and to classify a claim as ‘contractual’ or ‘tortious’ with regard to the substantive legal basis relied on by the applicant. At the very least, the Court in the AG’s view should hold on to a strict reading of the judgment in Brogsitter’: at 79: ‘the Court meant to classify as ‘contractual’ claims of liability in tort the merits of which depend on the content of the contractual duties binding the parties to the dispute.’ This in the view of the AG should be so even if (at 84) this authorises a degree of forum shopping, enabling the applicant to choose jurisdiction, with an eye to the appropriate rules. The AG points out that forum shopping particularly for special jurisdictional rules, is not at all absent from either Regulation or Convention.
Forum shopping considerations in (now) Article 7(1) have been an issue since the seminal case of De Bloos, C-14/76: at 13: ‘for the purposes of determining the place of performance within the meaning of Article 5, quoted above, the obligation to be taken into account is that which corresponds to the contractual right on which the plaintiff’s action is based.’ Among others Brogsitter may be seen as an attempt by the Court to manage the forum shopping considerations arising from De Bloos. It would be good for the Court to clarify whether De Bloos is still good authority, given the many textual changes and case-law considerations of (now) Article 7(1).
Finally, there is of course an applicable law dimension to the dispute although this does not feature in the reference. The relationships between companies and their directors are governed not by employment law, but by company law (at 52). For an EU judge, the Rome I and Rome II Regulations kicks in. Rome I contains, in Article 8, provisions relating to ‘individual employment contracts’, however it also provides, in Article 1(2)(f), that ‘questions governed by the law of companies’ concerning, inter alia, the ‘internal organisation’ of companies are excluded from its scope (at 55). Rome II likewise has a company law exemption. That puts into perspective the need (or not; readers know that I am weary of this) to apply Rome I and Brussels /Lugano consistently.
One had better sit down for a while when reviewing these Opinions.
Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 18.104.22.168, Heading 22.214.171.124, Heading 126.96.36.199.9.
I have reported elsewhere (In Dutch – I am hoping for some time at some point to write something similar in English; see in particular para 23) on the fact that the conjunctive ‘or’ has been dropped in all language versions of Article 19 of the Brussels I recast:
The provisions of this Section may be departed from only by an agreement:
- which is entered into after the dispute has arisen;
- which allows the consumer to bring proceedings in courts other than those indicated in this Section; or
- which is entered into by the consumer and the other party to the contract, both of whom are at the time of conclusion of the contract domiciled or habitually resident in the same Member State, and which confers jurisdiction on the courts of that Member State, provided that such an agreement is not contrary to the law of that Member State.
This contrast with the similar proviso on choice of court in employment contracts, Article 23:
The provisions of this Section may be departed from only by an agreement:
- which is entered into after the dispute has arisen; or
- which allows the employee to bring proceedings in courts other than those indicated in this Section.
I have suggested, with others, that much as I do not understand why the conjunctive has been dropped, its deletion, combined with its being kept in Article 23, means that for consumer contracts, choice of court pre the dispute are now simply impossible under the Regulation, while being maintained for employment contracts. I was also puzzled as to why such an important change was not discussed at all in the run-up to the recast.
A little bird at the European Commission (one high up the conflicts tree) now tells me that what has happened in reality, is quite different. Reportedly the ‘juristes-linguistes’ took it upon them to correct an apparent linguistic mistake in the previous version of the Regulation (indeed one going back to the Brussels Convention): there ought not to be a conjunctive when listing more than one, non-cumulative alternative. That would also explain the difference with Article 23, where there are only 2 alternatives.
This clears up the legislative intent. It does not to me, at least, clear up the linguistic confusion. We may have been grammatically wrong under the previous format (I cannot judge the correctness of that in all these language versions). However at least we were legally certain. Being fully respectful of grammatical correctness myself (punctuation jokes never fail to amuse me), I am not sure which one to prefer in this instance.
Do single internet transactions lead to multiple jurisdictions for consumer contracts? The ECJ in Maletic
In Case C-478/12 Maletic, plaintiffs (the Maletics) are domiciled in Bludesch (Austria), which lies within the jurisdiction of the Bezirksgericht Bludenz (District Court, Bludenz, Austria). They had booked and paid for themselves, as private individuals, a package holiday to Egypt on the website of lastminute.com. On its website, lastminute.com, a company whose registered office is in Munich (Germany), stated that it acted as the travel agent and that the trip would be operated by TUI, which has its registered office in Vienna (Austria). The booking was made for a particular hotel, the name of which was correctly communicated to TUI by lastminute.com, however the former had mismanaged the booking. Upon their arrival in Egypt, the Maletics discovered the mix-up, stayed at the hotel which they had intended, and subsequently sued for the recovery of the extra costs. They brought an action before the Bezirksgericht Bludenz seeking payment from lastminute.com and TUI, jointly and severally.
The Bezirksgericht Bludenz dismissed the action in as far as it was brought against TUI on the ground that it lacked local jurisdiction. According to that court, Regulation 44/2001 was not applicable to the dispute between the applicants in the main proceedings and TUI as the situation was purely domestic. It held that, in accordance with the applicable provisions of national law, the court with jurisdiction was the court of the defendant’s domicile, that is, the court having jurisdiction in Vienna and not that in Bludenz. As regards lastminute.com, the court held that it had jurisdiction to hear the substantive proceedings on the basis of Article 15 of the Jurisdiction Regulation.
The booking transaction therefore was a single transaction, even if it led to two separate contracts. Assessed separately, one of those clearly leads to application of the Brussels I-Regulation. The other one does not for it is purely domestic. Does the latter become ‘international’ by association?
The ECJ held that it did, for two reasons. Firstly, it referred to its judgment in Owusu in which it held (under the Brussels Convention but with no less relevance for the Brussels I Regulation) that the mere domicile within an EU Member State of just one of the parties involved, is enough to trigger the application of the Regulation. In Owusu, that finding was not affected by the remainder of the parties and fact being external to the EU. The ‘international’ element required to trigger the application of the Jurisdiction Regulation can therefore be quite flimsy indeed. The Court does not refer to Lindner (Case C-327/10) however that case in my view is an even stronger indication of the relaxed attitude of the Court vis-a-vis the international element required. In Maletic, the Court held that the second contractual relationship cannot be classified as ‘purely’ domestic since it was inseparably linked to the first contractual relationship which was made through the travel agency situated in another Member State.
Further, the Court referred to the aim of the consumer title of the Regulation, in particular recitals 13 and 15 in the preamble to Regulation No 44/2001 concerning the protection of the consumer as ‘the weaker party’ to the contract and the aim to ‘minimise the possibility of concurrent proceedings … to ensure that irreconcilable judgments will not be given in two Member States’. Those objectives, the Court held, ‘preclude a solution which allows the Maletics to pursue parallel proceedings in Bludenz and Vienna, by way of connected actions against two operators involved in the booking and the arrangements for the package holiday at issue in the main proceedings.’
I suppose what the Court meant but did not say is that the alternative would not so much ‘allow’ the Maletics to pursue the case in two different courts but rather would oblige them do so. Moreover of course in the case at issue, the parallel proceedings would not concern two different Member States but rather two different courts in one Member State. National joinder and lis alibi pendens rules presumably would go a long way to avoid irreconcilable judgments – not enough, so it would seem, to satisfy the ECJ.
The case was heard without Opinion by the Advocate General. I think it may have warranted such: for the outcome I would suggest is not necessarily straightforward.
As tweeted last week, the Court of Justice has clarified the scope of the consumer title of the Brussels-I Regulation in Case C-218/12 Emrek. In Spicheren, a town close to the German border, Mr Sabranovic sells second-hand motor vehicles. He had an internet site on which French telephone numbers and a German mobile telephone number were mentioned, together with the respective international codes. Mr Emrek, who resides in Saarbrücken (Germany) and who learned through acquaintances (not via the internet) of Mr Sabronovic’s business went there and purchased a second-hand motor vehicle.
Subsequently, Mr Emrek made claims against Mr Sabronovic under the warranty before the Amtsgericht (District Court) Saarbrücken. Mr Emrek took the view that, under Regulation No 44/2001, that court had jurisdiction to hear such an action. It was clear from the set-up of Mr Sabranovic’s website that his commercial activity was also directed to Germany. However, it was also clear that the contract that had been concluded was not the result of that direction: Mr Emrek had heard from the business by word of mouth, not the internet. Must there be a causal link between the means employed to direct the commercial activity to the Member State of the consumer’s domicile, namely the internet site, and the conclusion of the contract with the consumer?
The Court held that requiring such causal link would raise questions of burden of proof. Difficulties related to proof of the existence of a causal link would tend to dissuade consumers from bringing actions before the courts of their domicile and would therefore weaken the protection of consumers pursued by the regulation. However if and when that causal link is in fact established, it would constitute strong evidence which may be taken into consideration by the national court to determine whether the activity of the professional trader is ‘directed at’ the Member State of the consumer’s domicile.
The Court’s judgment could have certainly swayed differently. There are – among other textual – reasons for arguing pro requiring a causal link between the activities directed at the consumer’s place of domicile, and the eventual contract. The ECJ pushes out the consumer protection boat yet a little further.
I can’t quite think of a pun to end this posting. I’ll just end it. Geert.
Readers of this blog will have noticed that one is getting quite excited about the impending review of the Brussels I Regulation, the Jurisdiction Regulation. I have previously reported on the impact of some of the Council’s proposals, in light of their June general approach document. Parliament has now added the ultimate input prior to the vote in First Reading in November.
Tadeusz Zwiefka MEP, the rapporteur on the review, has issued his (draft) Report which, much like the Council in its June 2012 document, regroups Parliament’s suggestions for amendment. Mr Zwiefka’s text largely speaks for itself and I shall not repeat it all here. It is clear that alignment between Parliament and Council is near complete, not all of it, I believe, very wisely so (in particular, on the arbitration exclusion and on the protected categories), as I have reported earlier when reviewing the Council’s general approach.
There is one advantage to having the Parliament’s text: it also includes all recitals (as opposed to the Council’s General Approach document which had some recitals included as footnotes, but not all). This clarifies at least one element, namely the application of the consumer title of the Regulation.
I had suggested earlier, that Council’s (and now also Parliament’s) insertion in Article 16(1) of a possible forum against companies not domiciled in the EU, for consumer’s contracts, does not trump the Council’s re-insertion of Article 4 (now as noted, 4(a)), hence the counterparty would still have to be domiciled in the EU, for the consumer contracts section to apply. Parliament’s recital 11(f) now suggests I was wrong:
‘However, in order to ensure the protection of consumers and employees, to safeguard the jurisdiction of the courts of the Member States in situations where they have exclusive jurisdiction and to respect party autonomy, certain rules of jurisdiction in this Regulation should apply regardless of the defendant’s domicile.’
Were this amendment to go ahead, the condition of ‘directing activities to’ the Member State’ in Article 15 JR, will gain ever more importance for the territorial scope of the Regulation.