Filenews 31 July 2022 - by Eleftheria Paizanou
Ex officio, the courts of eleven European Union (EU) countries are investigating cases of unfair terms by banks and land developers to the detriment of consumers. On the occasion of judgments of the Court of Justice of the European Union concerning the protection of consumers against unfair terms in contracts, courts will now be able to examine ex officio cases of unfair terms and appeals on the issue of damages.
Specifically, last May the Court of Justice of the EU delivered five judgments on the basis of requests for preliminary rulings made by the national courts of Spain, Italy and Romania concerning the interpretation of the EU Directive on unfair terms in consumer relations.
Legislation will also change in Cyprus
A few weeks ago, the issue was discussed in the Parliamentary Committee on Trade, following a recommendation by Ecologists MP Stavros Papadouris. In the context of the debate it was said that the Legal Service prepared an opinion on the latest CJEU judgments, which confirms earlier case law that gives the right to provincial courts to examine the unfairness of a clause.
The intentions of the Ministry of Energy are to amend the legislation, with the aim of including a provision that will enable the provincial courts to examine ex officio the abusive nature of terms, so that they have a more comprehensive picture of the data before taking a final decision. It was also mentioned that the Republic has been harmonized with a relevant EU Directive with the unfair terms of contracts concluded with consumers. During the debate, Mr. Papadouris obtained data from a number of National Parliaments, which show that eleven of the 16 countries that responded to the request of the Cypriot authorities have adopted the European Directive that protects borrowers.
What other countries apply
In detail, member states that responded to the call of the Cypriot authorities in relation to the way they regulated the issue of unfair terms in consumer contracts reported the following:
- In Greece, national courts examine ex officio the unfairness of the term, which falls within the scope of the EU Directive.
- Croatia decided last March that national courts have the power and obligation to examine ex officio the possible unfairness of terms in consumer contracts. The decision followed a meeting of the presidents of the provincial courts and the Supreme Court of the Republic of Croatia.
- In Romania, national courts examine ex officio the possible unfairness of terms in consumer contracts. This arrangement was enshrined in an emergency government decree, which came into force on May 28. The decree provides that the Court is obliged to examine ex officio whether a contractual term is unfair, provided that it has at its disposal the necessary legal and factual elements. In fact, when the court concludes that a term is unfair, it is obliged not to apply it, unless the consumer raises an objection.
- In France, the recent judgment of the Court of Justice of the EU has been codified with the relevant legislation that has been in place since March 2014. The legislation enables the national court to examine ex officio the unfairness of terms in consumer contracts. It is also stated that it is consistently jurisprudent that the court is obliged to examine the unfairness of the term when it has before it the necessary legal and other elements.
- In Sweden, national courts examine ex officio the unfairness of terms in consumer contracts. In the meantime, there is also case law from the Swedish Court of Appeal, which has recognised that national courts must examine the matter ex officio.
- In Spain, in order to comply with the case law of the Court of Justice of the EU, a Royal Decree-Law has been issued, which allows the competent authorities to rule ex officio on the possible unfairness of a contractual term falling within the scope of the European Directive.
- The reply sent to the Republic of Cyprus by Hungary states that the national courts examine ex officio the unfairness of contractual terms concluded with consumers.
- Procedural rules in Portugal allow national courts to examine ex officio the unfairness of contractual terms concluded with consumers. In addition, the National Code of Civil Procedure provides that at the stage of enforcement of the judgment, the defendant may raise as a defence the unfairness of the term.
- In Austria, national courts may examine ex officio the unfairness of the contractual term.
- In Belgium, national courts must examine ex officio the unfairness of terms concluded with consumers.
- In Poland, national courts examine ex officio the unfairness of the term.
- In Slovenia, national courts do not examine cases of unfair terms ex officio and there is no intention to amend the relevant legislation.
The interpretation of the Court of Justice of the EU
With the ruling of the European Court of Justice, provincial courts will now be able to examine cases of unfair terms ex officio. Moreover, the relevant European directive requires Member States to have a strong and clear legislative framework in place to protect consumers who are in a worse bargaining position than the entrepreneur.
According to the recent ruling of the Court of Justice of the EU, "national judges must examine ex officio the unfairness of a contractual term within the scope of the Directive and that Member States must provide for appropriate and effective measures to put an end to the use of unfair terms".
In addition, the Court noted that European Union law does not harmonise the procedures for examining the possible unfairness of a contractual term and, consequently, these procedures fall within the internal legal order of the Member States. The Court had expressed the position that there is no effective review of the potential unfairness of the terms of the contract in question and that the rights conferred by the EU Directive cannot be guaranteed.
At the same time, the Court of Justice of the EU recalled that the system of protection established by the EU Directive is based on the notion that the consumer is in a weaker position vis-à-vis the seller or supplier, both in terms of the possibility of negotiation and in terms of the level of information. In fact, due to the weaker position in which consumers find themselves, the Directive provides that they are not bound by unfair terms. In essence, it is a mandatory provision, which is intended to replace the formal balance introduced by the Convention, with a substantial balance.
POINT OF VIEW
Immediate compliance with the CJEU ruling is required
Immediately the competent services should proceed to the amendment of the relevant legislation in Cyprus, in order to comply with the decision of the Court of Justice of the European Union. By changing the legislation, consumers' rights against the unfair terms of banks and land developers will be safeguarded. This is because provincial courts will be able to intervene ex officio and examine cases of unfair terms and appeals on the issue of damages.
With the opening of the Parliament in September, the relevant bill should be submitted, so that there is a clear legislative framework, which will protect consumers who are in a worse negotiating position than the entrepreneur.
