Make It Stringent: A Plea for an Unfair Terms Regulation

Abstract

The Unfair Terms Directive (UTD) is one of the most important pieces of EU private law, yet its understanding and implementation in the Member States is quite diverse. Despite the abundance of preliminary rulings on the Directive, the Court of Justice of the European Union (CJEU) has not managed to bring uniformity into its interpretation. The main reason is the legislative form chosen, which is that of a directive, allowing Member States very wide discretion in transposing its rules into their national law. This has given rise to sharp differences between Member State laws. The result is uncertainty, legal fragmentation, and an uneven playing field in the Union.To remedy this situation, we suggest a recast of the UTD and its transformation into a regulation. This would have several benefits. First, the scope, depth and the effects of unfair terms control would be the same in all Member States. Second, the Court of Justice of the European Union would no longer have to take account of the complex background of the different national laws when responding to references for preliminary rulings; instead, it could directly declare a certain clause as being incompatible with the Regulation and decide on its consequences. Third, the Annex of the Directive could be made binding, which would further enhance legal certainty and the effectiveness of the control. Finally, as the Regulation would fully harmonize the standard of unfair terms control, with the result that clauses compatible with it could be used throughout the Union, without any risk of running afoul of national law. This would give a boost to the integration of the Internal Market.