Unfair Contract Terms Directive Research Articles

The Unfairness of Personalised Price Terms in Consumer Credit Products

Abstract This article examines whether, and if so to what extent, a lender can engage in the algorithmic personalised pricing of consumer credit products (PP) under the Unfair Contract Terms Directive (UCTD) and the Consumer Credit Directive (CCD). To this end, the author first analyses the economic literature to discuss the mechanics of PP and the economic impacts on different consumer groups. This overview is followed by an examination of the UCTD and the CCD, in the broader context of EU regulatory law, as these Directives apply to the practice and the contractual terms. Subsequently, the author applies the considerations of the European Court of Justice (CJEU) in the jurisprudence regarding price terms in credit and mortgage agreements to personalised price terms. Finally, the author concludes that the Directives indeed limit the extent to which a lender can engage in PP, but that the frameworks in the broader EU regulatory context would be better suited than the Directives to address the negative economic impacts of the practice.

Variable Interest Rate Clauses and the Unfair Contract Terms Directive in Spain. Can the ECJ provide further guidance on the unfairness of main contract terms? Would doing so exceed its interpretative role?

Variable Interest Rate Clauses and the Unfair Contract Terms Directive in Spain. Can the ECJ provide further guidance on the unfairness of main contract terms? Would doing so exceed its interpretative role?

Enlightenment of the EU’s “Unfair Contract Terms Directive” to China

Enlightenment of the EU’s “Unfair Contract Terms Directive” to China

A Short Biography of the Unfair Contract Terms Directive on the Occasion of Its 30th Anniversary

This year marks the 30th anniversary of the adoption of Council Directive 93/ 13/EEC on Unfair Terms in Consumer Contracts. The article explores how the Court of Justice of the European Union’s (CJEU) case law on the Directive has evolved over the last three decades. Contrary to what one may have expected at the time the legislation was passed, the Directive has had a greater impact on the Member States’ procedural law than on substantive contract law. In particular, the CJEU has refrained from spelling out a common European standard to assess the fairness of contractual terms in business-to-consumer transactions. Instead, the Court leaves it by and large to domestic courts to determine, on the basis of the applicable national law, whether the substance of a particular clause is unfair and therefore void. On the other hand, the CJEU has been keen to develop procedural requirements for the judicial review of standard terms in consumer contracts, thus significantly restricting the principle of national procedural autonomy in the realm of consumer law. Finally, the article addresses some more recent trends in the CJEU’s case law, especially with regard to the legal consequences arising for the contract as a whole where a contractual term is found to be unfair.

The UCTD 30 Years Later: Identifying and Blacklisting Unfair Terms in Digital Markets

Abstract Thirty years since it entered into force, the Unfair Contract Terms Directive (‘UCTD’) needs updating to address the challenges posed by digital services. This concerns in particular the fundamental research question of identifying new unfair terms of digital service providers (‘DSPs’) so that they can be included in a new blacklist. These challenges are central to the ongoing EC study named ‘Fitness Check of EU Consumer Law’ concerning the evolution of consumer law in the digital age, and promoting a fair and transparent environment for consumers in an ever-changing digital landscape. The article identifies digital-specific unfair terms used by DSPs and organises them into four main themes (i.e., digital services and contents, automation and personalisation, price & free services, and consumers’ data rights). It also discusses the methodological approaches adopted by institutions and researchers in detecting such types of unfair terms in digital environments. Finally, the article examines the possible regulatory options and, particularly, the possibility of establishing a new blacklist of digital-specific unfair terms and/or developing EC guidelines for fairness assessment under the UCTD.

Rescuing transparency in the digital economy: in search of a common notion in EU consumer and data protection law

Abstract Transparency remains a contested concept in European Union (EU) law and policy. All the main instruments of EU consumer and data protection law require that consumers be given access to and understand certain information about their relationships with traders. Improved transparency is also proposed as a response to a variety of problems associated with digital markets, including those experienced by consumers and data subjects. At the same time, transparency is increasingly challenged as ineffective and potentially even counterproductive from doctrinal and critical scholarship alike. First, transparency is seen as inherently unable to transform the economic reality on the ground and to address the power imbalances between consumers and traders. Secondly, it is argued that acts of representation involved in transparency suffer from complexity and are prone to exploitation by the actors who engage in it. This, in turn, casts doubt on the ability of transparency to steer the behaviour of businesses and transform markets to the benefit of consumers and society. This article builds upon prior critiques of transparency and connects them with a doctrinal analysis of EU consumer and data protection law and in particular the Unfair Contract Terms Directive, the Unfair Commercial Practices Directive, and the General Data Protection Regulation. Seven different notions of transparency are identified: (i) Transparency as access to the medium over time; (ii) Transparency as presentation of information that facilitates understanding; (iii) Transparency as formulations that facilitate understanding; (iv) Transparency as non-ambiguity and logical intelligibility; (v) Transparency as the absence of deception and confusion; (vi) Transparency as completeness and specificity; and (vii) Transparency as non-arbitrariness. The article submits that the acts of representation involved in transparency are already recognized in the three legal regimes and attempts are made to leverage the mediated nature of transparency to consumers’ advantage. Crucially, existing efforts to regulate mediation and improve its quality can, nowadays, be reinforced with the help of algorithmic systems geared toward supporting consumers. Moreover, some of the deployments of transparency identified—most notably transparency as non-arbitrariness—push its outer conceptual boundaries in ways that bring transparency very close to fairness. The article ultimately questions a vision of transparency as a necessarily softer-touch protective frame, which cannot alter business conduct. The conceptual richness of transparency offers opportunities for its deployment in more disruptive ways.

The Commencement of Prescription (and what the Consumer’s Awareness of the Unfairness is) within the Unfair Contract Terms Directive

Abstract Directive 93/13/ECC does not regulate prescription periods. However, some parameters can be drawn from the effectiveness principle that national legislation must consider in order to comply with Directive 93/13. This paper argues that the commencement of prescription for restitutionary claims following the unfairness of a term within the Directive 93/13 is determined with a reasonable discoverability criterion concerning the unfairness of the term. A consumer is able to discover the unfairness from the moment when a litigation context concerning the term in question arises. The commencement of prescription cannot be postponed until a court of last resort has decided over the issue on the unfairness.182

Do Too Many Cooks Spoil the Broth? How EU Law Underenforcement Allows TikTok’s Violations of Minors’ Rights

For some time already, there have been concerns about TikTok’s business practices and their compliance with EU law. Different market investigations found out that TikTok’s Terms of Service do not comply with the Unfair Commercial Practices Directive, the Unfair Contract Terms Directive or the Consumers Rights Directive, and that they also infringe the General Data Protection Regulation and the Audiovisual Media Services Directive. This is particularly problematic considering that many children, a vulnerable category under the applicable law, use TikTok on a daily basis, which intensifies the severity of the infringements. Although the protection of minors is one of the policy objectives of the EU, this article argues that the enforcement structure is deficient. In view of TikTok’s practices infringing EU law, the European Consumer Organization, BEUC, called for an EU-level coordinated action to the European Commission and national authorities to request TikTok to align its practices with EU consumer law under the Consumer Protection Cooperation (CPC) Regulation. However, the developments following BEUC’s call for action revealed that the CPC Regulation is not sufficiently effective. Ultimately, the ongoing problems and the seemingly lenient interpretation and application of the CPC Regulation by EU authorities that allow the continuation of TikTok’s identified abusive and misleading practices provide evidence that the institutional apparatus for an EU-wide action for enforcement of consumer and data protection law is failing to deliver. This article provides a practical account of these developments and argues that “too many cooks spoil the broth”—i.e., that the plethora of rules, organizations, and procedures involved in enforcement paradoxically lead to the ineffectiveness of EU law. The paper takes the reconstruction of TikTok as a blueprint for discussing various options on how the existing enforcement structure of EU law in general, and CPC in particular, could and should be improved in light of the entry into application of the Digital Services Act.

CJEU case law on CHF loans the most important issues still awaiting for the decision (limitation of claims, remuneration for the usage of capital)

The Unfair Contract Terms Directive and provisions of the national law which implement that legal act realize a system of consumer protection against the usage of abusive clauses in contracts concluded by consumers and professionals. The large set of case law provided by the CJEU makes it possible to clarify the principles and scope of the consumers protection. However, it is not comprehensive, as there are still important legal issues that have not been yet resolved by the CJEUs judgements. They concern, in particular, such important issues for borrowers as determining the beginning of the limitation period for claims of the parties to the contract, as well as assessing the legitimacy of the lenders' claims for payment of remuneration for the use of the capital of the loan, which had been paid on the basis of a contract which has been declared void. That issues are addressed by references in preliminary ruling proceedings, currently conducted before the CJEU on the basis of questions submitted by Polish courts, in cases concerning borrowers. Examination of these questions leads to the conclusion, that the Court probably will take a pro-consumer position on these key issues, consistently advocating for the broad protection of the weaker party to the contract.

Foreign Currency Loans and the Foundations of European Contract Law – A Case for Financial and Contractual Crisis?

Abstract Loans with variable interest rates indexed to foreign currencies carry a double risk for borrowers: a rise of interest rates and an adverse development in the exchange rate. While they therefore could have been forbidden for consumer credit, they are allowed both at EU and (most) national levels. Consumer credit arrangements indexed to foreign currencies that were legal in principle have raised enormous problems when they occurred in large numbers in Eastern and Central European countries and reference was not directly written into the terms (like in Romania), but could change with additional discretionary decisions (such as in Poland and Croatia). While Croatia has introduced special legislation to cure the overall problem, Polish cases are potentially not only causing a systemic risk for the2 whole banking system, but abundantly are the subject of CJEU case law. This triggers the core interest in contract law, namely an unheard-of relevance in EU law of general and more specific questions of the law of restitution – on the basis of unjust enrichment and/or of damages. This article presents the following five main theses. Firstly, while the Unfair Contract Terms Directive (UCTD) contains too vague a scheme of remedies/sanctions for detailed answers, the overarching benchmark is clear, namely a fair balance of interests and the meeting of justified expectations, which the parties, especially on the consumer side, could have had at the moment when the loan was issued. Secondly, general (EU) principles of unjust enrichment, as well as of damages, are recognised by the CJEU in EU law. They order the restitution of what was gained above the status quo ante, but could not have been acquired on markets even by informed and proper contracting at that time and/or the restitution of losses incurred as compared to the status quo ante. Thirdly, Articles 23 and 24 of the Mortgage Credit Directive (MCD) constitute a suitable model around which a set of claims in unjust enrichment can be shaped and can be applied also to old cases. Fourthly, any windfall profit of borrowers (gain beyond what could have been achieved at the moment of formation of the contract) has to be avoided in the name of fairness and justified expectations – which are recognised in CJEU case law as the two main benchmarks of the regime of sanctions of the UCTD. Finally, a fair restitution regime is reached if the borrower, who had not been properly informed (with the nullified clause), can now make an informed choice between the different offers that were offered on markets when the loan was issued. Thus, he/she could now opt for a loan in either the national currency plus applicable interbank interest rate (in the Polish case Zloty tied to WIBOR) or their foreign currency counterparts (i.e. a loan in CHF tied to LIBOR). Expropriation (of banks) of the loan capital, as well as the possibility to use that capital to generate interest have to be avoided, for penalisation is neither an aim of European contract law nor of the UCTD.

European Consumer Law Rationale in Light of New Challenges

This paper reviews the origin of the EU consumer protection paradigm, its development in legal doctrine and the CJEU jurisprudence, as well as the impact left on it by the insights from vulnerable consumer theory and behavioural economics discussed in the legal doctrine. The authors search for an answer whether certain social and economic challenges can be addressed within the current framework of the EU Consumer law (i.e., the Unfair Contract Terms Directive).

The Future of the Special Duty of Care in the Financial Sector – Perspectives from the Netherlands

A clear trend is evolving as more and more banks and other financial institutions are being successfully sued before the civil courts of the Netherlands for breaches of their special duty of care (‘bijzondere zorgplicht’). Whereas it was initially mainly banks that had reason to worry about claims for damages based on a breach of the special duty of care, other financial institutions too are now having to take the possibility of such claims very seriously. Another factor is that the special duty of care owed by financial institutions now seems to apply not only in their dealings with retail clients but also in relation to non-retail clients that need protection. The author discusses the main developments relating to the special duty of care, leading to a consideration of how things may evolve in the future. Banks, financial institutions, MiFID (Directive 2004/39/EC), MiFID II (Directive 2014/65/EU), conduct-of-business rules, duty of care, product governance, product intervention, mistake, error, contract law, tort law, Dutch Civil Code, Unfair Contract Terms Directive (Directive 93/13/EEC), nudging, FinTech, sustainable finance, mass damage

Restricting Access to Legal Content in House Rules: The Platform’s Freedom To Conduct a Business as a Counterargument To Limit Users’ Freedom of Expression

This chapter focuses on platforms’ protection against (unjustified) interference with the free drafting of house rules, viewed through a lens of European fundamental rights protection. It discusses the difference in protection of two fundamental rights in the European Charter of Fundamental Rights: article 16’s freedom to conduct a business and article 17’s right to property. The articles’ subject of protection (“the essence of the right”) will be mapped by analyzing the CJEU’s case-law between respectively 1974 and 1979 until 2020 and the outcome of this analysis will be applied to the process of running a platform. It will show that article 16, rather than article 17, covers platforms’ house rule-drafting. However, it is unlikely that restrictive measures will interfere with the freedom’s essence. To be justifiable, measures that do not interfere with the essence must live-up to the principle of proportionality. Therefore, subsequently, the question arises whether potential measures live up to this principle. To prevent a purely normative answering of that question - due to the fact that a standardized test does not exist - the Unfair Contract Terms Directive’s unfairness test will be used as interpretational guidance. It is concluded that measures limiting a platform’s contractual freedom can, and most likely will, be justifiable to protect platform users’ freedom of expression. That opens the door for future legislation. Outside the direct realm of platforms, this chapter demonstrates that the freedom to conduct a business has been reduced to an empty shell, or rather, a shell that has never been inhabited. Apart from the situation where an undertaking would be able to demonstrate that a proposed measure would mean the end of the business, the freedom to conduct a business does not provide any effective protection.

Towards a General Theory of Harm for Consumer Law

The recent book Consumer Theories of Harm is an important contribution to consumer policy. It is the first attempt to develop theories of harm for consumer law. This essay presents the main arguments of the book (Sections 1 and 2). There are four archetypal scenarios of harm that consumer law should consider: the scam, the lemon, the shock, and the subsidy. Section 3 critically engages with the normative foundations of the analysis. Section 4 proposes to consider the shock scenario, one of the four archetypal scenarios of harm proposed by the book as the benchmark against which assess the other three scenarios. Section 5 shows the importance of searching the theories of harm latent in legislation by showing that ancillary terms in standard terms and conditions are understood by the Unfair Contract Terms Directive as an instance of the scam scenario, not of the shock scenario as proposed by the authors. Finally, Section 6 proposes additional lines of inquiry stimulated by Consumer Theories of Harm.

Applying the Unfair Contract Terms Directive to Public Contracts

Applying the Unfair Contract Terms Directive to Public Contracts

The Unfair Contract Terms Directive

The harmonisation of consumer law in Europe has been an important objective within the EU. Efforts have focused not only on improving the functioning of the internal market, but also on securing a high level of consumer protection in the Member States. With regard to consumer contracts, the Unfair Contract Terms Directive has come to play a key role, not least due to the case law of the European Court of Justice in this area in recent years. This article examines the need for an unfairness test of standard contracts and argues that the directive can be expanded to also include individually negotiated contract terms, and terms that relate to the main subject matter of the contract, the adequacy of the price, and changed circumstances. Such amendments would result in a greater correspondence between EU law and Swedish and Nordic law. Although full harmonisation is not possible in the short term, I will argue that a revision should point in this direction. However, I will begin my account with a presentation of the directive and how it has been implemented in Swedish law.

Online Platform Service Providers on Platform 9¾: A Call for an Update of the Unfair Contract Terms Directive

This article argues for an update of the Unfair Contract Terms Directive of 1993 in light of the Commission’s Digital Single Market Strategy of 2015. The Directive in its current setup tolerates a certain amount of differences in the unfairness assessment based on national law due to its minimum harmonization approach and the mechanism of decentralized enforcement by national courts according to national law, designed by the CJEU. A comparative unfairness assessment of contract terms of five popular online platform service providers according to the national laws of Germany, the UK and France reveals just how different the result really is. The differences in national unfairness assessment according to the laws of the Member States go beyond the amount of differences justified by the Directive viewed from the perspective of the Commission’s legislative strategy. This inconsistency can be resolved by an update of the Unfair Contract Terms Directive. A modernization and the adoption of a maximum harmonization approach seem the most adequate considering the Digital Single Market Strategy. Right now, the Directive is stuck on the symbolic platform 9¾ – in between platform 9, the offline world for which it was created, and platform 10, the digital market. Online Platform Service Providers, Unfair Contract Terms, Digital SingleOnline Platform Service Providers, Unfair Contract Terms, Digital Single Market, Liability Clauses

Regulating the Economic Impact of Data as Counter-Performance: From the Illegality Doctrine to the Unfair Contract Terms Directive

In economic terms, personal data functions as an equivalent for monetary compensation in many exchanges of the digital economy. However, data’s properties strikingly differ from those of money. This contribution therefore starts by analysing the economic properties of personal data and methods for measuring its value. This leads to two specific legal questions. First, data has a strictly positive economic value even when its transfer violates the GDPR. This paper argues that such GDPR-infringing transfers still ought to constitute valid counter-performance and fall under the scope of the Directive on Contracts for the Supply of Digital Content and Digital Services. The illegality doctrine, which would lead to the invalidity of the contract, should not be applied. Second, the Unfair Contract Terms Directive forms an important part of the regulatory perimeter for exchanges including data as counter-performance. Building on the inherent indeterminacy of data’s value, the paper explores how the unfairness assessment of that directive can be applied to the data price of such exchanges. It concludes by suggesting that a right to “data-free” services may be a valuable option going forward.

How Does the Unfair Contract Terms Directive Penetrate National Legal Systems? – A Case Study Based on Mortgage-Secured Loans for Housing Purposes, Indexed or Denominated in CHF in Poland

The main aim of this article is to present the process of how the Unfair Contract Terms Directive was accepted into the Polish legal system. In order to do so, it first briefly explains, how the problem that allowed the massive testing of the Unfair Contract Terms Directive, i.e. the vast amount of consumer mortgage-secured loans for housing purposes, indexed or denominated in CHF (further: the CHF loans) came into existence in Poland. The story of the CHF loans also perfectly illustrates how the Polish legal system, which had taken a very liberal turn after 1989, struggles with the EU consumer protection concepts (which might also be representative for other countries of young democracies). It shows how the lack of adequate reactions of the governmental agencies led to burdening the judiciary system with the weight of the CHF loans problem, and how the Polish courts have not been sufficiently prepared for applying EU law. As an example, the article presents three issues that are at different stages of development when it comes to the completeness of the dogmatic construction, and which vary, when it comes to the degree of their intertwining with EU law.

European Unfairness and American Unconscionability: A Letter From a European Lawyer to American Friends

Abstract The Unfair Contract Terms Directive (UCTD) and the Common Law doctrine of unconscionability in the United States both pursue the same aim: they seek to protect consumers against abuse of power by traders who are in a position to exploit the asymmetry of the contracting process. However, both sets of rules rest on different premises. In particular, they allocate trust differently between courts and markets. This accounts for deep-running differences despite apparent similarities. This contribution analyses these similarities and differences by commenting on the unconscionability doctrine as expressed in the Draft Restatement of consumer contracts from a European point of view.