Judgment;Summary — ECLI:EU:C:2020:687
Date: 2020-09-10
Language of the case: Dutch
Court formation: Sixth Chamber
Subject matter: Consumer protection;Approximation of laws
Procedure: Reference for a preliminary ruling
Origin: Netherlands

Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
7 October 2019 
Referring court: 
Rechtbank Amsterdam (Netherlands) 
Date of the decision to refer: 
19 September 2019 
Applicant: 
A 
Defendants: 
B 
C 
  
Subject of the action in the main proceedings 
The main proceedings involve a dispute between A, a foundation which leases out 
social housing in Amsterdam, and B and C. A considers B to have breached a 
lease she concluded with it by not using the dwelling in question as her main 
residence but subletting it (for higher than the rent price) to her daughter, C. For 
that reason, A claims that B and C must vacate the dwelling and that B must pay 
the rent arrears, the profits made from the subletting as well as a fine for breach of 
the lease. 
Subject matter and legal basis of the request for a preliminary ruling 
This request, based on Article 267 TFEU, concerns unfair terms in consumer 
contracts. More specifically, the question is whether, in assessing whether a 
penalty clause is unfair, account must be taken of (all) other penalty clauses in the 
contract, irrespective of whether those other clauses are actually relevant and/or 
are relied on in the case at hand. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-738/19 
 
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Question referred for a preliminary ruling 
How should Directive 93/13 and, more specifically, the principle of cumulative 
effect contained therein, be interpreted when assessing whether the sum which a 
consumer who fails to fulfil his obligations is required to pay in compensation 
(‘penalty clause’) is disproportionately high within the meaning of point 1(e) of 
the annex to that directive, in a case in which penalty clauses are associated with 
shortcomings of various kinds which, by their very nature, do not have to occur 
together, and indeed do not do so in the present case? Is it also relevant in that 
regard that, with regard to the shortcoming on the basis of which payment of the 
fine is sought, compensation in the form of the remittance of unfairly made profits 
is also sought? 
Provisions of EU law cited 
Article 3(1) and (3) of Council Directive 93/13/EEC of 5 April 1993 on unfair 
terms in consumer contracts (‘Directive 93/13’) and point 1(e) of the annex to that 
directive 
Relevant provisions of national law 
Article 6:104 of the Burgerlijk Wetboek (Netherlands Civil Code; ‘BW’) 
Brief summary of the facts and the procedure in the main proceedings 
1 It has been established in the main proceedings that A leased out to B a social 
dwelling – which are very scarce in Amsterdam – and that, contrary to the lease 
agreement, she did not have her main residence there and moreover subleased the 
dwelling to her daughter, C. For that reason, A has requested the 
voorzieningenrechter (judge hearing applications for interim measures) of the 
Rechtbank Amsterdam (District Court, Amsterdam; ‘the referring court’) to order 
B and C to vacate the dwelling and B to pay the rent still outstanding. The 
referring court considers it plausible that the court ruling on the merits will grant 
those requests and that A, in view of the scarcity of and the public interest in 
social housing, has an urgent interest. For that reason, it granted the 
abovementioned requests for interim measures. 
2 Moreover, in the Algemene Voorwaarden sociale woonruimte (general conditions 
of social housing; ‘AVSW’) of 1 November 2016, which are applicable to the 
lease agreement between A and B, there is a large number of penalty clauses set 
out in regard to several specific acts. A invokes one of those clauses in order to 
claim that B should be ordered to pay a fine of EUR 5 000 for subletting the 
dwelling in breach of the lease agreement. A also claims that, pursuant to Article 
6:104 BW, B should repay the profit made on the subletting. 
A 
 
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3 The referring court is in doubt as to how it must assess whether the penalty clause 
invoked by A is unfair and whether the claim under Article 6:104 BW and the 
other penalty clauses set out in the AVSW – not invoked in this case – play a role. 
For that reason, it reserved its decision on those claims and referred the preceding 
question to the Court of Justice for a preliminary ruling. 
Brief summary of the reasons for the referral 
4 According to Article 3(1) of Directive 93/13, a contractual term which has not 
been individually negotiated shall be regarded as unfair if, contrary to the 
requirements of good faith, it causes a significant imbalance in the parties’ rights 
and obligations arising under the contract, to the detriment of the consumer. The 
penalty clause is one of the terms in the indicative list set out in the annex to that 
directive, in accordance with Article 3(3) thereof. Terms from that list do not 
necessarily have to be considered unfair. 
5 The referring court takes the view that the term at issue is not in itself unfair, 
despite the amount of the fine, given the social interest served by its deterrent 
effect. 
6 However, in paragraph 101 of the judgment of the Court of Justice of 21 April 
2016, Radlinger and Radlingerová, C-377/14, EU:C:2016:283 ( ‘the Radlinger 
judgment’), it was held that ‘Directive 93/13 must be interpreted as meaning that, 
in order to assess whether the amount of compensation required to be paid a 
consumer who does not fulfil his obligations is disproportionately high, within the 
meaning of point 1(e) of the annex to that directive, it is necessary to evaluate the 
cumulative effect of all the penalty clauses in the contract in question, regardless 
of whether the creditor actually insists that that they all be satisfied in full’. 
7 The question arises as to how that assessment should be interpreted with respect to 
the phrase ‘all the penalty clauses’. Unlike the Radling judgment, the present case 
does not concern a situation in which more than one penalty is contractually 
associated with one and the same shortcoming, but rather, a situation in which 
penalties are associated with a series of shortcomings of various kinds, such as 
using common areas or the garden as a storage area, leasing out the rented 
dwelling as holiday accommodation, using the dwelling for the cultivation of 
drugs, not using the dwelling as the main residence and subletting the dwelling. In 
the case at hand, only the latter two – closely related – shortcomings have 
occurred, with A having sought the payment of a fine only in respect of the 
subletting (and also filed a legal claim for transfer of profits). 
8 The question therefore arises as to whether penalties that have been imposed on 
other acts or omissions, unrelated to nature or content, must be included in the 
assessment of the fairness of a penalty clause imposed on contractually prohibited 
conduct that has indeed occurred. The Radlinger judgment sheds no light on this 
question of practical importance. 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-738/19 
 
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9 According to the referring court, the following can be argued in support of an 
affirmative answer to that question. The Radlinger judgment held without 
reservation that the cumulative effect of all contractual terms must be considered, 
and that all the circumstances attending the conclusion of the contract, as well as 
all the other terms of the contract or of a related contract, must be taken into 
account. Moreover, this is a protection system for the benefit of the consumer, so 
that in principle it seems obvious that the above rule should be interpreted 
broadly. 
10 In support of a negative answer to that question, it can first be argued that the 
Radlinger judgment concerned a situation in which more than one penalty was 
contractually associated with one and the same shortcoming. What should apply in 
such a case does not also automatically apply in a case where penalty clauses are 
associated with shortcomings of various kinds which, by their very nature, do not 
have to occur together, and indeed do not do so in the present case. 
11 Second, the rationale of the rule in the Radlinger judgment is evidently that the 
consumer, when deciding whether to adhere to a contractual prohibition, may and 
must be able to involve all the circumstances of the case, thus also all the 
contractual penalties associated with the acts or omissions concerned. Viewed in 
that light, it is in principle irrelevant whether the opposing party actually invokes 
all those penalties afterwards in proceedings. In making that assessment, however, 
the consumer will not take into account that penalties were also imposed in 
relation to very different activities or omissions that he need not consider. Thus, a 
tenant who is contemplating subletting in breach of a contractual prohibition has 
no reason to consider that, as in the present case, a contractual penalty also applies 
to improper delivery of the leased property and to drug-related activities. He will 
therefore also not be deterred from subletting by those other penalty clauses. It is 
therefore reasonable to assume that the rule in the Radlinger judgment, in view of 
its rationale, does not relate to the cases as referred to here. 
12 Third, an affirmative answer to that question would have undesirable legal 
consequences. After all, in that case, the mere fact that the contract in question 
contains an unfair penalty in respect of an act or omission which does not occur 
does not make it possible to demand compliance with terms which are not in 
themselves unfair. Focused on the case of prohibited subletting, it would not only 
harm the landlord’s reasonable interest, in that he would not want his property to 
be misused by third parties, but also the general interest involved in careful 
tenancy. After all, allowing a property to be misused by third parties is often 
accompanied by nuisance to local residents. 
13 Last, a fourth reason for answering the above question in the negative is the 
fundamental principle of proportionality. It would be disproportionate to consider 
penalties for acts that have not actually occurred. 
14 In the light of the foregoing arguments, the referring court favours the following 
interpretation of Directive 93/13 and the Radlinger judgment. When assessing 
A 
 
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whether the sum which a consumer who fails to fulfil his obligations is required to 
pay in compensation is disproportionately high within the meaning of point 1(e) of 
the annex to that directive, it is necessary to ascertain the cumulative effect of all 
terms involving a sanction which in the contract are associated with the 
shortcoming in question, even if those terms are not in themselves unfair. In that 
regard, no special significance should be attached to terms involving a sanction 
which in the contract are linked to shortcomings of a different nature, if those 
other shortcomings have not occurred in the case in question. 
15 However, since there may be reasonable doubt as regards this interpretation and 
since clarity is important for a large number of cases brought in practice, the 
referring court has referred the abovementioned questions to the Court of Justice 
for a preliminary ruling.