WRITTEN QUESTION E-1562/97 by Ben Fayot (PSE) and Viviane Reding (PPE) to the Commission (6 May 1997)

Subject: Consumer credit - protection of non-residents by Belgian legislation

Belgium transposed Directive 87/102 ((OJ L 42, 12.2.1987, p. 48. )) of 22 December 1986 on consumer credit into a national law of 12 June 1991. This law stipulates that its provisions apply only to credit agreements concluded with consumers having their habitual residence in Belgium.

A large number of credit agreements are currently being concluded between Belgian financial brokers and consumers residing in the Grand Duchy of Luxembourg. These 'easy credit' agreements stipulate that Belgian legislation is applicable, and indeed this is the legislation with which most links exist.

All too often, however, these agreements fail to respect consumers' rights under Belgian law (the granting of credit without any agreement being handed over, ignorance of deadline for renouncing an agreement, ...). Belgian professionals tell consumers that the Belgian law is not applicable to non-residents.

1. Does the Commission share our view that the above directive, and thus the national laws transposing it, do not permit discrimination between residents and non-residents, given that these protection measures are compulsory and all consumers must benefit fully from them, in so far as their agreement can be localized in the Member State in question, namely Belgium?

2. Can the Commission explain why it failed to notice any problem when it verified the conformity of the relevant Belgian law with Directive 87/102, even though the provisions restricting the field of application to Belgian residents appear to constitute a serious violation of the principle of non-discrimination set out in Article 7 of the Treaty?

3. Does the Commission agree that the full protection of resident and non-resident consumers is particularly important since Directive 87/102 constitutes a minimal text allowing the Member States to maintain or adopt stricter provisions to protect consumers, so that a consumer may in certain cases be better protected by the legislation of the country of origin of the professional, than by his own legislation?

Answer given by Ms Bonino on behalf of the Commission (3 July 1997)

Belgian professionals are wrong to tell consumers resident in the Grand Duchy of Luxembourg that Belgian law does not apply to them. If a matter is brought before the Belgian or Luxembourg courts, these will certainly apply Belgian law except in cases where, under certain circumstances, Luxembourg law is more favourable to the consumer. This approach derives from the rules of private international law established under the Rome Convention of 19 June 1980 on the law applicable to contractual obligations.

This Convention lays down the general rule that a contract is governed by the laws of the country chosen by the parties (Article 3) or, in the absence of any such choice being made, by the laws of the country with which the contract is most closely linked (Article 4). In the cases referred to by the Honourable Members, the applicability of Belgian law clearly derives from Article 3 of the Convention, since it is the law chosen by the parties. However, even if no applicable law had been chosen, Belgian law would still in principle apply on the basis of Article 4, since the country most closely linked with a credit agreement is deemed to be that in which the lender has his business establishment.

Article 2 of the Belgian Law of 12 June 1991 would, if interpreted literally, seem to rule out this approach, given that it states that 'this Law shall apply to credit agreements concluded with consumers habitually residing in Belgium [...]'. This Article must, however, be interpreted in the light of the Rome Convention, which is a legal instrument that takes precedence over Belgian law. The sole effect of this Article is to give greater protection to consumers resident in Belgium by setting a limit on the freedom of the parties to choose the applicable law. This therefore means that arrangements on the granting of credit to consumers habitually resident in Belgium by lenders also registered within the country must be subject to Belgian law. This restriction does not infringe the Rome Convention.

In the light of these considerations, the Commission can thus reply as follows to the specific questions raised by the Honourable Members:

1. Directive 87/102/EEC for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit does not contain any provision laying down the territorial scope of any transposition legislation. Nevertheless, the Commission agrees with the Honourable Members that, if Belgium refused to apply its Law transposing Directive 87/102/EEC to loans provided by lenders based in Belgium to consumers not resident in the country, this would constitute a serious violation of the spirit of the Directive - not, strictly speaking, because of the discrimination between residents and non-residents, but because such an approach would create a legal vacuum in which non-resident consumers would not be covered by any transposition legislation.

2. As can be gathered from the above observations, Belgium has not restricted the applicability of its Law transposing Directive 87/102/EEC to Belgian residents only; this would constitute indirect discrimination on grounds of nationality, which is prohibited under Article 6 of the EC Treaty. Firstly, Article 2 of the Law covers all consumers resident in Belgium, irrespective of nationality. And secondly, it does not seek to restrict the scope of the Law, but rather to ensure its application, under the circumstances mentioned above, even if the parties choose otherwise.

3. With regard to areas covered by directives providing for minimal harmonisation, consumers may be better protected by the laws of the country in which the professional is established than they may be by legislation in their own country. This follows from the minimal nature of the directives in question. The aim of these directives is not to apply the laws most favourable to consumers, but rather to guarantee them a minimum level of protection regardless of the applicable law under rules of private international law.

Under the common rules established by the Rome Convention, the applicable law is generally that of the country of origin of the supplier of goods or services to non-residents. However, in cases where non-resident consumers have, in their own country, been approached by professionals, the Rome Convention guarantees that, under certain circumstances, the laws of the consumers' country of residence will apply if these are more favourable to them (Article 5 of the Convention).