Judgment of the Court (Grand Chamber) of  31 January 2006  in Case C-503/03 Commission of the European Communities v Kingdom of Spain (Freedom of movement for persons — Directive 64/221/EEC — National of a third country who is the spouse of a national of a Member State — Right of entry and residence — Restriction imposed on grounds of public policy — Schengen Information System — Alert issued for the purposes of refusing entry)
Date: 2006-04-08
Institutions: Court of Justice
Subjects: European Commission, Spain, action for failure to fulfil an obligation, admission of aliens

8.4.2006

EN

Official Journal of the European Union

C 86/3

1. Article 3(2)(a) of Council Directive 85/577/EEC of 20 December
1985 to protect the consumer in respect of contracts negotiated
away from business premises must be interpreted as excluding
from the scope of the Directive contracts for the sale of immovable
property even where they are merely a component of an investment
scheme financed by a loan for which the negotiations prior to the
conclusion of the contract were held in a doorstep-selling situation,
both as regards the contract for the purchase of the immovable
property and the loan agreement serving solely to finance that
purchase.

JUDGMENT OF THE COURT

(Grand Chamber)

of 31 January 2006

in Case C-503/03 Commission of the European Commu-
nities v Kingdom of Spain (1)

2. Directive 85/577 does not preclude national rules which limit the
effect of cancellation of the loan agreement to the avoidance of
that agreement, even in the case of investment schemes in which
the loan would not have been granted at all without the acquisi-
tion of the immovable property.

(Freedom of movement for persons — Directive 64/221/EEC
— National of a third country who is the spouse of a
national of a Member State — Right of entry and residence
— Restriction imposed on grounds of public policy —
the
Schengen Information System — Alert
purposes of refusing entry)

issued for

3. Directive 85/577 does not preclude:

— a requirement that a consumer who has exercised his right to
cancel under the Directive must pay back the loan proceeds to
the lender, even though according to the scheme drawn up for
the investment the loan serves solely to finance the purchase of
the immovable property and is paid directly to the vendor
thereof;

— a requirement that the amount of the loan must be paid back

immediately;

— national legislation which provides for an obligation on the
consumer, in the event of cancellation of a secured credit agree-
ment, not only to repay the amounts received under the agree-
ment but also to pay to the lender interest at the market rate.

However, in a situation where, if the Bank had complied with
it obligation to inform the consumer of his right of cancella-
tion, the consumer would have been able to avoid exposure to
the risks inherent in investments such as those at issue in the
main proceedings, Article 4 of Directive 85/577 requires
Member States to ensure that their legislation protects consu-
mers who have been unable to avoid exposure to such risks, by
adopting suitable measures to allow them to avoid bearing the
consequences of the materialisation of those risks.

(1) OJ C 264, 01.11.2003.

(2006/C 86/05)

(Language of the case: Spanish)

In Case C-503/03 Commission of the European Communities
(represented by: C. O'Reilly and L. Escobar Guerrero, Agents) v
Kingdom of Spain (represented by: M. Muñoz Pérez, Agent) —
action under Article 226 EC for failure to fulfil obligations,
(Grand
brought on 27 November 2003 — the Court
Chamber),
Jann
(Rapporteur), C.W.A. Timmermans, A. Rosas, J. Malenovský,
Presidents of Chambers, S. von Bahr, J.N. Cunha Rodrigues, R.
Silva de Lapuerta, K. Lenaerts, E. Juhász, G. Arestis, A. Borg
Barthet and M. Ilešič, Judges; J. Kokott, Advocate General; R.
Grass, Registrar, gave a judgment on 31 January 2006,
in
which it:

composed of V. Skouris, President, P.

1. Declares that, by refusing entry into the territory of the States
party to the Agreement on the gradual abolition of checks at their
common borders, signed on 14 June 1985 at Schengen, to Mr
Farid, and by refusing to issue a visa for the purpose of entry into
that territory to Mr Farid and Mr Bouchair, nationals of a third
country who are the spouses of Member State nationals, on the
sole ground that they were persons for whom alerts were entered in
the Schengen Information System for the purposes of refusing
them entry, without first verifying whether the presence of those
persons constituted a genuine, present and sufficiently serious
threat affecting one of the fundamental
interests of society, the
Kingdom of Spain has failed to fulfil its obligations under Articles
1 to 3 of Council Directive 64/221/EEC of 25 February 1964
on the coordination of special measures concerning the movement
and residence of foreign nationals which are justified on grounds
of public policy, public security or public health;

2. Orders the Kingdom of Spain to pay the costs.

(1) OJ C 21, 24.01.2004.