CELEX: 62003CJ0070
Language: en
Date: 2004-09-09 00:00:00
Title: Judgment of the Court (First Chamber) of 9 September 2004. # Commission of the European Communities v Kingdom of Spain. # Failure of a Member State to fulfil obligations - Directive 93/13/EEC - Unfair terms in consumer contracts - Rules of interpretation - Rules concerning conflict of laws. # Case C-70/03.

Case C-70/03
      Commission of the European Communities
      v
      Kingdom of Spain
      (Failure of a Member State to fulfil obligations – Directive 93/13/EEC – Unfair terms in consumer contracts – Rules of interpretation – Rules concerning conflict of laws)
      Summary of the Judgment
      1.        Approximation of laws – Unfair terms in consumer contracts – Directive 93/13 – Rule of interpretation most favourable to the
            consumer where there is doubt about the meaning of a term – Distinction between actions involving an individual consumer and
            actions for cessation 
      (Council Directive 93/13, Arts 5 and 7(2))
      2.        Approximation of laws – Unfair terms in consumer contracts – Directive 93/13 – Contract governed by the law of a third country
            and having a close connection with the territory of the Member States – Meaning of ‘close connection’ – Criteria referred
            to in Article 5(1) of the Convention on the law applicable to contractual obligations – Exclusion
      (Rome Convention of 19 June 1980, Art. 5; Council Directive 93/13, Art. 6(2))
      1.        The proviso in the third sentence of Article 5 of Directive 93/13 on unfair terms in consumer contracts that the rule of interpretation
         most favourable to the consumer is to prevail where there is doubt about the meaning of a term is not to apply in the context
         of actions for cessation, referred to in Article 7(2) of the Directive, is a binding legislative provision which confers rights
         on consumers and assists in determining the result which the directive seeks to achieve.
      
      The distinction thus made concerning the applicable rule of interpretation, as between actions involving an individual consumer
         and actions for cessation which involve persons or organisations representative of the collective interest of consumers may
         be accounted for by the different aims pursued by those actions. In the former case, the courts or competent bodies are required
         to make an assessment in concreto  of the unfair character of a term contained in a contract which has already been concluded, while in the latter case it is
         their task to assess in abstracto  the unfair character of a term which may be incorporated into contracts which have not yet been concluded. In the former case,
         an interpretation favourable to the individual consumer concerned benefits him or her immediately. By contrast, in the latter
         case, in order to obtain, by way of prevention, the most favourable result for consumers as a whole, it is not necessary,
         where there is doubt, to interpret the term in a manner favourable to them. Accordingly, an objective interpretation makes
         it possible to prohibit more frequently the use of an unintelligible or ambiguous term, which results in wider consumer protection.
      
       (see paras 16-17)
      2.        Article 6(2) of Directive 93/13 on unfair terms in consumer contracts, which provides that Member States are to take the necessary
         measures to ensure that the consumer does not lose the protection granted by that directive by virtue of the choice of the
         law of a non-Member country as the law applicable to the contract if the latter has a close connection with the territory
         of the Member States, must be interpreted as meaning that the deliberately vague term ‘close connection’, which seeks to make
         it possible to take account of various ties depending on the circumstances of the case, may be given concrete effect by means
         of presumptions. On the other hand, it cannot be circumscribed by a combination of predetermined criteria for ties such as
         the cumulative conditions as to residence of the consumer and conclusion of the contract referred to in Article 5 of the Convention
         on the law applicable to contractual obligations of 19 June 1980.
      
       (see paras 32-33)

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            JUDGMENT OF THE COURT (First Chamber)9 September 2004(1)
         
         
               (Failure of a Member State to fulfil obligations  –  Directive 93/13/EEC  –  Unfair terms in consumer contracts  –  Rules of interpretation  –  Rules concerning conflict of laws)
               
             In Case C-70/03,ACTION under Article 226 EC for failure to fulfil obligations,brought before the Court on 17 February 2003,
            
            
            Commission of the European Communities, represented by I. Martínez del Peral and M. França, acting as Agents, with an address for service in Luxembourg,
            
            
            applicant,
            
            v
            Kingdom of Spain, represented by L. Fraguas Gadea, acting as Agent, with an address for service in Luxembourg,
            
            defendant,
            
            
            THE COURT (First Chamber),,
            
             composed of P. Jann (Rapporteur), President of the Chamber, A. Rosas and R. Silva de Lapuerta, Judges,
            
             Advocate General: L.A. Geelhoed,Registrar: R. Grass,
            
            
            
            
            after hearing the Opinion of the Advocate General at the sitting on 29 April 2004,
         gives the following
         
         
         Judgment
         1
            
          By its application the Commission of the European Communities asks the Court to declare that, by failing correctly to transpose
         into national law Articles 5 and 6(2) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts
         (OJ 1993 L 95, p. 29, hereinafter ‘the directive’), the Kingdom of Spain has failed to fulfil its obligations under the provisions
         of the EC Treaty and of the directive.
         
         
         
         2
            
          As set out in Article 1(1), the purpose of the directive is to approximate the laws, regulations and administrative provisions
         of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer.
         
         
         
         3
            
          Article 10(1) of the directive provides that Member States are to bring into force the laws, regulations and administrative
         provisions necessary to comply therewith no later than 31 December 1994. 
         
         
         
         4
            
          The directive was transposed into the Spanish legal system by Ley 7/1998, de 13 de abril, sobre condiciones generales de la
         contratación (Law 7/1998 of 13 April 1998 on general terms in contracts, Boletín Oficial del Estado  No 89 of 14 April 1998, p. 12304) (‘Law 7/1998’), amending Ley General 26/1984, de 19 de julio, para la defensa de los consumidores
         y usuarios (General Law 26 of 19 July 1984 providing for consumer protection, Boletín Oficial del Estado No 176 of 24 July 1984, p. 21686) (‘amended Law 26/1984’).
         
         
            
               Pre-litigation procedure
            
         
         5
            
          Having given the Kingdom of Spain the opportunity to submit its observations, the Commission, on 25 May 2000, sent to it a
         reasoned opinion alleging that it had failed correctly to transpose Articles 5 and 6(2) of the directive and calling on it
         to comply with that opinion within two months of its notification.
         
         
         
         6
            
          By letter of 27 September 2000, the Spanish Government stated the reasons why it believed it had transposed those provisions
         of the directive correctly.
         
         
         
         7
            
          Finding the Kingdom of Spain’s reply to the reasoned opinion unsatisfactory, the Commission brought the present action.
         
         The first plea: failure correctly to transpose Article 5 of the directiveLegal framework The directive
         
         
         8
            
          Article 5 of the directive provides:
         ‘In the case of contracts where all or certain terms offered to the consumer are in writing, these terms must always be drafted
         in plain, intelligible language. Where there is doubt about the meaning of a term, the interpretation most favourable to the
         consumer shall prevail. This rule on interpretation shall not apply in the context of the procedures laid down in Article
         7(2).’
         
         
         
         9
            
          The actions referred to in paragraph 7(2) of the directive are actions for cessation, that is to say ‘whereby persons or organisations,
         having a legitimate interest under national law in protecting consumers, may take action according to the national law concerned
         before the courts or before competent administrative bodies for a decision as to whether contractual terms drawn up for general
         use are unfair, so that they can apply appropriate and effective means to prevent the continued use of such terms’.
         
          National legislation
         
         
         10
            
          Article 10(2) of amended Law 26/1984 provides:
         ‘Where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail.’
         
         
         
         11
            
          Article 6(2) of Law 7/1998 states:
         ‘Doubts about the interpretation of unintelligible general conditions shall be settled in favour of the party agreeing to
         be bound by general conditions.’
         
         Pleas in law and arguments of the parties
         
         12
            
          The Commission criticises the Kingdom of Spain for the fact that the national legislature did not state that the rule of interpretation
         favourable to the consumer does not apply in the case of collective actions for cessation referred to in Article 7(2) of the
         directive. That omission could compromise the effectiveness of such actions since, by relying on the rule of interpretation
         most favourable to the consumer, a seller or supplier could prevent an unintelligible term liable to be interpreted as unfair
         from being prohibited.
         
         
         
         13
            
          The Spanish Government contends that the rule of interpretation in question concerns only individual actions and that, in
         respect of collective actions, objective interpretation is the rule. It adds that the Spanish legislation, which offers a
         higher level of protection than that provided by the directive, includes a list of terms which are, in all cases, unfair.
         The fact that that list is mandatory precludes an interpretation favourable to the consumer from being relied on in order
         to render actions for cessations ineffective.
         
         Findings of the Court
         
         14
            
          As the Advocate General pointed out in paragraph 7 of his Opinion, it is less the content of the obligation laid down in Article
         5 of the directive on which the parties are at variance in regard to the first plea than the form and means by which that
         obligation is to be transposed into national law.
         
         
         
         15
            
          According to settled case-law, whilst legislative action on the part of each Member State is not necessarily required in order
         to implement a directive, it is none the less essential for the national law at issue effectively to guarantee that the directive
         will be applied in full, that the legal position under national law is sufficiently precise and clear and that individuals
         are made fully aware of their rights and, where appropriate, may rely on them before the national courts (see, inter alia,
         Case C-144/99 Commission  v Netherlands [2001] ECR I-3541, paragraph 17, and Case C-478/99 Commission  v Sweden [2002] ECR I-4147, paragraph 18).
         
         
         
         16
            
          The distinction made in Article 5 of the directive concerning the applicable rule of interpretation, as between actions involving
         an individual consumer and actions for cessation which involve persons or organisations representative of the collective interest
         of consumers may be accounted for by the different aims pursued by those actions. In the former case, the courts or competent
         bodies are required to make an assessment in concreto  of the unfair character of a term contained in a contract which has already been concluded, while in the latter case it is
         their task to assess in abstracto  the unfair character of a term which may be incorporated into contracts which have not yet been concluded. In the former case,
         an interpretation favourable to the individual consumer concerned benefits him or her immediately. By contrast, in the latter
         case, in order to obtain, by way of prevention, the most favourable result for consumers as a whole, it is not necessary,
         where there is doubt, to interpret the term in a manner favourable to them. Accordingly, an objective interpretation makes
         it possible to prohibit more frequently the use of an unintelligible or ambiguous term, which results in wider consumer protection.
         
         
         
         17
            
          It follows that the proviso in the third sentence of Article 5 of the directive is a binding legislative provision which confers
         rights on consumers and assists in determining the result which the directive seeks to achieve.
         
         
         
         18
            
          The Spanish Government has not established that that result can be achieved in the national legal system.
         
         
         
         19
            
          In respect of the statement of the Spanish authorities that the rule of interpretation favourable to the consumer concerns
         only individual actions, the Kingdom of Spain has not pointed to any provision in its legal system or any decision of its
         national courts which might support that argument.
         
         
         
         20
            
          Article 10(2) of amended Law 26/1984 and Article 6(2) of Law 7/1998 lay down a general rule of interpretation favourable to
         the consumer without any kind of restriction, and Article 12 of Law 7/1998, concerning collective actions for cessation, contains
         no exception regarding the application of that rule of interpretation.
         
         
         
         21
            
          The scope of those provisions is supported by their place in national legislation. Article 10 of amended Law 26/1984 is integrated
         into Chapter II of that law, entitled ‘Protection of economic and social interests’, while Article 6 of Law 7/1998 is in Chapter
         I of the amended law, entitled ‘General provisions’. Those headings indicate that they concern provisions of general application
         containing no restriction as to the specific case of collective actions for cessation. 
         
         
         
         22
            
          Accordingly, the first plea must be regarded as well founded.
         
         The second plea: failure correctly to transpose Article 6(2) of the directiveLegal framework The directive
         
         
         23
            
          Article 6(2) of the directive reads as follows:
         ‘Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this
         Directive by virtue of the choice of the law of a non-Member country as the law applicable to the contract if the latter has
         a close connection with the territory of the Member States.’
         
          National legislation
         
         
         24
            
          Article 10a(3) of amended Law 26/1984 provides:
         ‘The rules on protection of consumers against unfair terms shall be applicable, irrespective of the law chosen by the parties
         to govern the contract, under the terms and conditions provided for in Article 5 of the Rome Convention on the law applicable
         to contractual obligations.’
         
         
         
         25
            
          Article 3(2) of Law 7/1998 states:
         ‘Without prejudice to the provisions of international treaties and agreements, [this law] shall also apply to contracts subject
         to foreign law when the party agreeing to be bound thereby has given such consent on Spanish territory and is habitually resident
         there.’
         
          The Rome Convention
         
         
         26
            
          Under Article 5(1) of the Rome Convention on the law applicable to contractual obligations opened for signature in Rome on
         19 June 1980 (OJ 1980 L 266, p. 1) (‘the Rome Convention’), that article ‘applies to a contract the object of which is the
         supply of goods or services to a person (“the consumer”) for a purpose which can be regarded as being outside his trade or
         profession, or a contract for the provision of credit for that object’. According to paragraphs 4 and 5, Article 5 is not
         to apply to a contract of carriage unless it provides for a combination of travel and accommodation for an inclusive price,
         or to a contract for the supply of services, where the services are to be supplied to the consumer exclusively in a country
         other than that in which he has his habitual residence. 
         
         
         
         27
            
          Article 5(2) of the Rome Convention provides:
         ‘[A] choice of law made by the parties shall not have the result of depriving the consumer of the protection afforded to him
         by the mandatory rules of the law of the country in which he has his habitual residence: 
         
         
         
          
         –
            if in that country the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising,
               and he had taken in that country all the steps necessary on his part for the conclusion of the contract, 
            
         
         
                    or 
         
         
         
          
         –
            if the other party or his agent received the consumer’s order in that country, 
         
         
                    or 
         
         
         
          
         –
            if the contract is for the sale of goods and the consumer travelled from that country to another country and there gave his
               order, provided that the consumer’s journey was arranged by the seller for the purpose of inducing the consumer to buy.’
            
         
         
         
         Pleas in law and arguments of the parties
         
         28
            
          The Commission maintains that Article 6(2) of the directive seeks to ensure that all consumers are protected under all contracts
         entered into with a seller or supplier, while Article 10a of amended Law 26/1984 affords such protection only for certain
         types of contracts, that is to say those referred to in Article 5(1) of the Rome Convention, and only when certain conditions
         are satisfied, namely those laid down in Article 5(2). Those conditions are more restrictive than the sole requirement provided
         for in Article 6(2) of the directive that ‘the [contract] has a close connection with the territory of the Member States’.
         
         
         
         29
            
          According to the Spanish Government, it follows from a consistent interpretation of the national provisions on the protection
         of consumers against unfair terms that they are mandatory, irrespective of the law chosen by the parties to govern the contract.
         It contends that Article 3(2) of Law 7/1998 provides for the mandatory application of those national provisions, that is to
         say the protection conferred by the directive on contracts governed by foreign law when the party agreeing to be bound by
         them expressed consent in that regard on Spanish territory and is habitually resident there. It is in that way that actual
         effect is given to the term ‘close connection with the territory of the Member States’ in the words of Article 6(2) of the
         directive, in the case of contracts having a connection with Spanish law.
         
         Findings of the Court 
         
         30
            
          As is clear from the sixth recital in its preamble, the directive is intended ‘to safeguard the citizen in his role as consumer
         when acquiring goods and services under contracts which are governed by the laws of Member States other than his own’ (see,
         in that regard, Commission  v Netherlands, cited above, paragraph 18, and Commission  v Sweden, cited above, paragraph 18). Article 6(2) of the directive gives effect thereto. As is clear from the 22nd recital of the
         preamble to Directive 93/13, that provision seeks to avert the risk that, in certain cases, the consumer may be deprived of
         Community protection by the designation of the law of a non-Member country as the law applicable to the contract. For that
         purpose, it provides that the protection granted by the directive to consumers in contractual relationships within the Community
         is to be maintained for contractual relationships involving non-Member countries, as long as the contract has close ties with
         the territory of the Member States.
         
         
         
         31
            
          Under Article 1(1) and Article 3(1) of the directive, the substantive scope of the protection granted by it covers terms not
         individually negotiated in all contracts concluded between a seller or supplier and a consumer. It is true that, as the Commission
         rightly maintains, Article 10a of amended Law 26/1984 is more restricted in its scope since it applies only to the types of
         contracts referred to in Article 5(1)(4) and (5) of the Rome Convention. However, as the Spanish Government contends, that
         lacuna is supplied by Article 3(2) of Law 7/1998, which applies to all contracts concluded, without individual negotiation,
         on the basis of general conditions.
         
         
         
         32
            
          As regards ties with the Community, Article 6(2) of the directive merely states that the contract is to have ‘a close connection
         with the territory of the Member States’. That general expression seeks to make it possible to take account of various ties
         depending on the circumstances of the case.
         
         
         
         33
            
          Although concrete effect may be given to the deliberately vague term ‘close connection’ chosen by the Community legislature
         by means of presumptions, it cannot, on the other hand, be circumscribed by a combination of predetermined criteria for ties
         such as the cumulative conditions as to residence and conclusion of the contract referred to in Article 5 of the Rome Convention.
         
         
         
         34
            
          By referring to the latter provision, expressly as regards Article 10a of amended Law 26/1984 and, by implication, as regards
         Article 3(2) of Law 7/1998, the provisions of the Spanish legal system supposedly transposing Article 6(2) of the directive
         thus introduce a restriction incompatible with the level of protection laid down therein.
         
         
         
         35
            
          It follows that the second plea is also well founded.
         
         
         
         36
            
          In those circumstances it must be held that, by failing correctly to transpose into national law Articles 5 and 6(2) of the
         directive, the Kingdom of Spain has failed to fulfil its obligations under that directive.
         
         
         Costs
         37
            
          Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
         applied for in the successful party’s pleadings. Since the Commission has asked that the Kingdom of Spain be ordered to pay
         the costs and the latter has been unsuccessful, it must be ordered to pay the costs.
         
         
         
         
         
         
            
            
         
         
          On those grounds, the Court (First Chamber) hereby: 
         
            
            
             
               1.
                  Declares that, by failing correctly to transpose into national law Articles 5 and 6(2) of Council Directive 93/13/EEC of 5
                     April 1993 on unfair terms in consumer contracts, the Kingdom of Spain has failed to fulfil its obligations under that directive;
                  
               
            
            
            
             
               2.
                  Orders the Kingdom of Spain to pay the costs.
               
            
             Signatures.
      
      
          1 –
            
            Language of the case: Spanish.