Source: https://judgesinutopia.eu/blogs-2/
Timestamp: 2019-06-25 00:02:31
Document Index: 243217240

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Archive – Judges in Utopia
The Belgian mondial news MO Magazine dedicated a piece on air quality cases. In this context, Laura Burgers is interviewed and the Vidi Project Judges in Utopia is elaborately discussed, including Anna van Duin’s research on Article 47 of the Charter of Fundamental Rights of the EU.
Anne Adé ‘Een rechter heeft geen keuze, hij moet de bevolking beschermen tegen luchtvervuiling’ MO Magazine 8 June 2018
Article 47 Charter and Civil Courts: the case of arbitration clauses in consumer contracts
On 20 April 2018 Anna van Duin presented a part of her research at the colloquium ‘Citizen’s Rights and EU Law’, organised by the Cátedra Jean Monnet at the Universitat de Barcelona. Her working paper ‘Article 47 EUCFR and Civil Courts: the case of arbitration clauses in consumer contracts (the Netherlands vs Spain)‘ is now available online: http://diposit.ub.edu/dspace/handle/2445/122626 Click here for the full programme and a video registration of the colloquium.
The Netherlands’ oldest opinion magazine De Groene Amsterdammer published a short essay by Laura Burgers in which she explains the global climate change litigation trend with the aid of a deliberative democracy model.
See: Mijn motivatie is dat ik denk dat ik gelijk heb.
by Fien de Ruiter (student assistent)
On 22 March 2018, a public debate was organised at the University of Amsterdam on the so-called ‘robot judge’, in response to recent commotion about online arbitration in consumer cases in the Netherlands, offered by e-Court. E-court promises to provide an easier and cheaper alternative for adjudication before a State court. Most Dutch health insurance companies have included e-Court in their standard terms and conditions as a means for dispute settlement. For example, they bring their claims to e-Court in the event that customers do not pay their medical bills in time. Such claims are almost always allowed, since they mainly concern default cases. The health insurer then only needs to ask the State court for leave to enforce the arbitral award.
Professors Ruth de Bock, Marco Loos and Evert Verhulp as well as investigative journalist Tim Staal discussed the pros and cons of the so-called ‘robot judge’.
Although e-Court did not set a good example, Professor Verhulp pointed out that the possibility to pre-sort cases through digital procedures without having to go to court is something we should consider more seriously. For example, it would help parties estimate how strong their case is, before they determine whether or not to go to court. If it turns out that chances are that they will lose, it will help them not to incur unnecessary costs associated with legal proceedings. But when there is a good chance of winning the case, it may be a motivation to go to court. In addition, through such digital preliminary procedures, it will be easier to focus on what the dispute is actually based on. If you let both parties enter data and thus see at which points they disagree, a judge knows which questions to focus on. When such developments in the future are further improved into a true ‘robot judge’, it is important that such systems remain completely transparent and can always be challenged.
On the other hand, one must be aware that alternatives do not amount into “default factories”. The core question of the debate about ADR, is if and how efficiency may be at the expense of procedural safeguards. Both in the audience as well as in the panel, people feared that the ‘robot judge’ will deprive the judiciary of its human touch. Professor de Bock strongly opposed the idea that there would be a market for dispute resolutions. The judiciary offers certain institutional safeguards that are of fundamental importance, such as the fact that all verdicts are published and therefore open for criticism. The value of certain procedures such as the assurance that both parties are heard and the oral hearing should not be underestimated. A judge in the audience pointed out the importance of parties explaining their stories, who will then try to find out what actually happened. Especially in cases concerning debt issues, it is not only important to force people to pay, but also to help them realise what went wrong.
Tim Staal pointed out that e-Court appears to automatically assume that you agree with the digital arbitration procedure. In total, only six people have opted for a State court. It is not obvious that of the large number of awards that e-Court has given out, everyone was well aware they agreed to arbitration. Many people do not realise that an arbiter is not the same as a government judge. The article in De Groene Amsterdammer also showed that people are often persuaded to opt for e-Court because they do not fully understand what it entails. Moreover, Professor de Bock pointed out that it is questionable whether under current Dutch law it is even permissible at all to have judgments awarded by an automatized system. Can a judgment be issued solely by a ‘robot judge’ if this means the total absence of human beings? And is the court’s minimal test to grant permission still sufficient in view of EU consumer law?
It is time to submit these pressing questions to the Supreme Court, or even better, the European Court of Justice, before the robot judge is more than just a ‘digital mailbox’. Professor Loos argued that many ADR mechanisms do meet the standards of European law. However, there is always room for improvement, perhaps in a system in which the governmental judiciary and alternative dispute resolutions can complement each other. Professor de Bock suggested that perhaps it could be made possible for arbiters to be able to turn to a government court in case of pressing questions about, for example, the application of EU law. (See in this respect: http://recent-ecl.blogspot.nl/2018/03/arbitration-and-effective-consumer.html)
E-Court turned out to be a blessing in disguise. It raised may questions about how we want the judiciary to modernise. Where one person considers it impermissible that efficiency prevails over the guarantees that our law offers, the other sees it as a great advantage for the judiciary that the ‘robot judge’ offers a more efficient alternative. Hopefully soon a court will be able to ask preliminary questions about how to cope with the clash between the efficiency of e-Court and the procedural safeguards the judiciary offers.
Opinion on climate change damage litigation in newspaper Trouw
Today, Laura Burgers published an opinion on litigation on climate change damages against corporations in the Dutch newspaper Trouw. Although litigation is unlikely to solve the problem of climate change, litigation against corporations may further the democratic debate.
A possible action might concern the obligation of corporations to reduce greenhouse gasses emissions, such as promoted by the Principles on Climate Change Obligations for Entreprises. Yet actions for damages could be of importance as well. Litigation by activists stimulates society-wide deliberations, and the issue of damages is to be widely discussed: everybody is to some extent responsible for climate change and its ensuing damages, but which polluter pays for what exactly?
See: Met een rechtszaak krijg je het klimaat op de agenda
Article on activism through judicial procedures in 'Wijsgerig Perspectief'
Together with her friend Tamar de Waal, Laura Burgers published an article in the Dutch philosophy magazine Wijsgerig Perspectief on activism through judicial procedures. The article is both a theoretical investigation into the emancipatory potential of constitutional states and offers a more practical action perspective for activists who want to use judicial procedures to attain their goals.
With the aid of theory by Claude Lefort and Jürgen Habermas, the article shows that constitutional states can be a source of emancipation, but that judges generally have to stay within the boundaries of democratically determined laws and principles. Judges have space to go against majority decisions only when fundamental rights are at stake. However, since these fundamental rights typically are human rights, environmental interests may lack judicial protection. For activists, it may still be wise to begin judicial procedures, because even when the procedure is lost, the mere media attention for the case may influence society-wide democratic deliberations and, after time passes, this might open up space for the judiciary to take into account more interests than it could before.
Laura Burgers & Tamar de Waal ‘Activisme via de rechter’ 57 Wijsgerig Perspectief 4 (2017) pp 25-33
by Laura Burgers
It is a truth universally acknowledged that a constitutional state in possession of democratic institutions must have been made by humans. Law more generally is a human construction. Law is considered by some to be even problematically anthropocentric, that is, it would be overtly focused at human interests and thereby neglect the interests of animals and other forms of life on the planet.[1] Yet, in national legal systems across the globe, more and more natural entities get assigned legal personality: rivers, woods, mountains, even Mother Earth herself. This fascinating movement has entered the sphere of European private law, now the Scottish Muir Trust Foundation considers to endow its property, the mountain Ben Nevis, with legal personality.[2] Key questions here are whether such a move would diminish anthropocentrism in the law and whether it would lead to better environmental protection.
Many agree that the legitimacy of democratic laws follows from the idea that all those who have to abide by it have a voice in its construction.[3] This is very close to the principle of all affected interests, stipulating that all interests touched upon by a certain law should be considered in the process of law-making.[4] Yet those who have a voice in the law-making process typically are human beings, mostly inclined to defend human interests, which can lead to the problem of the law to be anthropocentric. The results are clear: Even though international consensus exists on the necessity to act upon – for instance – climate change, governments find great difficulties to implement environmental measures. In the world of today, many species are endangered or actually die out, rivers are polluted and entire islands disappear below sea level. Human wealth and technology thrive more than ever.
‘Legal personality’ is a status the law can assign to an entity; it refers to the ability to bear legal rights and duties and to defend those in court. Interestingly, legal systems do consider not only human beings to be legal persons, but also corporations and institutions such as municipalities, States, or churches. Animals or other natural entities normally have no legal status – for the law, they are mere ‘things’. This is to say that people may have responsibilities towards them, but normally these natural entities cannot defend their rights in court rooms, let alone articulate their voice, or vote in the political process.
Legal personality for natural entities
Yet in 2008, Ecuador was the first country on the world to include in its constitution rights of nature, or Pachamama. Furthermore, in 2010, Bolivia proclaimed its Ley de Derechos de la Madre Tierra (the law of the rights of Mother Earth) – making the Earth a legal person in the Bolivian legal system. In Argentina, a similar proposal is made. Last summer, in Columbia and India, courts recognized certain rivers to have legal personality;[5] in New Zealand, the same was done by legislation for a river and a forest.
In India and New Zealand, the reasons for endowing these rivers with legal personality were mostly religious – people in these countries consider the rivers to be divine entities. The Bolivian, Columbian and Ecuadorian moves, in contrast, were inspired by more environmental reasons. The Scottisch Muir Trust Foundation is ‘a conservation charity dedicated to protecting and enhancing wild places in the UK’.[6] Its reasons for giving the Ben Nevis – the highest mountain in the UK – the status of a legal person is purely environmental: nature and wild life should be protected. Lawyers working for the Muir Trust Foundation call themselves ‘wild lawyers’.
Balancing rights in private law
The question now becomes, of course, whether endowing a natural entity with legal personality indeed leads to better environmental protection. To be a legal person and thus, to be able to defend one’s rights in court, does not automatically mean one’s interests prevail in a private law conflict. On the contrary, in private law, rights and interests of two parties are typically balanced against each other. Outcomes can be compromises or an outright loss for one party. Imagine some corporation (= a legal person) would litigate about its factory, situated close to the legal person the Ben Nevis. The interests of this hypothetical factory could very well win against the interests of the mountain in private law litigation. Therefore, possibly stronger environmental protection could be obtained if governments simply declared natural entities to be national parks, or official ‘wild life areas’ that merit absolute protection against industrial interests.
Power of private law and the role of judges
For that last option, however, governments have to be willing to do so, whereas the core of problem ‘democratic laws are anthropocentric’ is precisely that environmental measures prove to be unpopular. The force of private law, now, is its bottom-up nature: a private foundation, such as Muir Trust, can decide to transform its property, a mountain, into a legal person. Judges have a particularly important role to play here, for it is for them to either acknowledge this legal personality and allow the natural entity standing in court, or dismiss the whole construction as ridiculous.
Judges for Utopia
Judges applying European private law should not be too proud, nor too prejudiced towards legal personality for natural entities. Certainly, legal personality is a mere legal status – a fiction, so to say – which does not lead to any better environmental protection as such. In this vein, Nick Mount remarked about the Columbian river with legal personality: “The Atrato River in general, and Rio Quito in particular, serve as a stark reminder that awarding environmental rights is not the same as realising them.”[7] Yet we should not forget the symbolic power of fiction that may lead us closer to a Utopia in the positive sense of the word. In political philosophy, calls are made to include animal voices in the democratic process,[8] or even ‘things’.[9] The rivers with legal personality and the Ben Nevis cannot vote for the elections (nor corporations, nor churches, for that matter). Yet to consider not only humans and their corporations, but also natural entities to be persons, legally speaking, might be a first step to turn the anthropocentric tide of our legal system.
[1] Cf eg Stephen M. Gardiner Debating Climate Ethics Oxford University Press (Oxford: 2016), pp 32-37
[2] See https://www.johnmuirtrust.org/assets/000/002/678/John_Muir_Trust_Journal_63_Autumn_2017_original.pdf?1508494702 and also https://www.ukela.org/content/page/6379/ben%20nevis.pdf
[3] Cf eg Jürgen Habermas Faktizität und Geltung; Beiträge zur Diskurstheorie des Rechts und des demokratischen Rechtsstaats Suhrkamp Verlag (Frankfurt: 1998), p 14
[4] Robert Goodin explains very clear why this principle reflects the essence of democracy in his ‘Enfranchising All Affected Interests, and Its Alternatives’ 35 Philosophy & Public Affairs 1 (2016), pp 40-68
[5] In India, this order is however stayed by the Supreme Court – we have to await how this is eventually going to be decided.
[6] https://www.johnmuirtrust.org/
[7] Nick Mount ‘Can a river have legal rights? I visited the jungles of Colombia to find out’ The Conversation 6 October 2017
[8] Sue Donaldson & Will Kymlicka Zoopolis, a Political Theory of Animal Rights Oxford University Press (Oxford: 2011); Eva Meijer Political Animal Voices PhD Thesis Univeristy of Amsterdam (Amsterdam: 2017), accessible through https://pure.uva.nl/ws/files/15946241/Thesis.pdf
[9] Bruno Latour has called for a ‘parliament of things’ to be established in We have never been modern Harvard Univeristy Press (Harvard: 1993) pp 142-145 and, later, again in Facing Gaia Polity Press (Cambridge: 2017). In 2015, students set up a parliament of things to negotiate a new climate agreement at the same time as the conference of the parties of the United Nations Framework Convention on Climate Change, the latter of which resulted in the Paris Agreement, which is celebrated for its ambition. It turned out that the students, amongst whom not only representatives of countries, but also of, for instance, oceans, were included, came up with an even more ambitious agreement. This enormous experiment was caught by David Bornstein in the movie Making it Work, which can be watched online for free. For further artistic experiments with this idea, see also
https://www.youtube.com/watch?v=oxG0ZWNpe1s
by Anna van Duin
Judicial law-making in a changing European legal order
by Timo Zandra (student assistent)
Theory and practice suggest that the European judiciary increasingly takes on a more active role when deciding on cases in which ifferent norms conflict. The courts are increasingly called upon to balance different values and to reconcile conflicting interests, such as balancing public interests in private relationships, as in Urgenda (2015) and CJEU Aziz (2013). Such delicate balancing necessarily comprises legal-political and institutional dimensions, and the court’s value-judgements as such invariably yield political implications. At present, a continuing ‘Europeanisation’ of private law extends this judicial balancing to the interplay of national and supranational rules in the multi-layered order of the EU, involving diverging ideas of justice and principles of law at the interface of EU and national private laws. Such hard cases may provoke innovative case law, sometimes attracting the label of ‘judicial activism’. How can we explain such rulings? How do we assess their democratic legitimacy? And, ultimately, what should the role of the judiciary be when reconciling conflicting interests at the interface of EU and national private laws? The workshop of 28-29 September facilitated dialogue between leading academics and legal practitioners on these questions (click here for the programme).
Contributions came from inter alia Jaap Spier and Luc Lavreysen, who argued that the judiciary should take on a more active role in solving global issues such as climate change in order to compensate political inertia. Moreover, CJEU Advocate General Maciej Szpunar elaborated on the tension between the case law of the Court and the procedural autonomy of the Member States, whilst Laura Burgers proposed a democratic legitimation of the Urgenda decision from Habermasian democratic theory. Oliver Gerstenberg, Chantal Mak, Micheal Dowdle and Dorota Leczykiewicz presented their work on the ideas of justice underlying the construction of a European polity and the potential of Fundamental Rights to serve as standards in judicial deliberations.
Furthermore, Fabrizio Cafaggi and Anna van Duin presented on the eminent role of courts in the interpretation and application of, and the development of (national) remedies and procedures based on, the fundamental right to effective legal protection – in particular under EU consumer law. Cafaggi spoke of the interaction between private and administrative enforcement; Van Duin presented on the role of article 47 ECFR in the case law of the CJEU on unfair terms. Spanish judge José Maria Fernández Seijo emphasised the search for justice in finding solutions for ‘real-life’ problems; Aida Torres Perez expanded on the narrative of judicial mobilisation in the case of housing rights in Spain. And finally, Aurelia Colombi Ciacchi expanded the debate to the level of judicial governance, expanding on different models across the EU member-states.
Just as the case law will evolve and develop, so will the questions discussed during the workshop increasingly be coming back to the national and European judiciary. The debate is blooming and, in the face of rising Euroscepticism and pan-European challenges, perhaps more relevant than ever: the shared search for justice binds the European polity – people and judiciary alike.
Yesterday the EU Court of Justice gave its long-awaited judgment in the joined cases from Spain on the infamous ‘floor clauses’ (cláusulas suelo). It is a real Christmas present to Spanish consumers and house-owners: the CJEU has “overruled” national case law that limits the temporal effects of the declaration of nullity of an unfair term. Nullity is nullity. The impact of this judgment on the Spanish banking sector is huge: banks will have to pay back an estimated amount of 3.000 to 5.000 million euros (source: El País). The judgment has already been called a “formidable varapalo judicial a la banca“, a tremendous judicial blow to the banks.
‘Floor clauses’ in mortgage loan agreements establish a minimum rate below which the variable rate of interest cannot fall. Until the Spanish Supreme Court (Tribunal Supremo) found them to be unfair in 2013 due to a lack of transparency, they were widespread. The biggest question for Spanish consumers after yesterday’s judgment, which has been widely covered in Spanish media, is: how much money do we get back?
The reason why they ask this question, is the Supreme Court’s decision to limit the temporal effects of its judgment to after the date of its publication, 9 May 2013, both in respect of collective actions for an injunction and individual actions by consumers claiming repayment. Only the amounts overpaid on the basis of ‘floor clauses’ after that date had to be paid back. One of the considerations of the Supreme Court was that retroactive (i.e. restitutory) effect of the invalidity of the clauses at issue would give rise to serious economic repercussions. Lower courts in Spain, however, doubted whether the Supreme Court’s approach was compatible with Directive 93/13/EEC on unfair terms in consumer contracts. Last July, we reported on this blog that it was permissible in the opinion of the Advocate General. The CJEU has now decided otherwise, which means that Spanish consumers can also claim repayment of the amounts overpaid to the banks on the basis of ‘floor clauses’ during the period before 9 May 2013, from the beginning of their contract.
For the readers of this blog, the judgment may not be entirely unexpected. The CJEU refers extensively to its previous case law about the interpretation of “not binding on the consumer” under Article 6(1) of Directive 93/13. It reiterates that it is for the national court “purely and simply” to exclude the application of an unfair term (para. 57). The national court may not revise the content of unfair terms, “lest it contribute to eliminating the dissuasive effect of the straightforward non-application with regard to the consumer of those unfair terms” (para. 60). The determination of unfairness “must, in principle, have the consequence of restoring the consumer to the legal and factual situation that he would have been in if that term had not existed” (para. 61). Thus, the national court must impose the repayment of amounts that prove not to be due, which entails “a corresponding restitutory effect” (para. 62). The absence of such restitutory effect would call into question the dissuasive effect that Articles 6(1) and 7(1) of Directive 93/13 are designed to attach to a finding of unfairness.
The CJEU then proceeds to consider that national (case) law may not alter the scope and, therefore, the substance of the protection guaranteed to consumers by the Directive. The Supreme Court was entitled to hold that its judgment did not affect situations in which a judgment with the force of res judicata had been given. While it is compatible with EU law to lay down reasonable time-limits for bringing proceedings, only the CJEU can decide upon a temporal limitation of the effects of a rule of EU law. National (case) law may not aversely affect the substance of the right that consumers acquire under that rule. The temporal limitation made by the Supreme Court is tantamount to depriving any consumer having concluded a mortgage loan contract before 9 May 2013 containing a ‘floor clause’ of the right to obtain repayment in full of the overpaid amounts. The CJEU concludes that national case law, such as that following from the Supreme Court’s judgment of 9 May 2013, ensures only limited protection for consumers. Such protection is incomplete and insufficient and does not constitute either an adequate or an effective means of preventing the continued use of ‘floor clauses’.
The CJEU rejects the argument brought forward by, among others, the Spanish government that the question of the effects of the finding of unfairness as regards ‘floor clauses’ does not fall within the scope of Directive 93/13, because that finding would afford a higher level of consumer protection than guaranteed by the Directive. The review of the substantive unfairness of a clause relating to the main subject-matter of the contract, where the consumer did not have the necessary information on the conditions and consequences of that contract before entering into it, falls within the scope of the Directive.
The CJEU brushes aside the Supreme Court’s considerations in one fell swoop. It does not matter whether the ‘floor clauses’ were in themselves lawful, that their use had long been tolerated on the market, that the banks had complied with the regulatory requirements for information, or that there could be serious economic repercussions. The judgment was a bombshell: “Ahora mismo sale gratis disparar contra la banca” (“Right now, the banks have been made fair game”; source ABC). It is perceived as yet another setback for the Spanish banking sector. A string of preliminary references to the CJEU, starting with the well-known Aziz case, has strengthened the judicial protection of consumers against unfair contract terms. Still, yesterday’s judgment comes as a surprising end to a long-running battle between Spanish consumers and the banks, supported by the government. It remains to be seen how the European judgment will be implemented at the national level; most banks do not seem eager to accept an obligation to automatically repay all their clients.
This morning, Advocate-General Mengozzi presented his Opinion in three high-profile cases that have generated a lot of attention in Spain (Joined Cases C-154/15, C-307-15 and C-308/15 (Gutiérrez Naranjo v. Cajasur Banco, Palacios Martínez v. BBVA and Banco Popular Español v. Irles López). I reproduce the summary I wrote for the blog on ‘Recent developments in European Consumer Law’ here:
The cases discussed in this blog post go far beyond the parties’ interests and are perceived as being part of an ongoing battle between “the banks” on the one hand and “the consumers” on the other. They originate from a disagreement between the Spanish Supreme Court (Tribunal Supremo) and lower courts about the required level of protection under the Unfair Contract Terms Directive (93/13/EEC). The subject matter of the three cases are the so-called cláusulas suelo (literally: ‘floor clauses’), i.e. minimum interest rate clauses, used by banks in mortgage loan agreements. In Spanish media, today has already been called “D-Day” for cláusulas suelo.
What are cláusulas suelo? AG Mengozzi explains: “Those clauses allow a banking institution which grants a variable rate mortgage loan to impose a lower limit on the variable interest rate, so that even if the applicable interest rate [e.g. EURIBOR] is below a certain threshold (or ‘floor’), the consumer will continue to pay minimum interest equivalent to that threshold.” Such ‘floor clauses’ were common practice in Spain. In a judgment of 9 May 2013, the Tribunal Supremo declared cláusulas suelo to be unfair. In short, it found that those clauses were not transparent: consumers were unable to foresee the economic and legal burden the contract would place upon them.
The present cases concern the effects of this judgment, more specifically the question of retroactive effect. Under Spanish law, the general penalty for unfair terms is invalidity, which creates a right to full restitution. To what extent can consumers claim restitution of the amounts paid on the basis of ‘floor clauses’? According to the Tribunal Supremo, such a refund is only due from the date of the judgment, 9 May 2013. It held that the temporal effects of its judgment could be limited under the principles of legal certainty, fairness and prohibition of unjust enrichment, because the banks had acted in good faith and there was a risk of serious economic difficulties (cf. the CJEU’s judgment of 21 March 2013, C-92/11, RWE Vertrieb). However, lower courts have questioned the date from which the refund should begin. Is the Tribunal Supremo‘s limitation of the restitutory effects produced by an unfair – and therefore, under Spanish law, invalid or void – contract term compatible with the interpretation of “non-binding” in Article 6(1) of Directive 93/13? Should the refund of the amounts paid by the consumer on the basis of the unfair term arise only on the date of a court decision confirming the unfairness, or from the date the contract was concluded?
Advocate-General: Tribunal Supremo‘s approach is permissible
AG Mengozzi first establishes that the Tribunal Supremo, by classifying ‘floor clauses’ as unfair terms in particular because of a lack of sufficient prior information, has not afforded a higher level of protection to consumers than that offered by Directive 93/13 and that thus, ascertaining the requested interpretation is relevant (paras. 43-50). He refers to the CJEU’s case law (inter alia, its judgment of 30 April 2014, C-26/13, Kásler) to conclude that the requirement of transparency within the meaning of Article 4(2) of Directive 93/13 must be understood in a broad sense: not only should the relevant term be grammatically intelligible to the consumer, but the consumer should also be able to assess the economic consequences resulting from the application of that term, including the calculation of the repayments and interests.
As regards Article 6(1) of Directive 93/13, AG Mengozzi considers that the expression “non-binding” is neutral. He then moves on to say that the CJEU seems to have considered the invalidity of unfair terms not as the only way to satisfy the requirement that unfair terms are non-binding (para. 60). The CJEU has not decided that national courts must declare those terms invalid and create a corresponding right to restitutio in integrum (para. 64). From 9 May 2013, ‘floor clauses’ must cease to exist in the Spanish legal order: they must be eliminated from existing contracts and can no longer be included in new contracts. Therefore, the full effects of invalidity under Spanish law are guaranteed from 9 May 2013 and the effectiveness of Directive 93/13 is fully assured pro futuro. With regard to the prior period, AG Mengozzi observes that EU law harmonises neither the applicable penalties nor the circumstances in which a supreme court decides to limit the effects of its judgments. This means that the present situation falls within the national procedural autonomy of the Member States (para. 68). In AG Mengozzi’s view, the Tribunal Supremo‘s approach – the temporal limitation – is permissible in the light of the principles of equivalence and effectiveness, provided that it remains quite exceptional (p. 73). While he disagrees with the alleged “innovative nature” of the judgment of 9 May 2013, AG Mengozzi points out that the Tribunal Supremo struck a balance between the protection of consumers and “the macroeconomic challenges to the already weakened banking system of a Member State” (para. 72). The safeguarding of legal certainty is “a concern shared by the EU legal order”, “on account of the many legal situations which are potentially affected and which could undermine the stability of an economic sector” (para. 74).
AG Mengozzi’s consideration of “macroeconomic challenges” is in line with the Tribunal Supremo‘s argument that its judgment, without a restriction of the retroactive effect, would cause a risk of serious economic difficulties. It has been said that the risk for the Spanish banking sector is 3.500 million euros; no wonder that the AG’s Opinion is perceived as a victory for the banks. Yet, the Opinion passes over a number of counter-arguments, brought forward on behalf of the consumers involved as well as by the referring courts.
First, it has been doubted whether the banks have actually acted in good faith.[1] As AG Mengozzi concludes, the judgment of 9 May 2013 was not really “innovative”; the CJEU’s case law after that date is “nothing other than the logical continuation of a series of earlier judgments” (para. 49). Can it be said that the banks’ “good faith” only ceased to exist on 9 May 2013? In addition, the banks themselves, who drafted and used the highly disputed ‘floor clauses’, were the cause of the lack of transparency making those clauses unfair. In this respect, AG Mengozzi’s remark that the conditions governing the circumstances in which a supreme court may limit the effects of its own judgments fall within the scope of the Member States’ national procedural autonomy (para. 80) is unsatisfactory, especially given the emphasis he puts at the same time on the balance struck by the Tribunal Supremo (paras. 72-74). If the Tribunal Supremo‘s reasoning is subjected to scrutiny in the light of the principle of effectiveness, the part on good faith could be more closely examined as well.
Secondly, the question has been raised whether the Tribunal Supremo‘s approach is contrary to the prohibition imposed on national courts of revising or altering the content of an unfair term (see, e.g., the CJEU’s judgment of 14 June 2012, C-618/10, Banco Español de Crédito). AG Mengozzi does not answer this question directly. Perhaps limiting the effects of invalidity is not the same as varying the content of contract terms, the ratio behind this prohibition might nevertheless apply equally.[2] It is not entirely clear why the required “deterrent effect” (para. 71) should not date further back than 9 May 2013. One could argue that the banks are now rewarded for awaiting the Tribunal Supremo‘s judgment before changing their practice. In the words of Prof. Francisco de Elizalde (footnote [1]): “It could lead possible infringers to believe that the greater the damage, the more lenient the remedies.”
Thirdly, AG Mengozzi appears to pay strikingly little attention to the position of consumers. Admittedly, achieving the balance sought by Directive 93/13 is not the same as favouring the consumer. But AG Mengozzi dismisses the plight of Spanish consumers too easily, where he says that a consumer who had concluded a loan agreement containing a ‘floor clause’ could simply repay one loan with another from a different banking institution, and that application of the ‘floor clause’ would not have led to a substantial change in the monthly amounts payable by consumers anyway (para. 73). He seems to overlook the economic risk mortgage loan agreements and ‘floor clauses’ pose to the consumer’s household finances. His statement is all the more curious in relation to the finding of unfairness of those very same ‘floor clauses’.
Finally, it is a pity that AG Mengozzi only spends one brief paragraph at the very end of his Opinion on the relationship between collective and individual actions (para. 81). In Case C-308/15, a specific question was asked by the referring court about the meaning of the right to effective judicial protection as enshrined in Article 47 of the EU Charter of Fundamental Rights in this respect (see para. 32). Not only does AG Mengozzi seem to deny the precedent effect of the Tribunal Supremo‘s judgments, he also does not seize the opportunity to propose a more systematic solution to the disparities between the Tribunal Supremo and lower courts (see also para. 23). He just presumes that the implementation by the lower courts is “likely to safeguard the principle of equality and the principle of economy of procedure” (para. 81), without even mentioning Article 47. Is this another missed opportunity? We will know when the CJEU renders its judgment in the cláusulas suelo saga. To be continued.
[1] See further: Francisco de Elizalde, ‘The Rain in Spain Does Not Stay in the Plain – Or How the Spanish Supreme Court Ruling of 25 March 2015, on Minimum Interest Rate Clauses, affects European Consumers’, EuCML 5/2015, pp. 184-187; link.
[2] The Commission, for example, has argued that the declaration of an unfair term as invalid “is not compatible with a limitation of the effects of such invalidation, unless such limitation is necessary to preserve the principle of res judicata” (see EurActiv)
Research on European law can without doubt benefit enormously from case-law databases, including the recently introduced European Case Law Identifier Search Engine(ECLI Search Engine, made available at the European e-justice Portal) and the Centre for Judicial Cooperation Database (CJC Database, available through the European University Institute Centre for Judicial Cooperation’s website).
Effective judicial protection: some reflections on Case C-49/14 (Finanmadrid)
Earlier this month, Professor Chantal Mak announced that my colleague Laura Burgers and I would join her as authors of this blog. My name is Anna van Duin, and the topic of my PhD research is ‘Article 47 of the EU Charter of Fundamental Rights in European Private Law Adjudication‘. In the present blog post, I will discuss Article 47 of the Charter in reference to the EU Court of Justice’s judgment in Case C-49/14: Finanmadrid.
Effective judicial protection: what is expected from national judges?
Article 47 of the Charter safeguards the right to effective judicial protection against the violation of rights falling within the scope of EU law. In essence, Article 47 expresses the premise ubi ius ibi remedium: rights cannot be enforced without effective remedies and adequate procedures (for further reading, see Professor Mak’s 2012 paper ‘Rights and Remedies’). For national judges, it is important to know what is expected from them in terms of the level of protection they should offer: does their national procedural framework meet ‘European’ standards? However, in practice it is difficult to assess whether national law lives up to EU law requirements, not in the last place because it is unclear which test should be applied and when: the principle of effectiveness, or (also) the principle of effective judicial protection as enshrined in Article 47 of the Charter? And what does that mean in a concrete case?
The difficulty becomes clear in the Finanmadrid case, which concerned a preliminary reference of a Spanish court – one out of many – regarding Directive 93/13 on Unfair Contract Terms. In short, ex officio examination by a judge of the (possible) unfairness of contract terms was not mandatory under Spanish procedural law. In uncontested ‘payment order proceedings’ (proceso monetorio), such an examination would only take place if the court registrar (secretario judicial) deemed it appropriate, or if the debtor opposed the requested payment order. Thus, the ‘burden’ was primarily on the debtor, i.e. the consumer. Judicial examination could not take place at the enforcement stage either, because the payment order had become binding by then. This was clearly against the requirements developed by the CJEU in its case law on Directive 93/13, e.g. Banco Español de Crédito. According to Advocate-General Szpunar, the fact that there had been no ex officio examination of unfair contract terms at any stage of the proceedings rendered Spanish procedural law contrary to the principle of effectiveness, which entails that the exercise of EU rights must not be rendered “practically impossible or excessively difficult”. Although an examination of unfair contract terms at the enforcement stage may not be desirable, the effectiveness of Directive 93/13 prevails over the binding force of the payment order. The CJEU shared the Advocate-General’s conclusion.
The Finanmadrid case demonstrates that the mere existence of a particular remedy or procedure – the consumer could have filed an opposition – is not always sufficient to provide effective judicial protection. In Finanmadrid, the contract terms at issue were presumed to be unfair, but the referring court was prevented from examining them. It could be said that, apart from the specific requirements of Directive 93/13, the right to an effective remedy before a court of law (cf. Article 47 of the Charter) is at stake here. What does Article 47 mean for national judges who find themselves confronted with a legislative gap or shortfall in the protection of rights derived from EU law, like the Spanish court in Finanmadrid?
This is a pressing issue for national civil courts in private law cases, as is illustrated by the high number of preliminary references from Spain referring to Article 47 of the Charter (e.g., C-307/17 and C-308/15, C-503/15, C-380/15, C-7/16, C-92/16 and C-120/16). In the Finanmadrid case, the referring court had also asked whether Spanish procedural law was contrary to the Charter, in particular the right to effective judicial protection and the right to be heard. Apparently, Article 47 of the Charter and the principle of effectiveness do not entirely coincide. This raises the question why judges would refer to Article 47: is it simply ‘window-dressing’ (i.e. rhetorical), is it used as an additional supporting argument, does it operate as an ultimum remedium in lack of another adequate response, or are there other explanations?
The relation between Article 47 on the one hand and the principle of effectiveness on the other has not been clarified yet. In previous judgments (e.g. Sánchez Morcillo), the CJEU has held that the right to an effective judicial remedy is a mandatory requirement, which is also applicable in the context of Directive 93/13. In Finanmadrid, Advocate-General Szpunar concedes that Article 47 of the Charter applies to every claim brought before a (national) court by individuals seeking protection of their EU rights. What is more, he brings forward that an “effective remedy” encompasses the rights of the defence, including the right to be heard. Indeed, an effective judicial remedy presupposes access to justice, and access to justice implies a fair trial. Rights, remedies and procedures are so closely connected that they cannot be distinguished or separated easily.
Against this background, it is unclear why neither the Advocate-General nor the CJEU addresses the link between Article 47 and the principle of effectiveness. It could, for example, be argued that Article 47 puts more emphasis on individual rights protection (cf. Articles 6 and 13 of the European Convention on Human Rights) than on the effective enforcement of EU law in general. In addition, while the principle of effectiveness entails a ‘negative’ test, Article 47 seems to be phrased positively: it guarantees both an effective (substantive) remedy and ‘due process’ (procedural) rights. Unfortunately, the CJEU’s judgment does not give any clarification or guidance as regards the role and scope of Article 47 of the Charter. On the day the judgment came out (18 February 2016), I published a short blog in which I called this ‘a missed opportunity’.
Together with Professor Mak, I attended a transnational training workshop for judges, organised by the Centre for Judicial Cooperation at the European University Institute in May 2016; click here for more information about the ACTIONES project. The focus of this workshop was on consumer protection and judicial interaction techniques in the application of the Charter; one of the topics was the role of Article 47 of the Charter. Next year, we will organise a national workshop for Dutch judges about the application of the Charter in European private law matters. In February 2017, the University of Parma hosts a workshop focused on Effective Judicial Protection; a call for judges will be published on the website of the ACTIONES project.
In my PhD research, I will further investigate how and why Article 47 of the Charter is mentioned, interpreted and applied in European private law adjudication, more particularly cases concerning Directive 93/13. What factors trigger a reference to Article 47? What role is there for Article 47 in the judicial assessment and development of (national) remedies and procedures? Relevant news and findings will be published on this blog. Therefore, stay tuned!
The Dutch Supreme Court & European contract law
Dutch-speaking readers of this blog may be interested in an article I wrote on the Dutch Supreme Court (Hoge Raad)’s handling of EU law in private legal disputes (published in Ars Aequi 2015, p 716-722). In brief, the main conclusion is twofold: On the one hand, the Court integrates EU law in Dutch private law in line with a monist (constitutionalist) perspective on the relationship between European law and national law. On the other hand, the Supreme Court seems hesitant to interfere in the system of private law laid down in the Dutch Civil Code, opting for interpretation of private law provisions in line with EU law rather than amendment of the Code.
Fair time limits for unfair terms control
AG Szpunar's opinion in case C-8/14 BBVA v Fernández Gabarro
The interaction between the CJEU and Spanish national judges in procedures regarding unfair terms assessment in mortgage enforcement proceedings offers a good example of judicial contributions to the fine-tuning of rules of private law. This morning, Advocate General Szpunar delivered his Opinion in the case of BBVA SA v Fernández Gabarro and others – I reproduce part of the summary I wrote for the blog on ‘Recent developments in European Consumer Law‘ here:
The BBVA case is a follow-up to the law reform that was set in motion by the CJEU’s Aziz judgment (on which we reported earlier; see also a posts on CJEU Sánchez Morcillo and CJEU Unicaja Banco). Following this judgment, Spanish procedural was changed so as to make it possible to stay mortgage enforcement proceedings while an assessment of the fairness of the contract terms governing the client/bank relationship is pending. The present case concerns the possibilities for effective judicial policing of unfair contract terms in disputes that had been brought to court before the law reform came into force and had not yet been concluded.
AG Szpunar observes that the question essentially regards the compliance of the Spanish provision with the principles of effectiveness and equivalence (para. 26). This implies that national rules safeguarding EU rights must not be less favourable than those governing similar domestic transactions that are not subject to Union law (equivalence), nor may they be framed in such a way as to render impossible or excessively difficult the exercise of rights conferred by Union law (effectiveness).
More importantly, in the AG’s opinion, several factors justify the conclusion that the time limit renders the exercise of the consumers’ rights under Directive 93/13 impossible or excessively difficult (para. 54 ff). These include the facts that procedural time limits in Spanish law hardly ever take effect the day after publication of new legislation, that consumers could only have taken full benefit of the time period set in Art. 4 if they had known about the provision coming into force, and that legal representation was required for raising a claim under Art. 4. Furthermore, on the basis of previous CJEU case law, in respect of national legislation which comes within the scope of Union law, it is for the Member States to establish those periods in the light of, inter alia, the significance for the parties concerned of the decisions to be taken, the complexities of the procedures and of the legislation to be applied, the number of persons who may be affected and any other public or private interests which must be taken into consideration (para. 61, referring to CJEU Sopropé and Pontin) – on all of these points Art. 4 raises concerns. Consequently, the AG reaches the conclusion that a transitional provision as is at stake in the present case does not comply with the Unfair Terms Directive in light of the principle of effectiveness.
Unfair terms assessment in mortgage cases in line with EU law
CJEU judgment in cases Unicaja Banco and Caixabank
In line with Advocate-General Wahl’s opinion in the case (on which I reported earlier on the blog ‘Recent Developments in European Consumer Law’), the CJEU found Spanish law to be compatible with EU law, provided that certain conditions were met.
See also the Court’s press release.
The constitutional imagination
European private law scholarship can learn a lot from European constitutional theory. Where constitutional rights and principles determine the framework within which modern societies (have) develop(ed), private legal rights and principles also form important building blocks in the architecture of transnational societies.
Hence, a reading suggestion on ‘The Constitutional Imagination’, by Martin Loughlin, available in the Modern Law Review and on SSRN. Its abstract reads:
‘The constitutional imagination refers to the way we have been able to conceive the relationship between thought, text and action in the constitution of modern political authority. The lecture seeks to demonstrate how modern constitutional texts come to be invested with a ‘world‐making’ capacity. The argument is advanced first by explaining how social contract thinkers have been able to set the parameters of the constitutional imagination (thought), then by showing that constitutions are agonistic documents and their interpretative method is determined by a dialectic of ideology and utopia (text), and finally by examining the degree to which constitutions have been able to colonise the political domain, thereby converting constitutional aspiration into political reality (action). It concludes by suggesting that although we seem to be entering a constitutional age, this is an ambiguous achievement and whether the power of the constitutional imagination can still be sustained remains an open question.’
An audio recording of Loughlin’s lecture is available on the website of the London School of Economics.