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IN THE COURT OF JUSTICE OF THE EUROPEAN UNION
CASE C-154/15
GUTIÉRRIEZ
WRITTEN OBSERVATIONS OF THE UNITED KINGDOM
The United Kingdom is represented by Liam Christie of the European Law
Group, Government Legal Department, acting as Agent, and by Sarah Ford,
Barrister.
Submitted by and
Liam Christie
Sarah Ford
Agent for the xxxxxxxxxxxxxx
Barrister
European Law Group
Government Legal Department
Room 3/02
1 Horse Guards Road
London SW1A 2HQ
By E-Curia
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21 July 2015
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A.
INTRODUCTION
1.
By an order dated 1 April 2015 the Juzgado de lo Mercantil n° 1 de
Granada (Spain) (“the referring court”) referred to the Court of Justice of
the European Union (“CJEU”) for a preliminary ruling two questions
concerning Articles 6(1) and 7(1) of Directive 93/13/EEC of 5 April 1993
on unfair terms in consumer contracts (“the Directive”).
2.
The questions arose in the context of proceedings commenced by the
Applicant, Francisco Gutiérriez Naranjo, against the Defendant, BBK
Bank Cajasur, S.A.U., concerning a general contractual condition
relating to the application of a minimum interest rate (floor clause) in a
mortgage loan.
3.
These are the Written Observations of the United Kingdom submitted
pursuant to Article 23 of the Protocol on the Statute of the Court of
Justice.
B. FACTUAL BACKGROUND
4.
The United Kingdom’s understanding of the factual background is as
follows.
5.
A judgment of the Tribunal Supremo (Supreme Court) of 9 May 2013
held that clauses restricting the minimum interest rate applicable to
mortgage loans granted to consumers were unfair on the grounds of lack
of transparency. The Tribunal Supremo applied a temporal limitation
such that its judgment did not have retroactive effect. Spanish provincial
courts have since been determining in individual cases whether or not to
apply a temporal limitation.
6.
In the domestic proceedings giving rise to the reference, the Applicant
seeks an injunction to prevent the use of a minimum interest rate clause
in his mortgage loan agreement. Further, the applicant claims that the
term is unfair on the grounds of lack of balance and lack of proportion.
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The Applicant seeks recovery of sums paid from the date of entry into
the mortgage loan agreement.
C. APPLICABLE PRINCIPLES
7.
The system of protection established by the Directive is based on the
idea that the consumer is in a weak position vis-à-vis the trader as
regards both his bargaining power and his level of knowledge, which
leads to the consumer agreeing to terms drawn up in advance by the
trader without being able to influence the content of those terms
(
Pereničová and Vladislav Perenič, EU:C:2012:144, paragraph 27).
8.
In view of that weak position, Article 6(1) of the Directive requires
Member States to lay down that unfair terms “
shal , as provided for
under their national law, not be binding on the consumer”. This is a
mandatory provision which aims to replace the formal balance which the
contract establishes between the rights and obligations of the parties
with an effective balance which re-establishes equality between them
(
Pereničová and Vladislav Perenič, paragraph 28).
9.
National courts which find that terms of a contract are unfair are required
under Article 6(1) of the Directive to draw al the consequences that
fol ow under national law, so that the consumer is not bound by those
terms (
Pereničová and Vladislav Perenič, paragraph 30). The
objective is to restore the balance between the parties while in principle
preserving the validity of the contract as a whole (
Pereničová and
Vladislav Perenič, paragraph 31).
10. The Directive does not seek to harmonise the penalties applicable in the
event of a term being found unfair. However, Article 7(1) of the Directive
requires Member States to ensure that adequate and effective means
exist to prevent the continued use of unfair terms in contracts concluded
with consumers (
Invitel, EU:C:2012:242, paragraph 35).
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11. The rationale behind the requirement that unfair terms wil not be binding
on consumers is to dissuade sel ers and suppliers from using such
terms. It would undermine the dissuasive effect and sel ers and suppliers
would stil be tempted to use such terms if the national court were
permitted to revise the content of unfair terms in such a way as to
safeguard the interests of sel ers or suppliers (
Banco Español de
Crédito EU:C:2012:349, paragraph 69).
12. However, it is not incompatible with the Directive for a national court to
delete an unfair term and substitute for it a supplementary provision of
national law where invalidity would otherwise lead to unfavourable
consequences for the consumer (
Kásler EU:C:2014:282 paragraphs 82
to 84;
Unicaja Banco, SA EU:C:2015:21, paragraph 33). Similarly, the
national court need not disapply an unfair term if the consumer does not
wish to assert its unfair and non-binding status (
Pannon
EU:C:2010:441). These matters do not undermine the dissuasive effect
of Articles 6(1) and 7(1) of the Directive.
13. Final y, in the absence of harmonisation, national rules governing
domestic proceedings concerning unfair terms in consumer contracts are
a matter for the national legal order of the Member State concerned,
provided that they are no less favourable than those governing similar
domestic actions (the principle of equivalence) and do not make it in
practice impossible or excessively difficult to exercise the rights
conferred on consumers by EU law (
Banco Popular Español SA
EU:C:2013:759, paragraph 45).
D. THE FIRST QUESTION
14. By its first question, the referring court essential y asks whether it is
compatible with Article 6(1) of the Directive for a national court to grant
temporal limitation of its judgment on an unfair contract term such that it
does not have retroactive effect.
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15. In the United Kingdom’s submission the first question should be
answered in the affirmative for the fol owing reasons.
16. First, as is evident from the applicable principles set out above, Article
6(1) of the Directive is concerned with the penalties which are applicable
as a matter of national law in order to achieve the result that an unfair
term is non-binding on consumers.
17. A distinction must be drawn between the applicable penalty and the
separate question of temporal limitation of a national court’s judgment.
The latter is an aspect of the court’s inherent jurisdiction exceptional y to
limit the effect of its judgments in order to serve the underlying objective
of the courts, namely to administer justice fairly and in accordance with
the law. Article 6(1) of the Directive is not concerned with temporal
limitation.
18. Secondly, temporal limitation in exceptional circumstances does not
undermine the dissuasive effect of the requirement that unfair terms are
non-binding on consumers. Unfair terms wil stil be non-binding on
consumers in the future, so sel ers and suppliers wil moderate their
conduct and wil not be tempted to continue to use such terms. Temporal
limitation is therefore compatible with the objective of Articles 6(1) and
7(1) of the Directive.
19. Thirdly, temporal limitation wil be compatible with the Directive provided
that it is applied in a manner which is no less favourable than in similar
domestic actions and it does not render it practical y impossible or
excessively difficult to exercise the rights conferred on consumers by the
Directive. The principle of equivalence is a matter the Spanish
government is best placed to address.
20. However, it is submitted that temporal limitation is clearly compatible
with the principle of effectiveness, since it does not hinder the
enforcement of EU rights. This could not conceivably be doubted in
circumstances in which it is wel established that the CJEU has the
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power to grant temporal limitation of its own judgments where justice
requires this (see, for example,
Skov and Bilka EU:C:2006:6).
21. In
RWE Vertrieb AG, EU:C:2013:180 the CJEU considered a request
for temporal limitation of its judgment concerning unfair terms in
consumer contracts. Although the CJEU did not consider the essential
criteria for the grant of temporal limitation to be satisfied in the
circumstances of that case, it did not state that the grant of temporal
limitation would be incompatible with Article 6(1) of the Directive as a
matter of principle.
22. Similarly, in
Schulz and Egbringhoff, EU:C:2014:2317 at [62] the CJEU
declined a request for temporal limitation because the risk of serious
difficulties had not been established. Again, the CJEU did not express
any reservations as to the compatibility of temporal limitation with the
Directive on principle.
23. Since temporal limitation of the CJEU’s own judgments is clearly
compatible with EU law, it fol ows that temporal limitation of national
courts’ judgments must equal y be compatible with EU law. Indeed, if the
CJEU were to conclude otherwise, it would give rise to the anomalous
outcome that it would be necessary to make a reference to the CJEU
pursuant to Article 267 TFEU in order to obtain temporal limitation of a
judgment on EU law.
24. For these reasons, the United Kingdom submits that the answer to the
first question of the referring court is that it is compatible with Article 6(1)
of the Directive for a national court to grant temporal limitation of its
judgment on an unfair contract term such that it does not have
retroactive effect.
E. THE SECOND QUESTION
25. By its second question, the referring court essential y asks, firstly,
whether an injunction restricting the use of unfair terms is compatible
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with the grant of temporal limitation, and secondly, whether it is
compatible with the Directive for a national court to specify the date from
which sums paid pursuant to an unfair term must be reimbursed to the
consumer.
26. The United Kingdom limits its observations to the second part of the
Second Question, which it is submitted should be answered in the
affirmative.
27. As already set out above, Article 6(1) of the Directive is limited to
requiring Member States to ensure that unfair terms are non-binding on
the consumer. It is not concerned with the availability of either damages
or a restitutionary remedy for the imposition of an unfair term. These
matters are not harmonised by the Directive and remain governed solely
by national law.
28. It fol ows that it would be compatible with the Directive for the national
court to specify the date from which sums paid pursuant to an unfair
term must be reimbursed to the consumer provided that any such rule is
applied in a manner which is no less favourable than in similar domestic
actions and it does not render it practical y impossible or excessively
difficult for consumers to exercise the rights conferred on them by the
Directive.
D. CONCLUSION
29. In conclusion, the United Kingdom submits that the Court should answer
the questions of the referring court as fol ows:
“1. It is compatible with Article 6(1) of the Directive for a national court to
grant temporal limitation of its judgment on an unfair contract term such
that it does not have retroactive effect.
2. It is compatible with the Directive for a national court to specify the
date from which sums paid pursuant to an unfair term must be
reimbursed to the consumer.”