Summary

On 6 July 2023, the Court of Justice of the European Union (“CJEU”), in delivering a ruling in the case of FS, WU vs. First Bank SA (Case C-593/22), considered the applicability of article 1(2) and the thirteenth recital of Directive 93/13/EEC on unfair terms in consumer contracts (“Directive 93/13”). Such clause and recital state that clauses within a consumer contract which reflect a mandatory statutory or regulatory provision of national law are presumed not to contain unfair terms and thus such clauses are not subject to the provisions of Directive 93/13. The CJEU clarified that such exclusion applies if the clause within the consumer contract is substantively equivalent to, and has the same normative content as the mandatory statutory or regulatory provision of national law. It also held that it is irrelevant if the mandatory statutory or regulatory provision being referred to is actually quoted verbatim or referred to expressly in the consumer contract. Moreover, the CJEU elaborated that in such instances, it is irrelevant if the consumer knows that a clause within a consumer contract to which it is party reflects a mandatory statutory or regulatory provision of national law.

Background to the case and Judicial Proceedings before the Romanian Courts

In August of 2007, the applicants entered into a loan agreement. The amount of the loan was 78,180 Swiss Francs (CHF) which was to be repaid in the currency indicated in the repayment schedule.

A case was brought before Judecătoria Cluj-Napoca (Court of First Instance, Cluj-Napoca, Romania) as the applicants claimed that (i) according to the loan agreement terms, the foreign exchange risk was to be borne by them and this was unfair and invalid; and that (ii)  contractual balance should be restored by way of recalculation and reimbursement (where necessary) in view of monthly instalments, interest and commissions which should have been calculated on the day of the agreement. However, the Judecătoria Cluj-Napoca (Court of First Instance, Cluj-Napoca, Romania), dismissed the action on the basis that the clause concerning the currency in which the loan was to be repaid derived from a clause in the Romanian Civil Code, i.e. it was a statutory or regulatory provision of national law and therefore, the applicants could not claim ignorance of the law or the effects of such obligations deriving therefrom.

An appeal was filed by the applicants before the Tribunalul Specializat Cluj (Specialised Court, Cluj, Romania), (the “Referring Court”) wherein they claimed that the principle of monetary nominalism had been misapplied and that First Bank SA had failed to provide them with information concerning foreign exchange rate risk.  On the other hand, First Bank SA raised the argument that since the clause being contested is based on a clause which derives from Romanian law (i.e. a statutory or regulatory provision) then the court of first instance, on the basis of article 1(2) and recital thirteen of Directive 93/13, was correct in not analysing whether the clause was unfair.

The Referring Court referred the case to the CJEU to clarify whether in article 1(2) of Directive 93/13 which states “the contractual terms which reflect mandatory statutory or regulatory provisions [] shall not be subject to this Directive”, the words ‘which reflect’ mean that the provision of national law must be reproduced in the contract, or whether an express reference must be made to the national law provision in the contract, or whether a clause in a consumer contract can still be considered as reflecting a statutory or regulatory provision of national law, despite not reproducing such national law provision or making express reference to it.

Legal Context and CJEU’s Legal Considerations

The CJEU observed that it is legitimate to assume that the national law of European Union member states strikes a balance between the rights and obligations of parties to contracts. It is for this reason that article 1(2) of Directive 93/13 provides that clauses in consumer contracts are excluded from the scope of such Directive if they ‘reflect’ statutory or regulatory provisions of national law. Having said this, the CJEU reiterated that this exclusion must be interpreted strictly in order to ensure consumer protection – the core objective of Directive 93/13.

The CJEU referred to previous preliminary rulings and went on to clarify that the term ‘mandatory statutory or regulatory provisions’ of national law is to be understood as referring to national law provisions which apply to the parties irrespective of their choice and those national law provisions which apply in instances where there are no other arrangements established.  If the national law provision does not apply to the contract in question, then the exclusion cannot apply.

In order not to undermine the effectiveness of the exclusion, the CJEU held that it is not necessary for the contractual clause in the consumer contract to correspond perfectly with the national law provision or that the national law provision be quoted word for word.

In the present case, the CJEU went on to state that, it was up to the Referring Court to determine whether the clause being disputed in the consumer contract reflects a statutory or regulatory provision of Romanian law i.e. whether the clause in dispute and the national provision are substantively equivalent, and this by considering the nature of the contract and the legal and factual context of the agreement in question.

Given that the two conditions for applicability of the exclusion in article 1(2) of Directive 93/13 are that the clause within the consumer contract is to reflect a statutory or regulatory provision and that such provision must be mandatory, the CJEU held that the consumer’s knowledge of the applicable legal provisions and the extent of information which was provided to such consumer by the other party to the contract is irrelevant and does not effect the applicability of the exclusion.

CJEU’s Ruling

In light of the above considerations and in accordance with the aim of Directive 93/13, the CJEU principally concluded that for a clause in a consumer contract to fall within the exclusion set-out in article 1(2) of Directive 93/13, the mandatory statutory or regulatory provision need not be specifically quoted or referred to therein, provided that that content of such clause is substantively equivalent to such mandatory statutory or regulatory provision of national law and this exclusion shall apply irrespective of whether the consumer knows that the clause reflects such a mandatory statutory or regulatory provision of national law.

Disclaimer: Ganado Advocates is responsible for contributing to this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report.

This article was first published in The Malta Independent on 06/12/2023.

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