Volume 19, Issue 4 - Special Issue on 30 Years of Unfair Contract Terms Directive

In this paper, the transparency requirement, regulated in Article 5 UCTD, is discussed. This provision requires traders to draft terms that are to be incorporated into contracts with consumers in plain and intelligible language. The paper discusses the function of the transparency requirement, the different elements, and the consequences of a breach of the requirement: should the contra proferentem rule be applied, is the term lacking transparency unfair, or could it be argued that such term never was incorporated into the contract to begin with? And does it actually matter?

Digital transformation is also transforming standard contract terms. With the emergence of online platforms, supported by algorithmic data analysis and self-enforcing technologies, platform terms are becoming increasingly common. The article argues that this type of terms differs from traditional standard terms in a number of ways, and it considers whether the existing unfair contract terms regime is still appropriate. The regulatory tools once developed for standard terms in bilateral agreements – transparency requirements, fairness review, and restrictions on contracting around – seem inadequate to meet the new challenges of digital transformation. In order to preserve – or rather recreate – the architecture of choice for private contracts, the paper argues for a new regulatory strategy: In order to strike the right balance between protecting private autonomy and avoiding significant imbalances, the regulatory objective should be to ensure the impartiality of platforms by focusing on the structural conditions of their rule-making.

Thirty years since it entered into force, the Unfair Contract Terms Directive (‘UCTD’) needs updating to address the challenges posed by digital services. This concerns in particular the fundamental research question of identifying new unfair terms of digital service providers (‘DSPs’) so that they can be included in a new blacklist. These challenges are central to the ongoing EC study named ‘Fitness Check of EU Consumer Law’ concerning the evolution of consumer law in the digital age, and promoting a fair and transparent environment for consumers in an ever-changing digital landscape. The article identifies digital-specific unfair terms used by DSPs and organises them into four main themes (i.e., digital services and contents, automation and personalisation, price & free services, and consumers’ data rights). It also discusses the methodological approaches adopted by institutions and researchers in detecting such types of unfair terms in digital environments. Finally, the article examines the possible regulatory options and, particularly, the possibility of establishing a new blacklist of digital-specific unfair terms and/or developing EC guidelines for fairness assessment under the UCTD.

Over the years, the UCTD has become one of the core EU directives aiming at the protection of both businesses and consumers (B2C), i.e., at the achievement of the appropriate balance between the parties’ rights and obligations. However, the UCTD has also left quite a number of important legal questions unanswered. Besides the general clauses on the assessment of the unfairness of contractual terms, there remains a high degree of uncertainty as to the meaning of the transparency requirement and the legal consequences of unfair contractual terms. As a result, in spite of CJEU settled case law, as well as European Commission interpretation guidelines, there are diverging patterns in the national case law of the Member States. The aim of this paper is to investigate these diverging patterns by looking more closely into national case law and into the relationship between the CJEU and the Member States courts, taking as a case study the way in which the UCTD was applied in five countries (Austria, Croatia, France, Italy and Poland) in cases involving consumer loans indexed to the Swiss franc. The survey shows that there are noticeable differences in the interpretation of core concepts underlying the UCTD, such as the unfairness test, the exclusions from the unfairness assessment, and the transparency requirement. The most problematic areas, however, concern the legal consequences of the unfairness of contractual terms. By relying on the analysis of these and related issues, the authors have come to the conclusion that347 even after 30 years of the existence of the UCTD, there are still many important legal questions that need solving.

From an analysis of the most recent case law of the CJEU, it becomes clear that it has taken a troublesome position on the interpretation of the Directive on Unfair Contract Terms (UCTD) and this could result in significant repercussions in terms of effective protection afforded to consumers and difficulties imposed on traders. More specifically, the CJEU’s main interpretive difficulties have focused on Article 6 of the UCTD and namely on the question of whether the non-binding nature of unfair terms implies the preclusion of contract revision and whether the UCTD legitimises rules that primarily serve to sanction sellers and suppliers rather than to ensure a rebalancing based on the principle of contract equality.

The paper examines the development of the case law of the Court of Justice of the European Union (CJEU) on the consequences of (non-)transparency claims in consumer contracts in the case of the supply of intellectual (legal) services. In its recent decision (Case C-395/21, D V), the CJEU was confronted with the consequences of the unfairness of the remuneration term contained in a legal services contract. The Court’s analysis of the non-transparency (and unfairness) of core terms under Articles 4 para 2 and 5 UCTD and its consequences under Article 6 UCDT raises a variety of questions. Specifically, the D V case illustrates the difficulties of the CJEU in striking an adequate and effective balance between consumer protection on the one hand and the right of the business party (lawyer) to her/his counter-performance (the remuneration) for the legal services on the other hand. This, in a nutshell, is because the unfairness of the term led—like most mortgage loan agreements denominated in foreign currency—to the invalidity of the whole price-setting mechanism, depriving the supplier of his/her remuneration in its entirety. Against this backdrop, the paper will address the troublesome relationship among the unfairness of core terms encompassed in consumer contracts providing intellectual services, restitutionary remedies and judicial revision of the unfair terms, alternatively leading to situations of consumer over-protection and under-protection. First, the paper will highlight why this case law poses new challenges for both consumer and national law and why it should be treated differently from – or, at least, in confrontation with – the recent CJEU’s case law concerning the mortgage loan agreements saga. Secondly, the paper395 will argue that the denial of remuneration of the supplier—even though complying with the aim to restore the legal and factual situation in which the consumer would have been in the absence of the unfair term—could entail consumer over-protection issues, since the performance could not be returned; this situation could potentially lead to clashes with overarching general principles (such as the principle of proportionality). Lastly, the exclusion of a judicial revision in the sense of a judicial estimate could be detrimental for the consumer if the quantification of the supplier’s remuneration would be impossible without such a judicial estimate. In that case, the invalidity of the unfair term and of the contract in its entirety could expose consumers to unjust enrichment claims, thus frustrating the CJEU’s aim of preventing judicial estimates of a fair charge and undermining the principle of legal certainty, as interpreted by the European Court. In this sense, such an orientation will trigger a situation of consumer under-protection. In the final analysis, the paper will address some of the possible systemic implications of the CJEU’s case examined. The paper will further suggest that, in order to prevent both situations of over-protection and under-protection of consumers, we should rethink the mechanisms of the transparency assessment under the UCTD – in particular, when essential terms are concerned and neither the restitution nor the remuneration of the services provided is possible or consistent with EU Consumer Law.

This paper is a critical presentation of the CJEU case-law on UCTD, with particular reference to the non-filling of the contractual gap resulting from the unfairness test by applying ‘dispositive’ law or supplementary interpretation. The result contradicts the principles and methods of national civil law: not only does the balance in the contract suffer under the position the CJEU has chosen, as it creates alternated forms of balance of interests rather than the identical ones sought by the parties, but moreover, the increasing number of different cases imposes an ambiguous approach on the CJEU, since European judges have to ask on a case-by-case basis what the best interest of the consumer is. By adopting such a functional approach in favour of the substantive justice of the contract, the ECJ decided with questionable results with regard to national civil law, while methodological legal questions as to whether the contract should stand as it is, following the unfairness test, or whether a supplementation of the contract should take place are still open. It is therefore of critical importance to achieve an optimal combination between a fair balance of the contract and effective consumer protection.423