Towards a Protective Condictio? The Bank M Case in the Prism of Restitutory Remedies: A Reconstructive Proposal

1 Introduction

In the case Bank M of 15 June 2023,^[1] the CJEU ruled for the first time on the specific topic of the legal consequences, in particular the restitutionary consequences, of the annulment of a consumer contract in its entirety – due to the fact that the contract at stake contained unfair terms and it was not capable of continuing in existence without the unfair terms. The judgment is part of the heated case-law debate that has arisen around foreign currency indexed variable-rate mortgage loans.^[2] This debate is of central importance for European contract law, as it has given impetus to the development of consumer law to an extent so far unprecedented in European contract law.^[3]

Given that, as clarified in the case Kásler, a standardised clause in a foreign currency loan determining the exchange rate of monthly instalments may be declared unfair under the conditions set out therein,^[4] the question arose as to how the presence of such a clause affected the entire contract in two respects. First, in the light of Article 6 para 1 of the Unfair Contract Terms Directive,^[5] it had to be determined whether the contractual regulation could be maintained after the158 elimination of an unfair term – as ruled in principle^[6] – or whether the elimination of the latter would make the survival of the contract legally impossible. Secondly, and consequently, it had to be clarified what consequences, in terms of restitutionary effects, the termination of the entire contract would have in the latter hypothesis.

The first question was answered in cases Dunai and Dziubak, where the Court clarified that if the unfair term is essential, in that it defines the main subject matter of the contract, the survival of the latter does not seem legally possible, a circumstance which in any case it is for the referring court to assess according to an objective approach.^[7] In particular, the maintenance of the contract does not seem possible when, according to the provisions of domestic law, the elimination of the unfair term would result in a change in the nature of the main subject matter of the contract.^[8] In this case, therefore, the CJEU authorises national courts to consider not only the unfair term, but also the entire contract, as void.^[9]

This landmark case-law has set the basis for the second question, which has been defined in the most recent case Bank M. In this case the CJEU established that Article 6 para 1 and Article 7 para 1 UCTD must be interpreted as not precluding a judicial interpretation of national law according to which the consumer has the right to seek compensation from the credit institution going beyond reimbursement of the monthly instalments paid and the expenses paid in respect of the performance of159 that agreement together with the payment of default interest at the statutory rate from the date on which notice is served, provided that the objectives of Directive 93/13 and the principle of proportionality are observed. They must be interpreted as precluding a judicial interpretation of national law according to which the credit institution is entitled to seek compensation from the consumer going beyond reimbursement of the capital paid in respect of the performance of that agreement together with the payment of default interest at the statutory rate from the date on which notice is served.

In the absence of a specific regulation on this point in Directive 93/13,^[10] and in view of the fact that in the European context the regulation on restitution is characterised more by principles than by detailed rules,^[11] this ruling can be seen as a landmark in the definition of a European law on restitution. In this respect, the Bank M case is undoubtedly of great interest for scholars in all Member States called upon to deal with cases similar to the one decided by the CJEU.

It is especially so for the Italian civil lawyers, since, even before the advent of Bank M, the Italian Supreme Court had already ruled on the same subject with a judgment with only apparently similar content. This is the United Sections ruling of 4 November 2019, No 28314,^[12] in which the Supreme Court defined the modus operandi of the nullity^[13] of an investment contract concluded between a professional160 party, the financial intermediary, and a party with less bargaining power, the client-consumer.^[14]

In that case the United Sections held that the nullity at stake was not subject to the discipline of the restitutionary consequences of nullity under ordinary law, resulting from the combined provisions of Articles 1422 and 2033 of the Italian Civil Code. This choice was justified ‘in the light of the peculiar legal regime of protective nullities’.^[15] According to the Court, the protective rationale of the invalidity at stake would be reflected in the discipline of the restitutionary effects resulting from its declaration, with an univocal correspondence between relative legitimation and the deactivation of the restitutory protection for the business party:^[16] the latter, in addition to not being legitimated to the nullity action, could not even avail itself of the direct effects of its declaration, acting counter-contentiously or autonomously, for the recovery of the objective undue payment.^[17] The protective nullity would thus be characterised by a special restitutionary regime: a unilateral recovery of an undue161 payment, which operates for the exclusive benefit of the protected party. This unprecedented version of the institute of objective undue payment has been defined, with a significant and effective expression, as ‘protective condictio indebiti’,^[18] to emphasise the close link between the protective function of voidness and the correlated modulation of the restitutory regime deriving therefrom.

Since both Courts allow the consumer to pursue restitutionary claims to which the professional party is not entitled as well, one might be led to believe that the same starting question was resolved in the same way in both cases, and therefore that, as a result of the case Bank M, a ‘protective condictio indebiti’ such as that established by the Italian Supreme Court can be said to have been established (also) in European contract law. However, for the reasons to be explained below, it is considered that the principle of law formulated by the CJEU should not be read in these terms. In fact, it is believed that the CJEU does not in any way intend to alter the rules on the recovery of undue payments in order to protect the consumer, by introducing a unilateral or asymmetrical condictio, but merely authorises the consumer to demand what, under domestic law, he or she would have obtained by exercising an action with different prerequisites, namely the action of unjust enrichment. The aim of the following reflections is therefore to provide a reconstructive reading of the case Bank M in the light of the core principles of the system of protection established by Directive 93/13, as well as, more generally, the restitution system derived from the general principles of EU law, in order to outline the regulation of restitution established by this ruling.

2 The Case Bank M.: The Case and the Issue

In the present case, a consumer and his wife concluded a mortgage loan contract with Bank M in 2008. The loan was indexed to the Swiss franc (CHF), as the contract provided that the monthly loan instalments were to be paid in Polish zloty (PLN) after conversion using the Swiss franc’s selling rate, in accordance with the table of foreign currency rates applied by the bank on the day of payment of each monthly instalment.^[19]

The consumer then brought an action against Bank M, seeking payment of a sum corresponding to half of the gain that the bank allegedly made from the monthly162 instalments paid under the contract during a certain period, plus default interest at the statutory rate (the other half being due to his wife, who was not a party to the main proceedings). In support of his claim, the appellant argued that the conversion clauses determining the exchange rate were unfair, that their presence rendered the loan contract totally null and void, and that the bank therefore received those instalments without any legal basis.^[20]

In its response, Bank M contended that the applicant’s action should be dismissed, arguing that the mortgage loan agreement should not be annulled in so far as it did not contain unfair terms; and that, if that agreement were to be annulled, it would be Bank M alone, and not the consumer, which would be in a position to claim payment of a debt in respect of the use of the capital without legal basis.^[21]

The Sąd Rejonowy dla Warszawy – Śródmieścia w Warszawie, which is the referring court, observes that, according to settled national case-law, conversion clauses such as those at issue in the main proceedings are undoubtedly unfair and, following the approach inaugurated in Dziubak, their deletion entails the invalidity of the entire loan contract. That being so, the Court has no doubts as to the consequences of the declaration of invalidity of the loan agreement, in terms of its radical ineffectiveness ab initio and the obligation for both parties to return the services rendered in performance of that contract as undue;^[22] on the other hand, it is disputed whether the parties may (also) claim, in addition to the sums respectively paid in performance of the agreement, the payment of other amounts on the account of the use of funds over a certain period without any legal basis. The legal grounds most often invoked by the parties in support of such claims are said to be undue performance and unjust enrichment.

That circumstance, together with the fact that the CJEU had not yet ruled on this subject matter in the light of Directive 93/13, prompted the referring court to make a reference to the ECJ for a preliminary ruling. The question referred to the Luxembourg Court is, therefore, whether Articles 6 para 1 and 7 para 1 of Directive 93/13, as well as the principles of effectiveness, legal certainty and proportionality, allow the parties to a mortgage loan contract, which has been declared void on the ground that it contains unfair terms, to pursue, in addition to the reimbursement of the sums paid in the performance of that agreement (the bank – loan principal, and the consumer – monthly payments, fees, commissions and insurance premiums)163 and statutory interest for late payment from the date of the demand for payment, any other claims (including remuneration, compensation, reimbursement of expenses or indexation of the amounts paid).

The CJEU has held that, in the event of annulment of a mortgage loan contract on the ground that it cannot continue in existence after the excision of the unfair terms, the possibility for a consumer to assert claims that go beyond reimbursement of the monthly instalments paid and the expenses paid in respect of the performance of that contract together with, where applicable, payment of default interest at the statutory rate from the date on which the notice is served is not in itself contrary to the objectives of Directive 93/13, subject to determination by the referring court. On the contrary, it may help to deter sellers or suppliers from including unfair terms in contracts concluded with consumers inasmuch as the inclusion of such terms leading to the nullity of a contract in its entirety could lead to financial consequences exceeding the restitution of the amounts paid by the consumer and, where appropriate, the payment of default interest. It is therefore permissible to uphold such claims, provided that, in so doing, the objectives of Directive 93/13 and the principle of proportionality are observed, an assessment which falls to be made by the referring court.

In contrast, to grant a credit institution the right to seek compensation from the consumer going beyond reimbursement of the capital paid in respect of the performance of that agreement and, therefore, to receive remuneration for the use of that capital by the consumer, as well as, as appropriate, the payment of default interest, could undermine the protective objectives pursued by the directive. Such an interpretation of national law could weaken the deterrent effect on professionals of the annulment of that contract. Indeed, there would be a risk of creating situations in which it would be more advantageous for the consumer to continue the performance of the contract containing an unfair term rather than exercising his or her rights under UCTD. In the CJEU’s view, that is what would happen if consumers were exposed to the risk of having to pay such a fee when they assert the rights conferred on them by the directive. The CJEU observes, moreover, that, in accordance with the principle nemo auditur propriam turpitudinem allegans, a party cannot be allowed to derive economic advantages from his, her or its unlawful conduct or to be compensated for the disadvantages caused by such conduct. The invalidity of the mortgage loan contract is in fact a consequence of the bank’s use of unfair terms. Therefore, the bank cannot be compensated for the loss of a profit similar to that which it hoped to derive from that contract.

As it is self-evident, the exact scope of the principle of law set by the CJEU is played out between the framing of the claims formulated by the parties, on the one hand, and the definition of the objectives of protection pursued by UCTD, on the other hand. To this end, the following discussion will revolve around these points. It will be164 seen how the general content of restitutory protection is articulated in a multilevel context, between European law and national laws, with the ultimate aim of verifying whether the ‘protective condictio indebiti’ outlined by Italian case law can enter fully into European contract law.

3 Restitutionary Protection: The General Meaning and the Remedies Attributable to the Category

For a complete framing of the issues addressed by the CJEU, on the one hand, and the Italian Supreme Court, on the other hand, it is necessary to clarify an essential point, namely what is meant, in general, by restitutory protection; that is, to find the identifying quid that constitutes its distinctive feature. This is followed by a brief examination of the principle of unjust enrichment, the pivot of the whole subject matter, and how it is specified where restitutionary protection operates in contractual matters.

Restitution means re-establishing the factual and legal conditions that characterised the subject’s situation before a certain alteration or change occurred; an alteration that must be removed, re-establishing the original situation and thereby restoring the value of the rules. It is necessary, of course, for this alteration and/or change to be illegitimate, i.e. contra ius, or, at least, not justified by the law, i.e. sine causa. The need to restore the status quo ante may arise not only from the infringement and/or alteration of a subjective right, ascribable to a situation lato sensu of belonging,^[23] but also in hypotheses where, apart from the infringement of rights, there have been alterations or transfers of wealth or utilities that do not find justification under the law (for example, in valid contracts). Thus, remedies for undue performance or unjust enrichment must be provided as well. Therefore, the quid identificative of restitutionary protection consists in the need to react to a factual situation that conflicts with the legal one.

The cases that give rise to this form of protection are, in principle, the infringement of a right; the appropriation of utilities that are the subject of another person’s right or which otherwise belong to others; and unjustified wealth transfers. The latter two cases are usually juxtaposed because they give rise to a case of unjust165 enrichment: in both cases, indeed, a person enriches himself at the expense or to the detriment of another, without just cause.^[24]

The principle underlying unjust enrichment (and the actions directed at it) is that no one may enrich himself at the expense of others, without a cause to justify it. It is a principle of commutative justice that has its roots in Roman law^[25] (just consider condictio and restitutio in integrum and Pomponius’ famous maxim in the Digesta: ‘jure naturae aequum est neminem cum alterius detrimento et iniuria fieri locupletiorem’)^[26] and that today permeates both civil law and common law systems.^[27] In various legal systems (including the Italian one, the Swiss one, the German one and the English one) this principle is expressed by means of a general clause^[28] and is specified in a series of cases that give rise to restitutionary claims (against unjustified enrichment).^[29]

In this regard, it cannot escape notice that, among the cases of unjustified enrichment, there is one that, in almost all legal systems (see Article 2033 et seq of the Italian Civil Code; 1376 Code Civil; § 812 BGB) is treated differently for historical reasons: it is the recovery of undue payments.^[30] Derived from the Roman condictio 166, it is the remedy through which restitutionary protection acts in contractual matters. Indeed, the institute allows for restitution of the service rendered when the contractual title that constituted its justification has ceased to exist: this happens, typically, when the contract is declared null and void (as stated by Article 1422 of the Italian Civil Code) or when it is annulled or rescinded or terminated.^[31] Since the basis of the restitutionary obligation is the failed contract, which renders the performance received sine titulo, restitutions that are the consequence of void or avoided or terminated contracts have the form of contractual obligations (and actions). As a result, restitutionary obligations must be bilateral and reciprocal: only thereby do they give rise to the restoration of the status quo which is the very core of restitutionary protection.

It should also be pointed out that some legal systems, including the Italian one, provide for a general action for unjust enrichment (see Article 2041 of the Italian Civil Code),^[32] which, in addition to the action for the recovery of undue payments, plays a residual role in the protection against unjustified displacement of assets. This means that, provided the necessary conditions are met, the recovery of undue payments should prevail over the general action for unjust enrichment. If, on the other hand, the conditions for an action to recover undue payments are not met, but the case is one of enrichment for reasons not recognised by the law, it will be possible to obtain (restitutionary) protection by means of the general action for unjust enrichment.167

4 Restitutionary Protection in European Contract Law, Between Principles and Detailed Rules

Although there is no source of primary or secondary EU law in which to find an organic regulation on restitution, the study of European private law nevertheless makes it possible to reconstruct a system of restitutionary protection in European contract law. Having made this clarification, one can therefore rightly speak of a European law of restitutionary protection, which takes the form mainly of general principles.^[33] Some of these – the principles of private autonomy, good faith and fairness, and unjust enrichment – are fundamental principles of the EU law, also common to the legal traditions of the Member States, which find their particular application in the area under consideration. Others have been developed by scholars and ECJ’s case-law in the light of the system of protection established by UCTD: they are therefore principles on which the entire discipline of consumer contracts is based and to which, therefore, the restitution regime inherent in them must be subject; they include, in addition to the aforementioned principles of private autonomy and good faith and fairness, the principle of consumer equality, the principle of no penalisation and the principle of procedural autonomy.

The principle of private autonomy not only plays a fundamental role in the private law of all Member States, but also constitutes the underlying rationale of the Fundamental Freedoms of EU primary law, as well as of most acts of secondary law, including, in particular, the UCTD.^[34] Indeed, European contract law has as its objective the protection of private autonomy and, where this is not sufficient, paternalistic protection.^[35] This principle can be seen in the provision of disclosure obligations, which provide consumers with a more solid ground for exercising their party autonomy in a meaningful way.^[36] The autonomous will of the parties must also be respected when it comes to restoring the property spheres of the parties to an invalid contract by means of mutual restitution of the services rendered in the performance of that contract. The general meaning of this principle in restitution168 law is in fact that restitution must place the parties in the same position as they would have been if they had not concluded the contract.

The principle of good faith and fairness is one of the most important principles of European contract law. It is a principle common to the Member States,^[37] and it constitutes the central objective of the UCTD.^[38] This is, moreover, the only principle directly expressed in the text of the directive, notably in Article 3 para 1, which constitutes the key rule of the entire directive on unfair terms, since it codifies the criteria on which the unfairness judgment is based. The principle of good faith and fairness operates not only ‘upstream’ of the unfairness judgment, but also ‘downstream’, namely at the level of restitution, implying the re-establishment of the legal and factual situation in which the parties would have found themselves if they had not concluded the contract;^[39] for this to happen, the parties – both parties – are obliged to return benefits received.^[40] The aim is to promote solutions in which the justified interests and expectations of both parties are safeguarded as far as possible, i.e. in a duly balanced manner and without giving priority to one party unilaterally. This implies that windfall profits (i.e. those that could not have been achieved in any market scenario) are to be regarded as unjustified and therefore have to be returned.^[41]

As for unjust enrichment – and restitutionary obligations arising therefrom – there are several indications that this is a fundamental principle of European restitution law. First of all, the DCFR dedicates an entire book to unjust enrichment,^[42] thus making it clear that in this matter there is a core of principles and general rules169 that are shared by national legal systems.^[43] Important comparative law studies show that one can thus speak of a true European law of unjustified enrichment.^[44] In turn, the CJEU has recognised that restitution of (unjust) enrichment constitutes a general principle that is common to the legal systems of the Member States;^[45] within these limits, its discipline finds application in the EU legal order, supplementing the legislation enacted by it.^[46] Indeed, the ECJ recognises the institution of the recovery of undue payments first of all as one of the aspects in which the direct effectiveness of EU rules is articulated, arising from the hypotheses in which, since undue sums of money have been paid or received by public administrations, in breach or misapplication of EU rules, the persons concerned seek their recovery.^[47] It is also known to apply in the case of the nullity of a contract, as a remedy to obtain the return of (undue) services rendered in the performance of the void contract.^[48] In most cases, EU law does not bind the States as to the specific action with which to give concrete expression to the principle, but merely fixes the standard of protection to be guaranteed, leaving the Member States the power to identify the form and means with which to give concrete expression to the desired scope of protection.^[49]

From the UCTD derives the principle of consumer equality, according to which consumers must be treated equally, but not more favourably than their professional170 counterparts.^[50] Aware of the asymmetries of information and bargaining power between professionals and consumers, the directive on unfair terms aims to re-establish equality between them, and in so doing responds to the ultimate goal of correcting the market failure.^[51] In particular, the directive aims to replace the formal balance established by the contract between the rights and obligations of the parties with a real balance that restores equality between them;^[52] certainly not to create an inequality in the opposite direction, to the advantage of the consumer and to the detriment of the seller or supplier. Translating this objective to the restitutive level, the general idea is not to over-protect consumers, but simply to restore the balance between the parties by compensating their respective spheres of property through restitutive obligations.^[53] Therefore restitutive obligations should not generate any windfall profit either for the consumer or for the supplier.^[54]

Consistent with this, Article 6 para 1 UCTD is not intended to penalise either contractual party. Just like the consumer,^[55] the professional party should not be adversely affected by any solution found. Of course, the UCTD aims at discouraging unfair practices in the drafting of contractual terms. However, there is no indication, either in the recitals or in any of the provisions, that the purpose of the directive is to penalise the user of unfair terms.

Finally, the principle of procedural autonomy, within the limits of respect for the principles of equivalence and effectiveness, mainly concerns procedural rules, such as those establishing limitation periods for the exercise of actions arising from unfair terms, such as actions for restitution.^[56] In this regard, the CJEU has clarified that Articles 6 para 1 and 7 para 1 UCTD permit actions for restitution to be subject to a limitation period, provided that the period is not less favourable than that provided for similar actions at national level (principle of equivalence) and does not render practically impossible or excessively difficult the exercise of rights conferred by EU171 law (principle of effectiveness).^[57] Therefore such a time limit may not start to run from a time when the consumer is not yet in a position to assess for himself the unfairness of a contractual term.^[58]

5 The System of Protection Established by Directive 93/13

The second source of European law on restitution is the system of protection established by the UCTD. As already mentioned, the directive does not contain specific rules on restitution. In regulating the consequences of the unfairness of a term, Articles 6 para 1 and 7 para 1 of the directive do not in fact regulate the consequences in terms of restitution, either in the case of the nullity of a single term or in the case of the nullity of the entire contract. This is because the determination of those consequences is in principle left to national law,^[59] in accordance to the principle of procedural autonomy conferred on the Member States, subject to compliance with the principles of equivalence and effectiveness.^[60]

Nevertheless, the aforementioned provisions contain legal entanglements of fundamental importance for the development of a system of restitution related to consumer contracts. It is precisely thanks to these legislative points of reference that the CJEU has been able to develop, particularly in recent years, a wide case-law, which constitutes the main body of case-law to look at when speaking of European law of restitution.

As it will be seen below, this case-law is not always straightforward, since it affects in different ways the aspects that need to be defined in order for the discipline on unfair terms to be effectively harmonised.^[61] The framework is not made any clearer by the deliberately generic vocabulary used by the Court so as not to contradict the linguistic choices made by the drafters of the directive and to make the reasoning accessible to the courts of all Member States.^[62] It is therefore not172 surprising that significantly different readings of certain aspects of this case-law have been proposed by scholars. In spite of all this, it is by no means an easy task to reconstruct the framework of restitution related to consumer contracts and, consequently, to identify the conforming interpretation that will allow the national court to determine whether the rule to be applied to the case at hand is compatible with EU law or not. This section and Section 7 will illustrate the main results reached by this case-law, which may be considered as fragments of a system that is still in development.

Following the direction opened by the leading case Kásler, we learn that not only in the case where the contract, after the unfair term has been excised,^[63] remains binding on the parties according to the same terms, but also in the case where the contract cannot be maintained without the unfair terms, it is for the Member States to determine in their national legislation how to give effect to such a declaration.^[64] This point is underlined in the Bank M case too.^[65]

The fact that Article 6 para 1 leaves in principle to national law^[66] the determination of the consequences of the unfairness of a contractual term cannot alter the scope nor, as a consequence, the substance of the protection guaranteed to consumers by UCTD. National legislation must therefore ensure that the objectives pursued by the directive are achieved.^[67] First of all, those rules must in any case ensure the re-establishment of the legal and factual situation in which the consumer would have found himself in the absence of that unfair term,^[68] in particular by conferring on the consumer a right to the restitution of the benefits which the trader173 has unfairly acquired to his detriment by relying on that unfair term.^[69] The absence of such an effect could indeed undermine the dissuasive purpose of the directive.^[70] Secondly, these rules must not be detrimental to the purpose of deterring professionals from including unfair terms in contracts concluded with consumers.^[71] Lastly, the measures adopted for these purposes must ultimately aim at restoring the balance between the parties to the contract by redressing the asymmetry between their respective positions in the contractual relationship.^[72] More specifically, the directive seeks to replace the formal balance, which the contract determines between the rights and obligations of the parties, with a real balance, aimed at restoring equality between the professional and the consumer,^[73] in accordance with the aforementioned principles of consumer equality and non-penalisation of the business that permeate the entire system of protection established by the UCTD. Whichever way national legislators decide to regulate restitution following the termination of consumer contracts, these are the operational implications that must necessarily occur so that the goals set by the European legislator can be achieved.

On the basis of what has been said so far, if a core term is found to be unfair, so that the contract could not legally exist without it, the rule set out in Article 6 para 1 is that the contract is null and void in its entirety (unless the consumer objects^[74])174, with all the consequences that this entails under national law, also as regards restitutions.

However, where the declaration of invalidity of the contract would expose the consumer to particularly harmful consequences, so as to penalise him or her and undermine the deterrent effect of the invalidity of the contract, Article 6 para 1 does not preclude the national court, in application of the principles of contract law, from eliminating the unfair term by replacing it with a supplementary provision of national law,^[75] or, failing that, from inviting the parties to the contract to renegotiate the content of the term,^[76] or, again, ensure that the consumer is ultimately in the situation he or she would have been in if the term held to be unfair had never existed,^[77] indicating, where appropriate, last-resort remedies provided by national law.^[78]

The detrimental consequences to which the consumer may be exposed following the declaration of invalidity of the contract include compensation exceeding his financial capacity,^[79] but also the situation of legal uncertainty in which the consumer may find himself or herself following the declaration of invalidity (in particular175 where national law allows the professional to claim remuneration for services rendered on a basis other than that of the null and void contract) and, again, the fact that the invalidity of the contract may affect the validity and effectiveness of the acts performed under that contract.^[80] It follows that the application of the rules of national law governing the consequences – including restitution – of the nullity of the contract is subject to the condition that they are not particularly harmful to the consumer.^[81]

Therefore, where, pursuant to Article 6 para 1, the contract is to be declared null and void in its entirety, and this nullity does not cause any inconvenience to the consumer as regards restitution, the provisions of national law concerning restitution for services rendered under the contract declared null and void shall apply. However, national laws do not provide for a double regime of restitution depending on whether a b-to-b or a b-to-c contract is declared null and void, but a single regime of restitution based on the discipline of recovery of undue payments, leading to bilateral and reciprocal restitution. This means that, in principle, the professional and the consumer are entitled to claim from each other the reimbursement of the equivalent of any undue performance made under the void contract.^[82] This regime of restitution is certainly compliant with the protection goals pursued by the UCTD, since bilateral and mutual restitution guarantees the restoration of the legal and factual situation prior to the conclusion of the contract containing unfair terms and, at the same time, is capable of restoring the balance between the parties to the contract, without any penalisation for one or the other.

6 Protective Voidness and Restitutionary Protection: Two Keys to Interpretation

Since the present contribution seeks to make a comparison between the European and the Italian case-law on the subject of the restitutive consequences of the nullity of a contract concluded with consumers by sellers or suppliers, at this point it is useful to explain how this issue is dealt with in Italian civil law.176

The analysis focuses on the concept of protective nullity, which the Italian legislature identified as the most appropriate instrument for achieving the results sought by the EU legislature in drafting and enacting a specific consumer protection law. This concept has been constructed in accordance with the protection objectives set by the EU legislature, and in a different manner from the other forms of invalidity known to the Italian legal system, in particular the nullity governed by Articles 1418 et seq of the Italian Civil Code. It is therefore an unprecedented form of invalidity, which departs from the traditional nullity-voidability binomial established by the Civil Code. More specifically, it is an ‘ancipite’ invalidity, responding both to the general interests and to the individual claims of the weaker party to the contract,^[83] and which can only be invoked by the latter,^[84] with a case characterised by prima facie inefficacy^[85] and recognisable ex officio, taking into account the procedural behaviour of the protected party.^[86] The increasing presence of protective nullity in the contractual scenario has meant that protective nullity has been acquired by the system as a ‘tertium genus of invalidity’^[87] flanking the classical nullity and voidability.

Due to the differences between the nullity governed by the Civil Code and the ‘new’ protective nullity, two opposing interpretations of protective nullity and the system that can be built around it have emerged, each of which has important implications for restitutionary protection.

Some authors have seen an irreducible gap between protective nullity and ‘traditional’ nullity. They have spoken in this regard now of ‘systems that are parallel to each other’^[88] now of ‘a model of nullity antithetical to the codified one’.^[89] The idea that the expression ‘protective’ is a sign of abandonment of the general contract law categories and their discipline and opens the way to different solutions aimed at protecting the weaker party has thus been reinforced.^[90] From this point of view,177 in the name of the protection of the weaker party, the nullity rules of the Code may in any way be derogated from in any way as regards the substantive and procedural consequences of the declaration of nullity;^[91] and in particular that, once a protective nullity has been declared, it is not subject to the regulation of the consequences of the general nullity regime.^[92]

The Italian Supreme Court shares this order of ideas, and so, in case No 28314 of 2019, develops, by way of judicial interpretation, a protective condictio, i.e. a unilateral recovery of undue payments in favour of the client-consumer. Such an approach produces disruptive consequences at the systemic level: it would create, indeed, an internal dualism with regard to nullity, concerning, on the one hand, the modus operandi of the remedy, and on the other hand, as its direct consequence, the restitutionary regime that derives from it. In particular, there would be a dual regime of restitution: bilateral in the case of the nullity of b-to-b contracts, and unilateral in the case of the nullity of b-to-c contracts. This would undermine an important cornerstone of the system, namely the unity of the approach to restitutionary protection resulting from the nullity of the contract as a justification for mutual patrimonial attributions between the parties.

At the outcome of the Court’s ruling, there was no lack of criticism from authors who consider that ‘traditional’ nullity set by the Civil Code and protective nullity do not constitute antithetical paradigms, but are two different forms of an institution that is unitary in its foundation and modus operandi. On the one hand, it is noted that protective nullity, like Civil Code nullity, protects both public order and private order interests. On the other hand, it is observed that when it affects the entire contract, nullity of protection determines its radical and ab origine ineffectiveness, just like Civil Code nullity.

Given this premise, it is difficult to avoid the consequence that the retroactive determination of the lapse of title gives all the parties to the contract, and not only to the customer or consumer, the possibility of recovering the service provided in performance of the contract.^[93] From this point of view, the restitution regime of the b-to-c contract should be entirely identical to that of the b-to-b contract, being based on bilateral and reciprocal restitution obligations on the part of the professional, on the one hand, and the customer or consumer, on the other. Each party to the contract is thus obliged to return the service received, without the possibility of soluti retentio, and is entitled to receive the service provided in return. There should therefore be a178 single restitution regime resulting from the nullity of the contract, given by the discipline of objective undue payment (Article 2033 et seq of the Italian Civil Code).

The question is which of the two interpretations is supported by the European restitution law. In this regard, the Bank M case, which is the latest act of a system in the making, comes to the rescue.

7 The Answer to the Question Referred for a Preliminary Ruling: A Reconstructive Proposal

The Bank M case adds a further element to the system of protection provided by the UCTD: on the one hand, it establishes the consumer’s right to claim from the bank a set-off that goes beyond the reimbursement of the monthly instalments paid and the costs paid for the performance of the loan agreement, as well as the payment of default interest at the statutory rate from the date on which the notice is served; on the other hand, it denies the bank the right to claim from the consumer a set-off that goes beyond the reimbursement of the capital paid for the performance of that agreement, as well as the payment of default interest at the statutory rate from the date on which the notice is served.

Since it is undeniable that, in the name of consumer protection, the Court has thus introduced an asymmetric restitution mechanism (since the consumer can claim restitution to which the professional is not entitled as well), the question is whether this asymmetry is similar to that envisaged by the Italian Supreme Court in case No 28314 of 2019. If this were the case, a protective condictio indebiti of European rank would be sanctioned by case-law, disrupting the system deriving from the UCTD and establishing a true and proper unilateral restitutionary statute of protection, that would complete the system of invalidity of b-to-c contracts, as in the Italian case. Such a conclusion can only be drawn where, according to the Bank M case, it is clear that what the consumer – and not the professional – is entitled to is the restitution of a service provided in performance of the contract and which has become undue after the contract has been declared null and void. Otherwise, the asymmetry of restitution established by the Bank M case does not involve the institution of the recovery of undue payments, but is placed at a different level.

8 Conclusions

The Bank M case represents a milestone in the definition of a European restitution law. It can rightly be said that the legal principles and the hermeneutical criteria set out therein will from now on constitute the first point of reference for the reconstruction of what happens in the field of restitution when a contract concluded between a business party and a consumer is declared null and void as a result of conduct on the part of the former which is contrary to the aims of protection of the latter pursued by Directive 93/13. This reconstruction allows important conclusions to be drawn about the dynamics of restitution in European contract law, with both practical and interpretative consequences.

It follows from a reading of the Bank M case that, in the hypothesis of the nullity of a consumer contract due to the presence of unfair terms, the parties are undoubtedly obliged to reciprocally return the services rendered, without soluti retentio in favour of one or the other. The nullity of a contract concluded between a professional and a consumer thus establishes, in principle, bilateral and reciprocal obligations of restitution of undue payments on both parties, which are indispensable in order to restore the status quo ante sought by the directive, in full compliance with the principles of equality between the consumer and the professional, the prohibition of penalising one of the parties and, more generally, the prohibition of unjust enrichment and the principle of good faith and fairness.

Although it does not establish a ‘protective condictio indebiti’ of European rank, the Bank M case allows the consumer to recover the profit made by the professional through the inclusion of unfair terms in the contract, since this constitutes unjust enrichment; on the other hand, it does not allow the professional to obtain remuneration for the use of the capital by the consumer, since such an effect would frustrate the dissuasive objective pursued by Article 7 of the UCTD. The case-law187 of ECJ thus shows us that, from a EU law perspective, the consequences of the proven unfairness of a term in a contract concluded between a professional and a consumer, both in terms of the annulment of the contractual regulation and in terms of the activation of the resulting restitutionary protection are nothing other than the result of a delicate and complex balancing of the various interests underlying the protection of consumers against unfair terms (and, more generally, the need to prevent and/or correct the market failure caused by the presence of such terms in standardised transactions). On the one hand, there is the need to restore the consumer’s balance with his professional counterpart (a balance which was lost precisely as a result of the insertion of unfair terms): this is done by means of the recovery of undue payments. On the other hand, there is the long-standing scope of dissuading professionals from inserting such terms in contracts concluded with consumers, an objective presided over by Article 7 para 1 of the directive:^[119] this is the direction in which the recovery of profits in favour of the consumer, not offset by remuneration for the business party, is heading.

At the level of interpretation, the case under consideration shows that European private law must be understood according to its own parameters, which are different from those traditionally used for the interpretation of national law. It is therefore necessary to create a real system of European private law: a new dogmatics in which effective solutions can be found, capable of resolving the conflicts of interpretation that may arise in its application.^[120] This hermeneutic approach postulates the need to examine the content of the directive, to analyse its genesis and rationale, in order to ascertain whether the interpretation offered of it is in line with the cultural logic and the underlying legislative policy objectives, and whether it is also the result of the uniform application of the normative dictate in the various Member States of the European Union.^[121]