CJEC, 1st chamber, September 9, 2004, No C-70/03

THE COURT (First Chamber),

1 By its application the Commission of the European Communities asks the Court to declare that, by failing correctly to transpose into national law Articles 5 and 6(2) of Council Directive 93-13-EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29, hereinafter 'the directive'), the Kingdom of Spain has failed to fulfil its obligations under the provisions of the EC Treaty and of the directive.

2 As set out in Article 1(1), the purpose of the directive is to approximate the laws, regulations and administrative provisions of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer.

3 Article 10(1) of the directive provides that Member States are to bring into force the laws, regulations and administrative provisions necessary to comply therewith no later than 31 December 1994.

4 The directive was transposed into the Spanish legal system by Ley 7-1998, de 13 de abril, sobre condiciones generales de la contratación (Law 7-1998 of 13 April 1998 on general terms in contracts, Boletín Oficial del Estado No 89 of 14 April 1998, p. 12304) ('Law 7-1998'), amending Ley General 26-1984, de 19 de julio, para la defensa de los consumidores y usuarios (General Law 26 of 19 July 1984 providing for consumer protection, Boletín Oficial del Estado No 176 of 24 July 1984, p. 21686) ('amended Law 26-1984').

Pre-litigation procedure

5 Having given the Kingdom of Spain the opportunity to submit its observations, the Commission, on 25 May 2000, sent to it a reasoned opinion alleging that it had failed correctly to transpose Articles 5 and 6(2) of the directive and calling on it to comply with that opinion within two months of its notification.

6 By letter of 27 September 2000, the Spanish Government stated the reasons why it believed it had transposed those provisions of the directive correctly.

7 Finding the Kingdom of Spain's reply to the reasoned opinion unsatisfactory, the Commission brought the present action.

The first plea: failure correctly to transpose Article 5 of the directive

Legal framework

The directive

8 Article 5 of the directive provides:

'In the case of contracts where all or certain terms offered to the consumer are in writing, these terms must always be drafted in plain, intelligible language. Where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail. This rule on interpretation shall not apply in the context of the procedures laid down in Article 7(2).'

9 The actions referred to in paragraph 7(2) of the directive are actions for cessation, that is to say 'whereby persons or organisations, having a legitimate interest under national law in protecting consumers, may take action according to the national law concerned before the courts or before competent administrative bodies for a decision as to whether contractual terms drawn up for general use are unfair, so that they can apply appropriate and effective means to prevent the continued use of such terms'.

National legislation

10 Article 10(2) of amended Law 26-1984 provides:

'Where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail.'

11 Article 6(2) of Law 7-1998 states:

'Doubts about the interpretation of unintelligible general conditions shall be settled in favour of the party agreeing to be bound by general conditions.'

Pleas in law and arguments of the parties

12 The Commission criticises the Kingdom of Spain for the fact that the national legislature did not state that the rule of interpretation favourable to the consumer does not apply in the case of collective actions for cessation referred to in Article 7(2) of the directive. That omission could compromise the effectiveness of such actions since, by relying on the rule of interpretation most favourable to the consumer, a seller or supplier could prevent an unintelligible term liable to be interpreted as unfair from being prohibited.

13 The Spanish Government contends that the rule of interpretation in question concerns only individual actions and that, in respect of collective actions, objective interpretation is the rule. It adds that the Spanish legislation, which offers a higher level of protection than that provided by the directive, includes a list of terms which are, in all cases, unfair. The fact that that list is mandatory precludes an interpretation favourable to the consumer from being relied on in order to render actions for cessations ineffective.

Findings of the Court

14 As the Advocate General pointed out in paragraph 7 of his Opinion, it is less the content of the obligation laid down in Article 5 of the directive on which the parties are at variance in regard to the first plea than the form and means by which that obligation is to be transposed into national law.

15 According to settled case-law, whilst legislative action on the part of each Member State is not necessarily required in order to implement a directive, it is none the less essential for the national law at issue effectively to guarantee that the directive will be applied in full, that the legal position under national law is sufficiently precise and clear and that individuals are made fully aware of their rights and, where appropriate, may rely on them before the national courts (see, inter alia, Case C-144-99 Commission v Netherlands [2001] ECR I-3541, paragraph 17, and Case C-478-99 Commission v Sweden [2002] ECR I-4147, paragraph 18).

16 The distinction made in Article 5 of the directive concerning the applicable rule of interpretation, as between actions involving an individual consumer and actions for cessation which involve persons or organisations representative of the collective interest of consumers may be accounted for by the different aims pursued by those actions. In the former case, the courts or competent bodies are required to make an assessment in concreto of the unfair character of a term contained in a contract which has already been concluded, while in the latter case it is their task to assess in abstracto the unfair character of a term which may be incorporated into contracts which have not yet been concluded. In the former case, an interpretation favourable to the individual consumer concerned benefits him or her immediately. By contrast, in the latter case, in order to obtain, by way of prevention, the most favourable result for consumers as a whole, it is not necessary, where there is doubt, to interpret the term in a manner favourable to them. Accordingly, an objective interpretation makes it possible to prohibit more frequently the use of an unintelligible or ambiguous term, which results in wider consumer protection.

17 It follows that the proviso in the third sentence of Article 5 of the directive is a binding legislative provision which confers rights on consumers and assists in determining the result which the directive seeks to achieve.

18 The Spanish Government has not established that that result can be achieved in the national legal system.

19 In respect of the statement of the Spanish authorities that the rule of interpretation favourable to the consumer concerns only individual actions, the Kingdom of Spain has not pointed to any provision in its legal system or any decision of its national courts which might support that argument.

20 Article 10(2) of amended Law 26-1984 and Article 6(2) of Law 7-1998 lay down a general rule of interpretation favourable to the consumer without any kind of restriction, and Article 12 of Law 7-1998, concerning collective actions for cessation, contains no exception regarding the application of that rule of interpretation.

21 The scope of those provisions is supported by their place in national legislation. Article 10 of amended Law 26-1984 is integrated into Chapter II of that law, entitled 'Protection of economic and social interests', while Article 6 of Law 7-1998 is in Chapter I of the amended law, entitled 'General provisions'. Those headings indicate that they concern provisions of general application containing no restriction as to the specific case of collective actions for cessation.

22 Accordingly, the first plea must be regarded as well founded.

The second plea: failure correctly to transpose Article 6(2) of the directive

Legal framework

The directive

23 Article 6(2) of the directive reads as follows:

'Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-Member country as the law applicable to the contract if the latter has a close connection with the territory of the Member States.'

National legislation

24 Article 10a(3) of amended Law 26-1984 provides:

'The rules on protection of consumers against unfair terms shall be applicable, irrespective of the law chosen by the parties to govern the contract, under the terms and conditions provided for in Article 5 of the Rome Convention on the law applicable to contractual obligations.'

25 Article 3(2) of Law 7-1998 states:

'Without prejudice to the provisions of international treaties and agreements, [this law] shall also apply to contracts subject to foreign law when the party agreeing to be bound thereby has given such consent on Spanish territory and is habitually resident there.'

The Rome Convention

26 Under Article 5(1) of the Rome Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980 (OJ 1980 L 266, p. 1) ('the Rome Convention'), that article 'applies to a contract the object of which is the supply of goods or services to a person ("the consumer") for a purpose which can be regarded as being outside his trade or profession, or a contract for the provision of credit for that object'. According to paragraphs 4 and 5, Article 5 is not to apply to a contract of carriage unless it provides for a combination of travel and accommodation for an inclusive price, or to a contract for the supply of services, where the services are to be supplied to the consumer exclusively in a country other than that in which he has his habitual residence.

27 Article 5(2) of the Rome Convention provides:

'[A] choice of law made by the parties shall not have the result of depriving the consumer of the protection afforded to him by the mandatory rules of the law of the country in which he has his habitual residence:

- if in that country the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising, and he had taken in that country all the steps necessary on his part for the conclusion of the contract,

or

- if the other party or his agent received the consumer's order in that country,

or

- if the contract is for the sale of goods and the consumer travelled from that country to another country and there gave his order, provided that the consumer's journey was arranged by the seller for the purpose of inducing the consumer to buy.'

Pleas in law and arguments of the parties

28 The Commission maintains that Article 6(2) of the directive seeks to ensure that all consumers are protected under all contracts entered into with a seller or supplier, while Article 10a of amended Law 26-1984 affords such protection only for certain types of contracts, that is to say those referred to in Article 5(1) of the Rome Convention, and only when certain conditions are satisfied, namely those laid down in Article 5(2). Those conditions are more restrictive than the sole requirement provided for in Article 6(2) of the directive that 'the [contract] has a close connection with the territory of the Member States'.

29 According to the Spanish Government, it follows from a consistent interpretation of the national provisions on the protection of consumers against unfair terms that they are mandatory, irrespective of the law chosen by the parties to govern the contract. It contends that Article 3(2) of Law 7-1998 provides for the mandatory application of those national provisions, that is to say the protection conferred by the directive on contracts governed by foreign law when the party agreeing to be bound by them expressed consent in that regard on Spanish territory and is habitually resident there. It is in that way that actual effect is given to the term 'close connection with the territory of the Member States' in the words of Article 6(2) of the directive, in the case of contracts having a connection with Spanish law.

Findings of the Court

30 As is clear from the sixth recital in its preamble, the directive is intended 'to safeguard the citizen in his role as consumer when acquiring goods and services under contracts which are governed by the laws of Member States other than his own' (see, in that regard, Commission v Netherlands, cited above, paragraph 18, and Commission v Sweden, cited above, paragraph 18). Article 6(2) of the directive gives effect thereto. As is clear from the 22nd recital of the preamble to Directive 93-13, that provision seeks to avert the risk that, in certain cases, the consumer may be deprived of Community protection by the designation of the law of a non-Member country as the law applicable to the contract. For that purpose, it provides that the protection granted by the directive to consumers in contractual relationships within the Community is to be maintained for contractual relationships involving non-Member countries, as long as the contract has close ties with the territory of the Member States.

31 Under Article 1(1) and Article 3(1) of the directive, the substantive scope of the protection granted by it covers terms not individually negotiated in all contracts concluded between a seller or supplier and a consumer. It is true that, as the Commission rightly maintains, Article 10a of amended Law 26-1984 is more restricted in its scope since it applies only to the types of contracts referred to in Article 5(1)(4) and (5) of the Rome Convention. However, as the Spanish Government contends, that lacuna is supplied by Article 3(2) of Law 7-1998, which applies to all contracts concluded, without individual negotiation, on the basis of general conditions.

32 As regards ties with the Community, Article 6(2) of the directive merely states that the contract is to have 'a close connection with the territory of the Member States'. That general expression seeks to make it possible to take account of various ties depending on the circumstances of the case.

33 Although concrete effect may be given to the deliberately vague term 'close connection' chosen by the Community legislature by means of presumptions, it cannot, on the other hand, be circumscribed by a combination of predetermined criteria for ties such as the cumulative conditions as to residence and conclusion of the contract referred to in Article 5 of the Rome Convention.

34 By referring to the latter provision, expressly as regards Article 10a of amended Law 26-1984 and, by implication, as regards Article 3(2) of Law 7-1998, the provisions of the Spanish legal system supposedly transposing Article 6(2) of the directive thus introduce a restriction incompatible with the level of protection laid down therein.

35 It follows that the second plea is also well founded.

36 In those circumstances it must be held that, by failing correctly to transpose into national law Articles 5 and 6(2) of the directive, the Kingdom of Spain has failed to fulfil its obligations under that directive.

Costs

37 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has asked that the Kingdom of Spain be ordered to pay the costs and the latter has been unsuccessful, it must be ordered to pay the costs.

On those grounds, the Court (First Chamber) hereby:

1. Declares that, by failing correctly to transpose into national law Articles 5 and 6(2) of Council Directive 93-13-EEC of 5 April 1993 on unfair terms in consumer contracts, the Kingdom of Spain has failed to fulfil its obligations under that directive;