Consumer protection and the limits of CJEU Jurisdiction: a controversial Advocate General´s Opinion

According to Article 19(1) TEU the CJEU “shall ensure that in the interpretation and application of the Treaties the law is observed.” The Court is therefore the ultimate interpreter of European legislation, thus guaranteeing its uniform application. To that effect, the national courts are offered the possibility of submitting to it preliminary questions (Art. 267 of the TFEU). However, for this system to function adequately it is essential not only that Member States respect this pre-eminence, but that the CJEU respects the limits of its jurisdiction. In my view, the recent opinion by the Advocate General Szpunar (hereinafter AG) in Case C-125-18 – concerning a reference rate on Spanish mortgage loans and examined here in more detail could lead the CJEU to go beyond the boundaries of its jurisdiction . Let me explain why:

The problem arises in relation to one of the questions submitted by a Spanish Court to the CJEU, which can be summarized as follows: “Is it contrary to Directive 93/13, and to Article 8 thereof, for a Spanish court to rely upon and apply Article 4(2) when that provision has not been transposed into Spanish law?

This question touches upon an extraordinarily important issue. Article 4(2) of Directive 93/13 on consumer protection states that “Assessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, (…) in so far as these terms are in plain intelligible language.” This means that the assessment of unfairness of price and principal subject matter is excluded from the scope of the Directive.

However, Article 8 of the same Directive states: “Member States may adopt or retain the most stringent provisions compatible with the Treaty in the area covered by this Directive, to ensure a maximum degree of protection for the consumer.”  In the Case Caja de Ahorros y Monte de Piedad de Madrid (C-484/08) the Court understood that Articles 8 and 4(2) of the Directive “must be interpreted as meaning that they do not preclude national legislation (…) which authorises judicial review of the unfairness of contractual terms relating to the definition of the principal subject-matter of the contract.” This finding means that national legislations can establish the judicial review of the fairness of the price in consumer contracts. This conclusion is, in my opinion, debatable, because the rule of Article 4(2) makes perfect sense in a market economy: the examination of the abusive nature of non-essential clauses is justified by the fact that they are not only not negotiated but that they are not even taken into account by the consumer, since this analysis is not cost-effective for him. That is why the Directive allows these terms – that is, all those that do not regard price of main subject matter of the contract- to be annulled if they are unfair, even if they are clear and known to the consumer. The consumer, on the other hand, does pay attention to the price and the essential subject matter of the contract, and negotiates them with the supplier or with its competitors, and it is therefore not necessary for judges to control their fairness. Nor would it be convenient: if judges could – and consequently should – rule on whether or not the price in all consumer contracts is fair, we would no longer find ourselves in the market economy, as enshrined in Article 38 of the Spanish Constitution. For the same reason, such a finding could even be contrary to the Treaties of the Union (although in Case Caja de Ahorros the Court briefly dismisses that it could infringe rules of competition set in the Treaties, Para. 45 to 49).

But even if we were to agree with the Court and consider that Article 8 allows national legislation to establish that assessment, this will only be the case if has in effect been established by the law of that Member State. In the case the national law does not expressly impose or exclude that assessment, it is a question of interpreting national Law. That is why the Spanish judge´s question is not well posed: national courts do not “apply Article 4(2)” of the Directive to determine if that assessment is excluded, but their national law. However, the AG follows the reasoning of the question and concludes that  “Article 8 of Directive 93/13 precludes a national court from applying Article 4(2) of that directive in order to refrain from assessing whether a term is potentially unfair where the latter provision has not been transposed into Spanish law” (para. 100). The problem with this argument is that the national court is not applying Article 4(2) but Spanish Law. The AG is therefore interpreting that law, something that should be done by national courts.

In this case, moreover, this particular question was already examined by the Spanish Supreme Court in several judgments rendered after Case Caja de Ahorros. In its Judgment of 18 June 2012, it concluded that through a reform of Law 7/1998 the legislator had implicitly excluded price and principal subject matter from the assessment of unfairness. This was confirmed in a judgment of 9 May 2013: “the control of content (…) does not extend to fairness of the main object of the contract … in such a way that there is no room for price control”.

To justify his dissent with the Supreme Court´s doctrine, the AG says that the Spanish judgments do not comply with the requirements of legal certainty demanded by CJEU’s doctrine (Para. 95). But this doctrine, according to the CJEU itself, only applies in the case “Where national legislation has been the subject of different relevant judicial constructions, some leading to the application of that legislation in compliance with Community law, others leading to the opposite application” (C‑129/00, Para. 33). In this matter, however, the doctrine of the Spanish Supreme Court is clear, uniform and binding. Besides, it does not violate EU law, as it ends up applying a rule that is identical to the one of Article 4(2).

In my view, this opinion creates confusion over the limits of the CJEU´s jurisdiction, as it directly contradicts the Spanish Supreme Court´s interpretation of a crucial question of Spanish consumer law. Spanish Law has not expressly transposed Article 4(2), so we have to apply Article 8 and see what Spanish law states in that regard. That is what the Supreme Court has done in the above mentioned rulings, so we do have the equivalent of “judge-made law” regarding this question. The interpretation of the Supreme Court is, moreover, perfectly compliant with Directive 93/13 as it excludes unfairness assessment of price and principal subject matter of the contract, just like Article 4(2) does.

The CJEU is the ultimate interpreter of EU law, but the Spanish Supreme Court has the same function regarding Spanish law. This distribution is not only based on a political decision regarding the framework of the EU, it also makes sense from a practical point of view. The CJEU is a specialist in EU law, and the Spanish Supreme Court in Spanish law. It is more familiar with Spanish rules and the elements that according to Article 3 of the Spanish Civil Code should be used to interpret it: the rest of the Spanish legal system, the legislative background, the Spanish social reality and the objectives of the legislator.