Sellers that trade online with EU consumers need to ensure that
their standard terms of business are fair and communicated in plain
language to the consumer. We examine a recent case where the Court
of Justice of the European Union (CJEU) held Amazon's
'choice of law' clause to be unfair within the meaning of
the Unfair Consumer Contracts Directive (93/13/EEC). It also was
held that the term gave consumers the impression that only the law
chosen by Amazon applied to the contract between Amazon and the
Amazon EU, a company established in Luxembourg, conducted sales
with Austrian consumers remotely through a website, with a German
language page, called amazon.de. Amazon had no registered office or
branch in Austria. The website's standard terms and conditions
provided that the governing law was that of Luxembourg. A local
consumer protection organisation, the Verein fur
Konsumenteninformation ("VKI"), applied
for an injunction in the Austrian courts to prevent the use of this
standard term. After a number of appeals, the Austrian Supreme
Court stayed the proceedings and referred several questions to
Europe's highest court, the Court of Justice of the European
Union (the "CJEU"), for a preliminary
The CJEU held that a standard term which chooses a
supplier's member state law as the governing law, and not that
of the consumer was, in this case, unfair to consumers.
The CJEU considered the law applicable where an action is
brought against the use of unfair contractual terms. Article 6(1)
of the Rome II Convention provides that the law applicable to a
non-contractual obligation arising out of an act of unfair
competition is the law of the country where the interests of
consumers are, or are likely to be, affected. In the VKI case, that
would be Austria.
The CJEU held that where a contract has not been individually
negotiated, ie a standard form agreement or set of terms and
conditions, a governing law term is unfair insofar as it may lead
the consumer "into error" in believing that only the
seller's governing law applies. Also, the governing law clause
did not go on to explain to the consumer that it also had the
additional benefit of mandatory provisions of law from their own
jurisdiction. The CJEU held that the determination of which laws
are mandatory laws for this purpose is a matter for the national
If a seller or supplier is cross-border trading in the EU, it
should ensure its consumer facing terms and conditions are
regularly reviewed, so that they communicate in plain language to
consumers. In particular, the seller must ensure that the consumer
is not led "into error" of thinking that only the
seller's proposed governing law applies.
If you require specific guidance in relation to your
consumer-facing terms and conditions in light of this decision,
please contact a member of our Commercial team.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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