European Union: CJEU Decision - Implications For Business-To-Consumer Contracts

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 consumer. 

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 ruling.

CJEU Ruling

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 court.

Comment

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. 

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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