Constitutional Reasoning in Private Law: The Role of the CJEU in Adjudicating Unfair Terms in Consumer Contracts

• Date: 01 September 2015
• Published date: 01 September 2015
• DOI: http://doi.org/10.1111/eulj.12121
• Author: Oliver Gerstenberg

Constitutional Reasoning in Private Law:

The Role of the CJEU in Adjudicating

Unfair Terms in Consumer Contracts

Oliver Gerstenberg*

Abstract: This article explores the—often controversial—role of the CJEU as an inter-

preter of Directive 93/13/EEC on unfair terms. A fundamental problem that any modern

system of private law must address is how to combine two types of provisions: those that

are intended to facilitate private ordering through voluntary transactions, and those

setting out certain mandatory terms that are intended to protect vulnerable consumers

against risks inherent to free market transactions. This article argues that, in response to

the failure of various legislative initiatives, the Court’s jurisprudence has acquired both

a regulatory dimension and a constitutional dimension. The emergent judicial regime

illustrates an important departure from a rule-based conception of private law, based on

private autonomy as a stand-alone value, towards an innovative conception that extends

proportionality analysis into substantive private law but avoids one-sided outcomes.

I Background

A fundamental problem that any modern system of private law must address is how

to combine two types of provisions: those that are intended to facilitate private

ordering through voluntary transactions, and those setting out certain mandatory

terms that are intended to protect vulnerable consumers against risks inherent to free

market transactions. In the European single market, this fundamental problem is

exacerbated by the fact that the EU does not have a private law system of its own but

a multilevel system that must operate in close cooperation with national legal systems.

This paper explores some innovative features of this multilevel system by analysing

the role of the Court of Justice of the EU (CJEU) as an interpreter of Directive

93/13/EEC on unfair terms.1With regard to contractual terms that have ‘not been

* Law School, Exeter University. I presented earlier versions of this article at workshops at De Monfort

University and at Exeter University, organised by my (now) colleagues at Exeter, Mel Kenny and James

Devenney. For insightful comments, many thanks to Charles Sabel, Norbert Reich, and two anony-

mous reviewers. For a companion piece, discussing the theoretical foundations of judicial review, cf my:

The Justiciability of Socioeconomic Rights, European Solidarity, and the Role of the CJEU, in:

Yearbook of European Law (2014), pp. 1–32.

1For authoritative accounts, cf N. Reich, General Principles of EU Civil Law (Intersentia, 2014);

H. Micklitz and N. Reich, ‘The Court and the Sleeping Beauty: The Revival of the Unfair Contract

Terms Directive (UCTD)’, (2014) 51 Common Market Law Review 771–808; H. Micklitz and B. Kas,

‘Overview of Cases before the CJEU on European Consumer Contract Law (2008–2013) – Part I’,

(2014) 10(1) European Review of Contract Law 1–63.

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European Law Journal, Vol. 21, No. 5, September 2015, pp. 599–621.

individually negotiated’, the directive typically assumes the consumer typically to be

‘in a weak position vis-à-vis seller or supplier, as regards both his bargaining power

and his level of knowledge’, and therefore ‘aims to replace the formal balance which

the contract establishes between the rights and obligations of the parties with an

effective balance which re-establishes equality between them’2by providing that unfair

terms are non-binding on the consumer (Article 6). In order to assist national courts

in their task of determining whether a specif‌ic term is actually unfair, an annex of the

directive contains, as an interpretive aid,3‘an indicative and non-exhaustive list’ of 17

terms ‘which may be regarded as unfair’.4To catch what this list does not a general

clause in Article 3(1) def‌ines as unfair any contractual term, not individually negoti-

ated, that

‘contrary to the requirement of good faith, [. . .] causes a signif‌icant imbalance in the parties’ rights and

obligations arising under the contract, to the detriment of the consumer’.

When assessing the unfairness of a term, the national court must take into account

‘all the circumstances attending the conclusion of the contract and to all the other

terms of the contract or of another contract on which it is dependent’ (Article 4).

Article 7(1) requires Member States to ‘ensure that, in the interests of consumers and

of competitors, adequate and effective means exist to prevent the continued use of

unfair terms in contracts concluded with consumers by sellers or suppliers’.

In its landmark ruling in Freiburger Kommunalbauten (C-237/02), the Court set out

the parameters of its role as an interpreter of the directive by insisting that it is for the

domestic national courts to determine—‘in the light of the particular circumstances of

the case in question’5—whether or not a contested contract term is actually unfair. By

contrast, the CJEU’s own role is conf‌ined to providing interpretations of the ‘general

criteria’ in the relevant provisions of directives. According to the CJEU, then, domes-

tic courts and the CJEU must be seen as indispensable interlocutors in a two-level

dialogue:

‘the Court [CJEU] may interpret general criteria used by the Community legislature in order to def‌ine

the concept of unfair terms. However, it should not rule on the application of these general criteria to

a particular term, which must be considered in the light of the particular circumstances of the case in

question’.6

As the CJEU explains, the distinction between interpretation of the ‘general cri-

teria’ and their contextualising application is triggered by the fact that private law

relations ‘are to a signif‌icant extent still governed by national law’, with the implica-

tion that ‘the same type of [contractual] terms may even have different legal effects in

different national legal systems’.7Hence, the necessity of taking into account ‘the

consequences of the term under the law applicable to the contract’ when determining

the actual unfairness of an impugned contract term ‘requires that consideration [must]

be given to the national law’.8The distinction between interpretation and application

2eg CJEU, Joined Cases C-240/98 to C-244/98 Océano Grupo Editorial and Salvat Editores [2000] ECR

I-4941.

3St. Weatherill, EU Consumer Law and Policy (E. Elgar Publishing, 2013), at 149 ff.

4Art. 3(3) of the Directive.

5C-237/02 Freiburger Kommunalbauten, para 19.

6Para 22.

7AG Geelhoed, Opinion in C-237/02 Freiburger Kommunalbauten GmbH Baugesellschaft & Co. KG v.

Ludger Hofstetter and Ulrike Hofstetter (1 April 2004), at 30.

8ibid, para 21.

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