Provisional text
OPINION OF ADVOCATE GENERAL
MEDINA
delivered on 18 January 2024 (1)
Case C‑450/22
Caixabank, S.A., successor in law to Bankia, S.A. and Banco Mare Nostrum, S.A.,
Caixa Ontinyent, S.A.,
Banco Santander, S.A., successor in law to Banco Popular Español, SA and Banco Pastor, S.A.,
Targobank, S.A.,
Credifimo, S.A.U.,
Caja Rural de Teruel, S.C.C.,
Caja Rural de Navarra, S.C.C.,
Cajasiete Caja Rural, S.C.C.,
Caja Rural de Jaén, Barcelona and Madrid, S.C.C.,
Caja Laboral Popular, S.C.C. (Kutxa),
Caja Rural de Asturias, S.C.C.,
Arquia Bank, S.A., formerly Caja de Arquitectos, S.C.C.,
Nueva Caja Rural de Aragón, S.C.C.,
Caja Rural de Granada, S.C.C.,
Caja Rural del Sur, S.C.C.,
Caja Rural de Albacete, Ciudad Real and Cuenca, S.C.C. (Globalcaja),
Caja Rural Central, S.C.C. and Others,
Unicaja Banco, S.A., successor in law to Liberbank, S.A. and Banco Castilla la Mancha, S.A.,
Banco de Sabadell, S.A.,
Banca March, S.A.,
Ibercaja Banco, S.A.,
Banca Pueyo, S.A.
v
ADICAE,
M.A.G.G.,
M.R.E.M.,
A.B.C.,
Óptica Claravisión, S.L.,
A.T.M.,
F.A.C.,
A.P.O.,
P.S.C.,
J.V.M.B., successor in law to C.M.R.
(Request for a preliminary ruling from the Tribunal Supremo (Supreme Court, Spain))
(Reference for a preliminary ruling – Directive 93/13/EEC – Contracts concluded between sellers or suppliers and consumers – Collective proceedings – Action for an injunction and reimbursement – Mortgage contracts concluded with a significant number of banks and consumers – ‘Floor’ clause limiting the variation of the interest rate – Abstract review of transparency – Concept of the ‘average consumer who is reasonably well informed and reasonably observant and circumspect’)
I. Introduction
1. The requirement of transparency of contractual terms plays a significant role in ensuring effective consumer protection for the purposes of Directive 93/13/EEC. (2) The assessment of transparency of contractual terms involves not only formal but also substantive criteria. The consumer must be put in a position to understand fully the contractual terms and their economic consequences. The adoption of a substantive approach in the Court’s case-law on the requirement of transparency has been described in academic literature as a ‘gradual move towards a more … welfarist approach to the issue of unfair contract terms’. (3)
2. The case in the main proceedings raises the issue whether the judicial review of transparency of contractual terms is possible in the context of collective redress proceedings and, if so, under what conditions and following which method. The Court will also have to elaborate on the concept of the ‘average consumer’ in the context of collective proceedings which bear the characteristics of large-scale litigation, involving a significant number of financial institutions and contracts.
II. Legal framework
European Union law
Directive 93/13
3. Article 4 of Directive 93/13 provides:
‘1. Without prejudice to Article 7, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to 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.
2. 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, on the one hand, as against the services or goods supplie[d] in exchange, on the other, in so far as these terms are in plain intelligible language.’
4. Article 5 of Directive 93/13 states:
‘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).’
5. Article 7 of Directive 93/13 provides:
‘1. Member States shall 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.
2. The means referred to in paragraph 1 shall include provisions 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.
3. With due regard for national laws, the legal remedies referred to in paragraph 2 may be directed separately or jointly against a number of sellers or suppliers from the same economic sector or their associations which use or recommend the use of the same general contractual terms or similar terms.’
Spanish law
Law 7/1998
6. Article 12 of Ley 7/1998 sobre condiciones generales de la contratación (Law 7/1998 on General Contractual Conditions) of 13 April 1998 (BOE No 89 of 14 April 1998), in the version applicable to the case in the main proceedings (‘the LCGC’), provides:
‘1. It shall be possible to bring actions for an injunction and for recovery against the use of, or the recommendation to use, general conditions which are contrary to the provisions of the present legislation or to other mandatory or prohibitive legislation.
2. The action for injunction is aimed at obtaining judgment ordering the defendant to delete from its general conditions any conditions which are held to be null and void and to refrain from using such conditions in future, determining and specifying, depending on the circumstances, the content of the contract which is to be considered valid and binding.
A related action for the recovery of any payments made under such general conditions may be joined, as an ancillary matter, to an action for an injunction, as well as an action for damages caused by the application of such conditions.’
7. Article 17 of the LCGC provides:
‘1. An action for an injunction is possible against any seller or supplier who uses general conditions which are held to be null and void.
…
4. The actions provided for in the previous paragraphs may be brought jointly against a number of sellers or suppliers operating in the same economic sector or against their associations which use or recommend the use of identical general conditions which are held to be null and void.’
Royal Legislative Decree 1/2007
8. In accordance with Article 53 of the texto refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias (consolidated text of the General Law for the protection of consumers and users and other supplementary laws), approved by Real Decreto Legislativo 1/2007 (Royal Legislative Decree 1/2007) of 16 November 2007 (BOE No 287 of 30 November 2007), in the version applicable to the main proceedings, actions for an injunction are aimed at obtaining a judgment that orders the defendant to cease certain conduct and prohibit its future occurrence. An action may also be brought to prohibit conduct that has ended at the time the action is brought, if there is sufficient evidence pointing towards the immediate recurrence of that conduct. Provided that an application for a declaration of nullity and for annulment is made, there may be joined to any action for an injunction an action for failure to comply with obligations, an action for termination or rescission of the contract, or an action for recovery of payments made as a result of the conduct, terms or general conditions held to be unfair or non-transparent.
Law 1/2000
9. Article 72 of the Ley 1/2000 de Enjuiciamiento Civil (Law 1/2000 on the Civil Procedure Code) of 7 January 2000 (BOE No 7 of 8 January 2000, p. 575), in the version applicable in the main proceedings provides that actions brought by a single party against a number of parties or by a number of parties against a single party may be joined and conducted simultaneously, provided that there is a connection between such actions by reason of the origin or cause of action. The origin or cause of action will be considered to be identical or connected where the actions are based on the same facts.
III. Succinct presentation of the facts and procedures in the main proceedings
10. The Asociación de Usuarios de Bancos, Cajas de Ahorros y Seguros de España (ADICAE) (Spanish Association of Users of Banks, Savings Banks and Insurance (ADICAE)) brought a collective action for an injunction against 44 financial institutions operating in Spain. In its application, ADICAE sought an order requiring those institutions to cease and desist from the use of the general contractual term in their variable mortgage loan agreements which consists in restricting variable interest rates from falling below a certain threshold (‘the floor clause’). Moreover, ADICAE joined to the action for an injunction an action for recovery aimed at obtaining an order for reimbursement of the payments made under that term. ADICAE applied to add further defendants to its action on two occasions, raising the total number of defendants to 101.
11. The court of first instance allowed the action to proceed. Following calls in the national media, 820 consumers entered an individual appearance in support of the forms of order sought in the collective action.
12. The judgment at first instance upheld the action in part, except in relation to three financial institutions, and ruled that the ‘floor clauses’ (‘clausulas suelo’) contained in the general conditions of the mortgage loan contracts were null and void. By virtue of that judgment those financial institutions were ordered to delete the clauses at issue from the contracts and to cease and desist from using them in a non-transparent manner. They were also ordered to reimburse the sums wrongly paid under those clauses, with effect from the date of publication of the judgment of the Tribunal Supremo (Supreme Court, Spain) of 9 May 2013.
13. The defendant banks appealed against the judgment at first instance before the Audiencia Provincial de Madrid (Provincial Court, Madrid, Spain), which dismissed most of the appeals. In its judgment, that court established the method for reviewing the transparency of contractual terms in the context of collective actions (abstract review). More specifically, it held that it is necessary to establish whether the financial establishment concealed or misrepresented the economic consequences of the clause concerned. It considered that such concealment or misrepresentation occurs where the bank does not present the ‘floor clause’ on an equivalent footing to other clauses to which the average consumer pays attention, mainly those that set out the price of the contract.
14. The Audiencia Provincial de Madrid (Provincial Court, Madrid) listed certain practices which may constitute evidence of the lack of transparency of the contested clause. Those practices were, in particular the following: first, presenting the ‘floor clause’ together with information which is unrelated to the price of the contract, or together with secondary information which has the potential to reduce the price, thereby creating the appearance that the clause is subject to certain conditions or criteria which will make its application difficult in practice; second, placing the clause in the middle or at the end of long paragraphs which begin by dealing with other matters, so that the average consumer’s attention is diverted; and third, presenting the ‘floor clause’ together with the term limiting the upward adjustment of the interest rate (ceiling clause), so that the consumer’s attention is focused on the apparent security of having a cap on the hypothetical increase of the reference index, thereby diverting his or her attention from the importance of the minimum rate.
15. The banks appealed to the Tribunal Supremo (Supreme Court) against the judgment of the Audiencia Provincial de Madrid (Provincial Court, Madrid).
16. In its request for a preliminary ruling, the referring court raises two main issues. The first one relates to whether a collective action for an injunction is an appropriate procedural mechanism to carry out a review of the transparency of contractual clauses. In that regard, the referring court points out that an action for an injunction requires, by definition, an abstract review of the clause concerned, while the review of transparency requires a concrete examination of the specific contractual relationship of which the term at issue forms part, with a focus on the pre-contractual information provided to consumers. Therefore, it questions whether a collective action is appropriate for reviewing the transparency of a clause. Moreover, it has doubts as to whether a collective action for the review of transparency may be brought against all the financial establishments that make up the banking system of an entire country (over a hundred) where the sole common denominator among those institutions is the use of a similar clause in their mortgage contracts.
17. The second issue raised by the referring court relates to the definition of the average consumer in circumstances in which there are differences among the numerous financial institutions involved in the litigation, the contractual models that have been used, the customers concerned and in which the terms concerned have been used over a long period of time.
18. The referring court points out that the domestic case-law demonstrates the difficulties involved in the abstract review of transparency. In that regard, it refers to the case-law of the Tribunal Constitucional (Constitutional Court, Spain). That court held that the application of the effects of a collective action for an injunction to a whole set of contracts may infringe the contractual freedom of a consumer who does not wish to obtain the annulment of the contract. Moreover, it refers to its own case-law. The referring court has ruled in the past that an abstract review of ‘floor clauses’ is possible, taking into account the definition of the average consumer and the features of standard form contracting. However, in the relevant cases, the collective action was brought against a single financial institution or against a very small number of financial institutions. Accordingly, it was easier to group the contested practices and clauses into a limited number of standard situations and more practical to carry out an assessment from the perspective of the average consumer.
19. According to the referring court, an additional element of complexity in conducting an abstract review of transparency arises where an action for recovery is joined to an action for an injunction. In that regard, the referring court points out that the determination of the concrete financial consequences that the declaration of nullity may have for each of the consumers concerned is more suited to actions brought by individual consumers.
20. It is in the light of those considerations that the Tribunal Supremo (Supreme Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) For the purposes of a review of transparency in the context of a collective action, do Article 4(1) of [Directive 93/13], where it refers to the circumstances attending the conclusion of the contract, and Article 7(3) of that directive, where it refers to similar terms, allow for an abstract assessment of terms used by more than one hundred financial institutions in millions of banking contracts, without taking into account the level of pre-contractual information offered on the legal and financial burden of the term or the other circumstances occurring in each case at the time when the contract was concluded?
(2) Is the possibility of conducting an abstract review of transparency from the perspective of the average consumer, where a number of the contracts offered are aimed at different specific groups of consumers or where numerous financial institutions having, economically and geographically, very different business areas were using standard terms and conditions over a very long period of time during which public awareness of such terms evolved, compatible with Article 4(2) and Article 7(3) of [Directive 93/13]?’
21. Written observations have been submitted by the following financial institutions: Caixabank, S.A., Banco Santander, S.A., Targobank, S.A., Caja Rural de Teruel, S.C.C., Caja Rural de Navarra, S.C.C., Caja Rural de Jaén, Barcelona and Madrid, S.C.C., Caja Rural de Asturias, S.C.C., Arquia Bank, S.A., formerly Caja de Arquitectos, S.C.C., Nueva Caja Rural de Aragón, S.C.C., Caja Rural de Granada, S.C.C., Caja Rural del Sur, S.C.C., Caja Rural de Albacete, Ciudad Real and Cuenca, S.C.C. (Globalcaja), Caja Rural Central, S.C.C. and Others, Unicaja Banco, S.A., Banco de Sabadell, S.A. and Ibercaja Banco S.A.. Written observations were also submitted by ADICAE, the Spanish, Polish and Portuguese Governments and the European Commission. The Court put written questions to the parties to be answered at the oral hearing. With the exception of the Polish and the Portuguese Governments, those parties were also represented at the hearing which that took place on 28 September 2023.
IV. Assessment
Preliminary observations on the judicial review of the disputed ‘floor clauses’ (‘clausulas suelo’)
22. Before examining the questions referred, it is important to make some preliminary observations on the judicial review of ‘floor clauses’ in Spain and before the Court of Justice.
23. ‘Floor clauses’ were standard terms contained in the general conditions of variable rate mortgage loan agreements concluded with consumers by a significant number of financial institutions in Spain. They established a minimum rate below which the variable interest rate could not fall, regardless of whether the reference rate fell below that minimum. The minimum interest rate set in those loan agreements usually ranged between two and five per cent. (4) When the reference rates used in mortgage loan agreements (generally the Euribor) fell significantly below the threshold that had been set by the ‘floor clauses’, consumers who had entered into loan agreements containing such clauses realised that they could not benefit from that decrease and that they would still have to pay the minimum interest rate despite having a variable rate mortgage. (5) Individual consumers and consumer associations have filed several thousands of lawsuits in Spain claiming the illegality of ‘floor clauses’ and the restitution of the overpaid interest.
24. The Tribunal Supremo (Supreme Court), in a seminal judgment of 9 May 2013 (confirmed by the ruling of 25 March 2015), examined the legality of the ‘floor clauses’ in the context of a collective action brought by a consumer association against several banking institutions. It held that such clauses, which related to the definition of the main subject matter of the contract, were grammatically intelligible for consumers and satisfied, therefore, the requirement under Article 4(2) of Directive 93/13 that they be drafted in plain, intelligible language. Although it found that the ‘floor clauses’ in that case were, in themselves, lawful, that court considered that they did not satisfy the requirement of substantive transparency. (6) That finding was based on the ground that consumers were not provided with adequate information at the time the contract was concluded concerning the legal and financial consequences of the term at issue. The Tribunal Supremo (Supreme Court), after assessing those clauses in the light of the general criteria of good faith, balance of contractual rights and obligations and transparency, set out in Article 3(1), Article 4(1) and Article 5 of Directive 93/13, declared them void.
25. In the judgment of 9 May 2013, the Tribunal Supremo (Supreme Court) limited the restitutory effect of the finding of invalidity to overpayments made after the delivery of its judgment, in view of the serious economic repercussions that the retroactive restitutory effect would have on the banking sector. That limitation in time of the restitutory effect was ruled incompatible with Article 6 of Directive 93/13, in the judgment of the Court in Gutiérrez Naranjo and Others. (7)
26. It is against that background that I will examine the two questions referred for a preliminary ruling.
The first question
27. By its first question, the referring court asks, in essence, whether Article 4(1) of Directive 93/13 and Article 7(3) of that directive must be interpreted as allowing a national court to conduct an abstract assessment of the transparency of contractual terms in the context of collective proceedings, in circumstances in which the relevant proceedings are brought against a significant number of financial institutions and involve a large number of contracts.
28. The doubts of the referring court as to the suitability of a collective action for the abstract assessment of contractual terms stem, first, from the wording of Article 4(1) of Directive 93/13. According to that provision, the unfairness of a contractual term must be assessed by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of that contract. Second, the referring court notes the different nature of individual and collective proceedings: the first involve a concrete examination of the contractual relationship of which the term at issue forms part, while the second involve an abstract review of the clause concerned. Third, the referring court highlights the complexity of the circumstances in the main proceedings, owing to the very high number of defendants and contracts involved and on account of the many different formulations of the ‘floor clause’.
29. In order to address those concerns, it is important to recall, first of all, the case-law of the Court on the nature of judicial review in collective and individual proceedings, as well as on the examination of the requirement of transparency of contractual terms. On the basis of that case-law, I will examine whether and under what conditions it is possible to carry out a review of transparency in the context of a collective action of a scale such as that of the case in the main proceedings.
(a) The nature of the judicial review in collective and individual proceedings
30. The system of protection established by Directive 93/13 relies on two types of action: individual actions and collective actions. Those two types of action are in a relationship of complementarity. (8) In parallel to the subjective right of a consumer to bring an action before a court for examination as to whether a term of a contract to which he or she is a party is unfair, Article 7(2) of Directive 93/13 allows Member States to introduce a check on unfair terms contained in standard contracts by means of actions for an injunction brought in the public interest by consumer protection associations. (9)
31. The objective consisting in putting an end to the use of unfair terms is also pursued by Directive 2009/22/EC, (10) which supplements the consumer protection laid down in Directive 93/13 by making available suitable procedural means for injunctive relief. (11)
32. The Court has ruled that individual and collective actions have, in the context of Directive 93/13, different purposes and legal effects, and their nature differs. (12) Thus, in the context of an action involving an individual consumer, the courts are required to make an assessment in concreto of the unfair character of a term contained in a contract which has already been concluded. The national court is required to take into account, in accordance with Article 4(1) of Directive 93/13, all the circumstances attending the conclusion of the contract. In the case of an action for an injunction, the task of the courts is to assess in abstracto the unfair character of terms included by sellers or suppliers in contracts concluded with consumers. Moreover, the deterrent nature and dissuasive purpose of actions for an injunction, together with their independence of any particular dispute, mean that such actions may be brought even though the terms which it is sought to have prohibited have not been used in specific contracts. (13)
33. It must be pointed out that the verification in abstracto of unfair terms is specific to the collective redress mechanisms referred to in Article 7 of Directive 93/13. (14) The consideration of all the individual circumstances of the contract is appropriate only in the context of an individual action. (15) This follows from Article 4(1) of that directive which states that the assessment of all the circumstances attending the conclusion of the contract is ‘without prejudice to Article 7’. Thus, the judicial review in collective proceedings is always abstract irrespective of whether the terms under review have been used in specific contracts or not.
34. With regard to the effects of individual and collective actions, the finding of unfairness in an individual action is binding only on the consumer who is party to the proceedings. In collective actions, the finding of unfairness can apply more widely. It follows from the case-law of the Court that national legislation may provide for an ultra partes effect of the finding of unfairness in an action for an injunction against a seller or supplier. (16)
35. The mechanisms for verification in abstracto in a collective action complement the subjective right of the consumer to bring an individual action and have all the circumstances of his or her contract taken into account. Since the collective and individual actions are in a relationship of complementarity, the possibility of recourse to both types of action must be safeguarded under the system of judicial protection established by Directive 93/13. Thus, the requirements applicable in an individual action, in particular the need to consider all the individual circumstances of the contract, do not prevent the bringing of a collective action which is independent from any specific dispute and from individual circumstances.
36. Individual and collective actions are components of the comprehensive system of protection introduced by Directive 93/13.
(b) Review of transparency of contractual terms
37. The requirement of transparency is expressed by the rule that contract terms have to be drafted in plain intelligible language (Article 4(2) and Article 5 of Directive 93/13). (17) Moreover, it follows from the 20th recital of Directive 93/13 and point 1(i) of the Annex thereto that the consumer must gain prior knowledge of all the terms of a contract in order to be able to decide, in full knowledge of the facts, whether he or she wishes to be bound by those terms. (18)
38. More particularly, under Article 4(2) of Directive 93/13, the assessment of unfairness must not relate either to the definition of the ‘main subject matter of the contract’ or to the ‘adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other, in so far as these terms are in plain intelligible language’. It follows that the application of the exception to the mechanism for reviewing the unfair nature of contractual terms in relation to the core terms (the ‘core terms exemption’) is subject to the transparency of those terms.
39. Article 5 of Directive 93/13 sets out a more general rule on transparency requiring that contractual terms ‘must always be drafted in plain intelligible language’. That provision could be seen as stating, as suggested in academic writing, an ‘overarching principle’ of transparency. (19)
40. The Court has ruled that the transparency requirement as it appears in Article 4 of Directive 93/13 has the same scope as that referred to in Article 5 of that directive. (20)
41. According to the Court, the requirement of transparency must be understood in a broad sense, (21) involving both formal and substantive criteria. (22) Generally, formal transparency refers to the wording and method of presentation of the relevant information to the consumer. By way of illustration, the Commission Guidance on Unfair Terms lists the following aspects of presentation of contract terms as relevant factors for assessing transparency: the clarity of the visual presentation, the fact of whether a contract is structured in a logical way and whether important stipulations are given the prominence they deserve and are not hidden amongst other provisions, or whether terms are contained in a contract or context where they can reasonably be expected, including in conjunction with other related contract terms. (23)
42. The review of the substantive transparency of contractual terms (24) goes further than an assessment of the plain and intelligible nature of the drafting of a term and extends to whether a term allows the consumer to comprehend its real consequences.
43. In that regard, according to the settled case-law of the Court, the information provided before the conclusion of a contract, on the terms of the contract and the consequences of concluding it, is of fundamental importance for a consumer. It is on the basis of that information in particular that the consumer decides whether he or she wishes to be contractually bound to a seller or supplier by the terms previously drawn up by the latter. (25) Consequently, that requirement of transparency must be understood as requiring not only that the term in question must be formally and grammatically intelligible to the consumer, but also that an average consumer, who is reasonably well informed and reasonably observant and circumspect, is in a position to understand the specific functioning of that term and thus evaluate, on the basis of clear, intelligible criteria, the potentially significant economic consequences of such a term for his or her financial obligations. (26)
44. To date, the requirement of transparency has been examined by the Court in the context of individual proceedings, in the light of Article 4(2) and Article 5 of Directive 93/13, and mainly in relation to loan agreements. In such context, the question whether the requirement of transparency has been observed must be examined in the light of all the relevant information and all the relevant facts, including the promotional material and information provided in the negotiation of the loan agreement at issue, not only by the lender itself but also by any other person who, on behalf of the professional, participated in the marketing of the loan concerned. (27) Specifically, it is for the national court, when it considers all the circumstances surrounding the conclusion of the loan agreement, to ascertain whether, in the case concerned, all the information likely to have a bearing on the extent of his or her commitment has been communicated to the consumer, enabling the consumer to estimate in particular the total cost of the loan. (28) The relevant factors for the purposes of that assessment include the language used by the financial institution in the pre-contractual and contractual documentation. (29)
45. It follows that, in the context of individual proceedings for the transparency review, the national court has to consider all the circumstances surrounding the conclusion of the loan agreement. That being said, it must be observed that many of the elements forming the judicial assessment of transparency rest upon an objective assessment. The national court assesses a standard contract term included in pre-formulated standard contractual and pre-contractual documentation drawn up in advance by the lender in relation to loans proposed to an indefinite number of consumers. Moreover, the benchmark used for the review of transparency is not the specific individual consumer but the average consumer who is reasonably well informed and reasonably observant and circumspect. (30)
46. The concept of the average consumer is a fictio juris which tends to reduce to a common denominator situations which are very varied. (31) As such, it is an objective benchmark. In that regard, the Court has ruled that the observance of the transparency requirement must be ascertained in relation to the objective standard of the average consumer, who is reasonably well informed and reasonably observant and circumspect. (32) That standard cannot be deemed to correspond, inter alia, either to a consumer who is less well informed than that average consumer, or to a consumer who is better informed than the latter. (33)
47. Considering all the elements forming the review of transparency that have been developed in the Court’s case-law, it has righty been observed in the academic literature that the ‘hurdle for the transparency test to be fulfilled’ has been considerably raised, (34) rendering the model of the average consumer ‘attuned to the realities of consumer behaviour in standard form contracting’. (35)
48. To give one more illustration, in a case concerning agreements denominated in foreign currency, even though the consumer concerned had received a considerable amount of information, the Court ruled that the requirement of transparency cannot be satisfied by merely communicating information – even a large amount of information – to the consumer. The consumer must also be informed of the economic context liable to have an impact on the exchange rate variations and be given the opportunity to understand in concrete terms the potentially serious consequences on his or her financial situation. (36)
49. The higher the threshold to fulfil the transparency requirement, the lower the expectations that one may have of the average consumer. (37) Moreover, it falls on the seller or supplier to prove to the court that its pre-contractual and contractual obligations, relating in particular to the transparency of contractual terms, resulting in particular from Article 4(2) of Directive 93/13, have been fulfilled. (38)
50. Against an objective standard for the model of the average consumer and the setting of a high threshold for the transparency requirement to be met, the judicial review of the transparency of contractual terms has become more objective, relying on the standardisation of contracting.
51. In the light of those considerations, I will next examine whether a collective action is an appropriate judicial mechanism for the review of transparency.
(c) The appropriateness of a collective action for the review of transparency of contractual terms
52. In the system of protection introduced by Directive 93/13, the judicial review of the unfairness of contractual terms and of their transparency does not depend on the type of action that is being used, whether individual or collective. The very beginning of Article 4(1) of Directive 93/13, which provides for an individual assessment of the unfairness of a term, stipulates that that assessment is ‘without prejudice to Article 7’. In line with the complementarity approach referred to above, the individual assessment of the potential unfairness of a term included in a specific contract does not preclude an assessment in abstracto of that term in the context of a collective action.
53. With regard to the requirement of transparency, there is nothing in Directive 93/13 that indicates that its examination is precluded in the context of a collective action. First, transparency is a prerequisite for the application of the ‘core terms exemption’ under Article 4(2) of Directive 93/13. If an examination of the transparency of contractual terms were not possible in collective proceedings, that would mean that ‘core terms’ will always be excluded from review in such proceedings. Indeed, it would not be possible otherwise to examine whether they are drafted in plain intelligible language.
54. Second, Article 5 of Directive 93/13 (39) does not distinguish between individual and collective actions, with the exception of the applicable rule of interpretation. It follows from that provision that the prevalence of the rule of interpretation most favourable to the consumer does not apply in the context of the collective redress procedures provided for by Member States pursuant to Article 7(2). (40)
55. The narrow exception established in Article 5 indicates that the transparency requirement relates to the standard term, and not to the type of action introduced before the courts in order for that term to be reviewed. As I have noted above, (41) Article 5 is a central provision which enshrines an ‘overarching principle’ that cannot be confined to individual proceedings only. In view of its importance in the system of protection introduced by Directive 93/13, the requirement of transparency must therefore have equal validity for the mechanism provided for in Article 7(2) thereof. (42)
56. Rather than precluding the examination of transparency in a collective action, the judicial review needs instead to be adapted to the purpose and legal effects of collective actions.
57. A different interpretation, as the Commission essentially stated in its written observations, would defeat the purpose of collective actions by excluding the requirement of transparency from judicial review, despite collective redress being an essential component of the system of protection laid down in Directive 93/13.
58. Moreover, such an exclusion would be incompatible with the judicial protection afforded by Directive 2009/22, which as pointed out above, supplements the consumer protection laid down in Directive 93/13. Directive 2009/22 harmonised actions for an injunction aimed at the protection of the collective interests of consumers covered by the directives listed in Annex I thereof, among which figures Directive 93/13. Actions for an injunction may be relied on to challenge an infringement of any of the provisions of Directive 93/13, including those relating to transparency.
59. The exclusion of the examination of the transparency of contractual terms in the context of collective proceedings would also be inconsistent with recent relevant legislative developments for the strengthening of procedural mechanisms for the protection of the collective interests of consumers, namely the adoption of Directive (EU) 2020/1828 on representative actions. (43) Directive 2020/1828 applies to representative actions (44) against infringements of the provisions of Union law referred to in Annex I of that directive, including Directive 93/13. (45) To disregard those developments and interpret Directive 93/13 as meaning that the review of transparency would not be appropriate in collective proceedings would seriously fragment and undermine the effectiveness of the system of consumer protection which is now complemented by Directive 2020/1828. That would entail a serious setback in the protection of the collective interests of consumers.
60. With regard to the elements of judicial review of the requirement of transparency in collective proceedings, it is possible to transpose the case-law presented in the previous section with the adaptations necessary in the light of the procedural mechanism used. The elements that are specific to an individual action, namely the consideration of all the circumstances surrounding the conclusion of each contract, are not applicable. By contrast, the objective elements of the review of transparency are applicable to the abstract examination of transparency. In that context, as the Commission essentially put it at the hearing, it must be possible to assess the contractual clause regardless of the concrete and individual circumstances of each of the contracts. That is so owing to the standardisation of contracting which is reflected in the objective interpretation of the standard of the average consumer, regardless of the procedural mechanism used for the review of transparency.
61. More specifically, in order to assess the formal and the substantive transparency of a term in loan agreements, the judicial review should concentrate on the standard documents and the standard contractual and pre-contractual practices adopted by the professional concerned towards the average consumer when promoting and offering the contract. The review covers the contractual practices of the professional concerned and also its pre-contractual practices, namely the promotional material addressed to every consumer and standard pre-contractual information or guidelines provided by any other person who, on behalf of that professional, participates in the marketing of the loan concerned. All those elements form what the national appellate court aptly described as a ‘standard pattern’ of contracting. (46) Depending on the type of contractual term, the national court must identify the relevant criteria for the requirement of transparency to be met. Against those criteria, that court will have to ascertain whether the average consumer is in a position to understand the specific functioning of that term and thus evaluate, on the basis of clear, intelligible criteria, the potentially significant economic consequences of such a term for his or her financial obligations.
62. With regard, more specifically, to the review of the ‘floor clauses’ in the main proceedings, it must be ascertained whether the inclusion of those clauses constituted a general practice in standard banking documentation. The judicial review concentrates, next, on the standard contractual and pre-contractual practices of the professionals concerned to identify the criteria which render the specific term transparent or not.
63. As the referring court stated, the national appellate court identified certain practices that are relevant for the review of transparency of the ‘floor clauses’. Those practices included the concealment or disguising of the effects of the clause, its position in the agreement or its presentation together with the term limiting the upward adjustment. (47) Where the judicial review involves more than one defendant, it is important to identify for each bank whether the transparency criteria were fulfilled or not in its contractual practice. (48)
64. Moreover, a relevant criterion for the assessment of transparency of the ‘floor clause’ in standard contracts can involve the question whether the duration of the contract was reflected in the information provided to the consumer. A mortgage contract is a long-term contract, or even, as suggested in academic writing, a ‘life time’ contract. (49) The consumer must be able to understand the relationship between the relevant term, future developments in the economy and the economic consequences on his or her financial situation by means of simulations. Thus, the requirement of transparency cannot be satisfied by communicating to the consumer any kind of information on the ‘floor clause’ if that information is based on the assumption that the economic context will remain the same throughout the term of the agreement. (50) The consumer has to be informed that changing economic circumstances could have potentially serious consequences on his or her financial situation due to the triggering of the ‘floor clause’.
65. In sum, the judicial review of transparency in collective proceedings is appropriate and possible. The method followed by the national appellate court, as described by the referring court, is a concrete example in that regard. The judicial review must be adapted to the level of abstraction specific to collective actions and concentrate on the standard contractual practice of the supplier towards the average consumer, who is reasonably well informed and reasonably observant and circumspect.
(d) Review of transparency in the context of a collective action against a high number of suppliers
66. The next issue raised by the referring court is the question whether the ‘quantitative’ particularities of the case in the main proceedings should lead to the conclusion that the abstract review of transparency is not appropriate. The referring court explains that as opposed to a collective action brought against a single financial institution or a very small number of financial institutions, the case in the main proceedings involves a high number of defendant financial institutions and a high number of contracts with multiple different wordings and formulations, used over a long period of time.
67. In that regard, it must be pointed out, at the outset, that Article 7(3) of Directive 93/13 provides that, with due regard for national laws, the (collective) legal remedies may be directed ‘separately or jointly’ against ‘a number’ of sellers or suppliers from the same economic sector, which use the same general contractual terms or ‘similar’ terms. It follows from that provision that the relevant criterion in relation to the defendants in a collective action is not their exact number but their belonging to the same economic sector. With regard to the subject matter of the action, the judicial review covers similar terms.
68. The defendant financial institutions that have submitted written observations, as well as the Spanish Government, stated that the ‘homogeneity’ of the circumstances is a necessary condition for bringing a collective action. It follows from their submissions, essentially, that that requirement is fulfilled when the different individual situations can be decided collectively because they present factual and legal similarities such as to allow a common assessment. They argued that the collective action in the main proceedings should not have been admitted because the requirement of homogeneity was not respected.
69. In that regard, it must be pointed out that neither Directive 93/13 nor Directive 2009/22 provide for the ‘homogeneity’ of circumstances as a condition for reliance on collective redress mechanisms. Article 7(3) of Directive 93/13 refers to the substantive requirements of the identity of economic sector and the similarity of the contractual terms. It does not contain procedural requirements as to the required degree of similarity of the individual claims for a collective action to be brought before the courts, which is a matter for national procedural law. While the Court has already defined, on several occasions and taking account of the requirements of Article 6(1) and Article 7(1) of Directive 93/13, the way in which national courts must ensure that the rights which consumers derive from that directive are protected, the fact remains that, in principle, EU law does not harmonise the procedures applicable to examining whether a contractual term is unfair and that those procedures accordingly fall within the domestic legal system of the Member States, by virtue of the principle of procedural autonomy of those States; nevertheless, those procedures must be no less favourable than those governing similar domestic actions (principle of equivalence) and not make it impossible in practice or excessively difficult to exercise the rights conferred by EU law (principle of effectiveness). (51)
70. Thus, national procedural law may provide that the ‘homogeneity’ of the actions involved is a necessary condition for the admission of a collective action for the review of unfair terms. However, since Article 7(3) of Directive 93/13 provides for the judicial review in collective proceedings of similar terms, the homogeneity requirement may not be interpreted in a way such as to impose that all the circumstances in the relevant action must be identical. Where a collective action involves the same category of defendants, the same type of clause with the same effects and the same kind of legal relationships, all those elements could be a strong indication that the cause of action is sufficiently similar for that collective action to proceed. If it is possible to make an objective judicial assessment of standardised contractual terms, it should not be required to take into account the factual and legal aspects that are particular to each of the contracts and consumers affected by those terms.
71. Ultimately, it is the responsibility of the national court to determine whether in the case in the main proceedings there is a sufficient degree of similarity to allow the collective action to proceed. In that regard, it can take into account that the defendants are all banking institutions, the disputed clauses are all standard ‘floor clauses’, the legal relationships of which the ‘floor clauses’ form part are mortgage contracts and the effect of those clauses is to exclude the variation of the interest rate below a certain level.
72. It is useful to note that even Directive 2020/1828 – which is the most important example of harmonisation in the field of collective redress – has not harmonised every aspect of the representative proceedings that it governs. According to recital 12 of that directive, in line with the principle of procedural autonomy, it should be for Member States to decide on the ‘required degree of similarity of individual claims … in order for the case to be admitted to be heard as a representative action’. However, that recital recalls the limitation of the principle of effectiveness in that ‘such national rules should not hamper the effective functioning of the procedural mechanism for representative actions required by [Directive 2020/1828]’.
73. Even if Directive 2020/1828 is not applicable in the case in the main proceedings, during the hearing, certain financial institutions referred to national transpositions of that directive and, more specifically, to German and Italian law which both provide for the requirement of ‘homogeneity’ in the context of representative actions.
74. However, the fact that there is national legislation which provides for the requirement of ‘homogeneity’ does not lead to the conclusion that due to that requirement collective redress is not appropriate in a case in which the collective action is directed against many financial institutions and concerns a multitude of contracts. The relevant issue is to examine whether the implementation of the requirement of homogeneity achieves the right balance among the similarity of the situations covered by the collective action, procedural economy and the effectiveness of collective redress. (52)
75. Certain financial institutions put forward in their pleadings that the litigation was unmanageable. However, it is not for this Court to examine empirical aspects of the litigation. If the national court considers that the factual and legal situations concerned make a standardised assessment of the contractual clauses concerned possible, then it falls to that court to take the necessary measures of court management to allow the action to proceed.
76. That being said, it must be pointed out that the size of the litigation should not impinge upon the right of each financial institution to effective judicial protection. In the absence of a provision in Directives 93/13 and 2009/22 providing explicitly for a scheme of effective judicial protection for the seller or supplier, those directives must be interpreted in the light of Article 47 of the Charter of Fundamental Rights of the European Union. (53) Each financial institution must have the possibility to show that its own standardised practice fulfilled the criteria of transparency.
77. A final issue raised by the referring court is the additional complexity which arises in the present case due to an action for restitution of the payments made on account of a finding of unfairness of the term at issue being joined to the action for an injunction. In that regard, it must be pointed out that it is a matter of national procedural law to determine the method of enforcement of the judgment in collective proceedings. The possible difficulties in the enforcement stage are not a legal criterion to exclude collective redress proceedings.
78. In view of all of the above considerations, I take the view that Article 4(1) of Directive 93/13, in so far as it refers to the consideration of all the circumstances attending the conclusion of the contract, and Article 7(3) of that directive, in so far as it refers to similar contractual terms, must be interpreted as allowing a national court to conduct an abstract assessment of the transparency of contractual terms in the context of collective proceedings, in circumstances in which the relevant proceedings are brought against a significant number of financial institutions and involve a large number of contracts. In order to make that assessment, it is incumbent on the national court to review the standard contractual and pre-contractual practices of each of the financial institutions concerned in the light of the objective standard of the average consumer, who is reasonably well informed and reasonably observant and circumspect.
The second question
79. By its second question, the referring court asks essentially whether the abstract review of transparency from the perspective of the average consumer is compatible with Article 4(2) and Article 7(3) of Directive 93/13, in the circumstances of a collective action involving a significant number of financial institutions, a large number of different contracts and consumers and where the terms concerned have been inserted in the contracts over a long period of time.
80. It follows from the second question referred as well as from the order of reference that the referring court raises doubts as to the possibility of determining the concept of the ‘average’ consumer in the context of a collective action which presents the ‘quantitative’ features of the case in the main proceedings. More particularly, the referring court has stated that the collective action involves: first, numerous financial institutions of different sizes and with different structures, and operating in different geographical areas (from small local savings banks to some of the big European banks operating at multinational level); second, different contractual models used by each financial institution; third a long period of time of use of the relevant terms; and fourth, different groups of consumers who are difficult to standardise, such as consumers whose mortgage rights are subrogated to loans taken out by developers, consumers who qualify for social housing programmes or for public housing access programmes based on specific age ranges or consumers who obtain a loan on the basis of their occupation (civil servants or employees of certain companies, for example).
81. With regard to the concept of the average consumer, it was already pointed out above, in the context of the analysis of the first question, (54) that the observance of the transparency requirement must be ascertained in relation to the objective standard of the average consumer, who is reasonably well informed and reasonably observant and circumspect. (55) That standard cannot be deemed to correspond, inter alia, either to a consumer who is less well informed than that average consumer, or to a consumer who is better informed than the latter. (56)
82. The premiss of the objective benchmark of the average consumer in the context of Directive 93/13 is based on the concept of ‘consumer’ under Article 2(b) of Directive 93/13. It is apparent from that concept that the protection granted by that directive depends on the purposes for which a natural person is acting, namely those which are outside his or her trade, business, or profession, and not on any specialised knowledge held by that person. (57) On the basis of that premiss, the Court has held that the fact that a natural person who concludes a contract with the bank is an employee of that bank does not in itself prevent that person from being classified as a consumer for the purposes of Article 2(b) of Directive 93/13. (58)
83. Since the specific knowledge that a consumer may be deemed to have in the context of individual proceedings is not capable of justifying a deviation from the standard of the average consumer, the same should be true of the individual characteristics of different consumers in the context of collective proceedings. The objective concept of the average consumer corresponds to the standard form contracting, irrespective of the characteristics or the number of consumers involved.
84. As observed, in essence, by ADICAE in its oral submissions, differences in the age of consumers, their level of education or their occupation cannot be considered to be decisive criteria to differentiate between those consumers and to constitute different groups of consumers. That observation is correct provided that the natural persons concerned act outside their trade, business or profession. (59)
85. With regard to the differences between the financial institutions concerned and the different contractual models used by those financial institutions, I do not consider that such differences are capable of affecting the concept of the average consumer. As pointed out in the analysis of the first question above, in the context of the abstract examination of the requirement transparency, the judicial review does not concentrate on each contract and each consumer. The judicial review concentrates on the standard contractual and pre-contractual practices followed by each seller or supplier towards the average consumer in the promotion and offering of the contract. (60) It then falls upon each seller or supplier (in the case in the main proceedings, each financial institution) to prove that its own practices meet the transparency requirements.
86. The Polish Government suggested in its submissions that it is possible to rely on different types of average consumer in order to assess different groups of contracts. That government proposed that when a credit contract is concluded according to a particular model destined for a particular group of consumers, the concept of the average consumer corresponds to the average member of the group with which the contracts were concluded.
87. Ultimately, it is for the national court to manage litigation and to determine in each case the appropriate tools to do so. If that court considers that the factual and legal circumstances of the action reflect a standard practice and that the categorisation of consumers into different groups contributes to that assessment, then it must be allowed to do so. However, it must be recalled that the concept of the average consumer is separate from the knowledge or abilities of each consumer. Thus, any categorisation of the consumers involved in the collective proceedings may not be carried out on the basis of criteria that contradict the objective standard of the average consumer. It is therefore not possible to establish subgroups on the basis of the differing degree of knowledge of consumers or their age or their profession (to the extent that they act for purposes which are outside their trade or profession). Moreover, the contractual models used can be a distinctive element only if that element has a real influence on the concept of the average consumer concluding a specific type of contract. If the ability of the consumer to comprehend the concrete consequences of the use of the ‘floor clause’ is not influenced by the type of contract used, then the type of contract cannot be a criterion to distinguish some groups of consumers from all the others.
88. The last issue raised by the referring court concerns the relevance of the lapse of time for the application of the concept of the average consumer.
89. It is true that perceptions evolve over time. During the hearing, we were reminded of the ancient Greek doctrine of constant change of Heraclitus according to which ‘everything changes and nothing remains still’. (61)
90. That being so, the concept of the average consumer, as the Commission pointed out at the hearing, requires some stability to guarantee legal certainty. The general evolution of perceptions over time is not sufficient in itself to prove that the average consumer’s understanding of the contractual term at issue has changed. It is necessary to determine whether there has been a particular event that has changed markedly the average consumer’s perception of ‘floor clauses’. In that regard, a change in the legislative framework or a landmark judgment concerning the term at issue may be particularly relevant.
91. In the case in the main proceedings, the passage of time between the moment at which the contracts at issue were concluded and the fall in interest rates does not seem relevant or sufficient to affect the concept of the average consumer. As the Spanish Government put it at the hearing, in 2010 (before interest rates plummeted), the average consumer did not have more knowledge of ‘floor clauses’ than the average consumer did in 2000. Indeed, before the effect of the ‘floor clauses’ was triggered by the sharp fall in interest rates, the mere existence of those clauses in the contracts had no practical effect.
92. Therefore, it seems to me that the issue that has to be addressed is not so much that of the passage of time but rather the question whether the average consumer who concluded a loan after 2009 or 2010 should be treated differently than the average consumer who concluded a loan before that date. In that regard, it falls to the national court to determine whether the fall in interest rates led to the raising of awareness of ‘floor clauses’ and whether the financial institutions changed their practices and fulfilled the transparency requirements. It is incumbent on the national court to consider also whether there was confusion in consumers’ perception of the legality of those clauses before their judicial determination. That court may also consider whether its own judgment of 9 May 2013, in which it ruled that ‘floor clauses’ were lawful in principle, but that they lacked transparency and were unfair, was relevant to any change of perception as from that date. It is ultimately for the national court to make those determinations.
93. In view of the above considerations, I take the view that the abstract review of transparency from the perspective of the average consumer is compatible with Article 4(2) and Article 7(3) of Directive 93/13. The average consumer is an objective standard in relation to the assessment of standard contractual terms, irrespective of the characteristics or the number of consumers involved. The fact that the collective action brought in the main proceedings involves a significant number of financial institutions, a large number of different contracts and consumers and that the terms at issue have been inserted in the contracts over a long period of time does not affect, as such, the concept of the average consumer.
V. Conclusion
94. In the light of the foregoing considerations, I propose that the Court answer the questions referred by the Tribunal Supremo (Supreme Court, Spain) as follows:
(1) Article 4(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, in so far as it refers to the consideration of all the circumstances attending the conclusion of the contract, and Article 7(3) of that directive, in so far as it refers to similar contractual terms,
must be interpreted as allowing a national court to conduct an abstract assessment of the transparency of contractual terms in the context of collective proceedings, in circumstances in which the relevant proceedings are brought against a significant number of financial institutions and involve a large number of contracts. In order to make that assessment, it is incumbent on the national court to review the standard contractual and pre-contractual practices of each of the financial institutions concerned in the light of the objective standard of the average consumer, who is reasonably well informed and reasonably observant and circumspect.
(2) Article 4(2) and Article 7(3) of Directive 93/13
must be interpreted as being compatible with an abstract review of transparency from the perspective of the average consumer. The average consumer is an objective standard in relation to the assessment of standard contractual terms, irrespective of the characteristics or the number of consumers involved. The fact that the collective action brought in the main proceedings involves a significant number of financial institutions, a large number of different contracts and consumers and that the terms at issue have been inserted in the contracts over a long period of time does not affect, as such, the concept of the average consumer.