ECJ Opens Door on Possible Class Actions in Consumer Law

In a judgment of 26 April 2012, the Court of Justice of the European Union ("ECJ") ruled on a preliminary reference from a Hungarian Court concerning the interpretation of Article 6(1) of EU Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts ("Directive 93/13/EEC") (ECJ, case C-472/10, Nemzeti Fogyasztόvédelmi Hatόság v. Invitel Távközlési Zrt).

The ECJ was asked to rule on whether the provisions laid down under Hungarian law enabling consumer protection organisations to bring legal proceedings against unfair terms in the interest of consumers were in line with Directive 39/13/EEC.

More specifically, the Hungarian court asked the ECJ whether Article 6(1) of Directive 39/13/EEC had to be interpreted as meaning that a declaration of invalidity of an unfair term (included in the general conditions of a consumer contract), in an action for an injunction brought in the public interest and on behalf of consumers by a body appointed by national law, produced effects with regard to all consumers who had concluded a contract to which those general conditions applied, including those who were not party to the proceedings. In the affirmative, the ECJ was furthermore asked to clarify the consequences that national courts had to draw from such findings.

This question arose in the context of the Hungarian consumer protection authority receiving a large number of complaints from consumers concerning the company Invitel, a fixed-line telephone network operator, on the ground that Invitel had unilaterally introduced a term in the general business conditions of its subscriber contracts granting the operator the right to charge consumers "money order fees" retroactively. In addition, the method used to calculate these extra-fees was not specified in those contracts.

In its judgment, the ECJ highlighted that Directive 93/13/EEC required Member States to allow persons or organisations having a legitimate interest under national law in protecting consumers, to bring an action in order to obtain a decision as to whether contract terms drafted for general use were unfair and, where appropriate, to have those terms prohibited.

The ECJ found that the effective implementation of this objective required that the terms that were declared to be unfair should not be binding on either the consumers who were parties to the proceedings or those who were not parties to the proceedings but who had entered into a contract with the seller concerned on the same conditions.

Therefore the ECJ ruled that the contested Hungarian legislation was entirely consistent with the requirement of Directive 93/13/EEC on the basis of which Member States have to ensure that there are adequate and effective means to prevent the use of unfair terms.

In addition and with regard to the second part of the question, the ECJ added that national courts are required, on their own motion, and also with regard to the future, to draw all the consequences of a declaration of invalidity in an action for an injunction, in order to ensure that consumers who had concluded a contract to which the same general conditions apply and which contains such an unfair term will not be bound by that term.

Lastly, in a second question, the Hungarian Court had also asked for an assessment of the unfair nature of the contested term introduced by Invitel in the general business conditions of its subscriber contracts. However, the ECJ answered that this was a matter to be left to the discretion of the national courts.