Many thanks to Cristian Oró Martínez, Senior Research Fellow at the MPI Luxembourg.

The Commercial Court (Juzgado de lo Mercantil) nº 5 of Madrid delivered on 30 September 2013 a judgment in an action brought by the Spanish consumer association Organización de Consumidores y Usuarios (OCU) against the Irish airline Ryanair. OCU asked the Commercial Court to declare that 20 of the general terms and conditions used by the airline are unfair, and hence should not be binding on consumers, as provided by the Spanish Law on the protection of consumers and users (which transposed Directive 93/13, on unfair terms in consumer contracts). OCU also sought an injunction to prevent Ryanair from continuing to use these allegedly unfair terms and conditions.

 In its judgment, the Commercial Court held that 8 of the general terms issued by Ryanair are unfair, and hence void. These terms deal with a variety of issues relating to the contract of carriage concluded between the airline and its customers: (i) the choice of Irish law and the submission to Irish courts (Art. 2.4); (ii) the limitation of accepted travel documents (Art. 3.1.1 and annex on travel documentation); (iii) the 40 € fee for the re-issue of a boarding card at the airport (annex with table of optional fees); (iv) the possibility for the airline to refuse to carry passengers or their baggage (Art. 7.1.1); (v) the prohibition to carry in the checked baggage certain items, including money, jewels, cameras, computers, medicines, glasses, mobile phones, tobacco or passports (Arts. 8.3.2 and 8.3.3); (vi) the possibility for the airline to charge a storage fee for luggage not collected within a reasonable time (Art. 8.8.1); (vii) the possibility for the company to change the flight timing without having to justify it, and without giving the passenger the option to terminate the contract (Arts. 9.1.1 and 9.1.2); and (viii) the prohibition to pay in cash any fee or tax charged at the airport (Art. 18). According to the judgment, Ryanair should refrain from using these terms in future contracts.

To date, all these clauses continue to appear on the airline’s website. The judgment of the Commercial Court of Madrid can of course be appealed – and it is highly likely this has been the case. Its effective impact, therefore, remains to be seen. However, it may constitute a first step for the protection of consumers against alleged abuses by low-cost airlines.

Nevertheless, from a PIL perspective, the question which arises is whether the Spanish court was right in assessing the compatibility of the contract with Spanish consumer legislation. Ryanair claimed that the choice of Irish legislation was valid under Art. 5(2) of the Rome I Regulation, which allows parties to choose, among others, the law of the country where the carrier has its habitual residence. The court fails to address this allegation, and simply states that the choice of court and choice of law clause is invalid under Art. 90.3 of the Law on the protection of consumers and users. The reason would be that it causes a significant imbalance in the parties’ rights and obligations and hinders the consumer’s right to take legal action, insofar as it forces this weak party to litigate in a foreign country and under a foreign law, thus increasing the costs of the suit.

The Commercial Court bases its reasoning not only on the Spanish Law on consumer protection, but also on the provisions of Directive 93/13 and on some judgments in which the ECJ has interpreted it. It is arguable that, under Art. 23 of the Rome I Regulation, the Directive on unfair terms could trump the conflictual solution of Art. 5(2) of the Rome I Regulation. However, even in such scenario, the Commercial Court should have justified the reason why the Spanish transposition of the Directive on unfair terms should prevail over the Irish transposition. The problem stems from the Spanish Law on the protection of consumers and users, which purports to apply when the contract is closely connected with the territory of a State party to the EEA, irrespective of the law chosen by the parties (Art. 67.1). It is arguable that this provision should be read in light of Art. 6(2) of Directive 93/13, which states that “Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-Member country”. Thus, the Spanish legislation should only prevail over the parties’ choice of a third-State law, but not over the choice of the law of a Member State. Indeed, in the latter case the protection granted by the Directive is in principle guaranteed – at least as long as the ECJ does not declare that that particular Member State failed to correctly transpose it.

Therefore, the assessment of all the allegedly unfair terms should have probably been carried out under Irish law. The ensuing question is: would they be held unfair under Irish law? Or even: should they be considered unfair under the Directive itself? If so, the ECJ may end up having its say in the issue. We shall keep an eye on future developments – just as low-cost airlines will surely also do.

On November 22 and 23 the Research Project “The Architecture of Regulatory Competition” at the University of Helsinki will host a seminar on “Territorial Laws in a Global Era”. The programme reads as follows:

Friday, 22 November 2013

• 8.45 – 9.15 Registration and Coffee
• 9.15 – 9.30 Opening
• 9.30 – 11.30 Session I
  Erin O’Hara O’Connor: Law markets in global commerce (Key note)
  Jan Smits: Law as a package: On the limits of choice
• 11.30 – 12.30 Lunch
• 12.30 – 14.30 Session II
  Giesela Rühl: Competition for contract laws: Fiction or reality? Dream or nightmare?
  Teemu Juutilainen: Competition theory for property law: From fragments to whole
• 14.30 – 15.00 Coffee
• 15.00 – 17.00 Session III
  Peter Cserne: National judicial styles: Do they persist and do they matter in a global law market?
  Katri Havu: No-one’s law at the interface of EU rights and national remedies and procedure – insights
• 18.00 Seminar dinner at Spis (http://spis.fi/)
  

Saturday, 23 November 2013

•  9.00 – 11.00 Session IV
  Gralf-Peter Calliess: Transnational private law: Between uniform law, legal pluralism, and competition of jurisdictions
  Lécia Vicente: Bringing the essence of lex mercatoria back: Evolving business practices, networking of market agents and competition as sources of European company law
• 11.00 – 12.00 Lunch
• 12.00 – 14.00 Session V
  Elaine Fahey: The EU as a direct and indirect rule-exporter and standard bearer: Between theory and practice
  Emilia Korkea-aho: Implementation of territorial laws in a global era: An emerging arena for regulatory competition

In his first appearance at the Congreso de los Diputados (House of Representatives), less than a year ago, the Spanish Minister of Justice announced a package of far-reaching measures or reforms for the Spanish justice: some address the judiciary, others affect the structure of different procedures, as well as complementary aspects. Among the former I’d like to highlight the already achieved amendment of the Ley Orgánica del Poder Judicial, Ley 6/1985, of July 1, by the Ley 4/2013, of June 28, reforming the Consejo General del Poder Judicial; and the proposal for a new Ley de Demarcación y Planta Judicial (the text prepared by the Institutional Committee established by Agreement of the Council of Ministers in 2012 was recently published). The proposal is based on the creation of Tribunales de Instancia, which will gather the current uni-personal tribunals and work at a provincial district level. Appeal hearings will correspond to the Tribunales Superiores de Justicia (instead of the actual Audiencias), which will culminate the judiciary in the corresponding Autonomous Community.

Among the latter it is worth mentioning the draft Bill of the Ministry of Justice aiming to amend the Ley de Enjuiciamiento Civil, Ley 1/2000, of January 7. The draft is devoted almost entirely to the so called procuradores (attorneys). Another draft Bill, this time from the Ministry of Economic Affairs, targets the same group and has met (not surprisingly) with fierce opposition, as it removes the existing fees and eliminates the incompatibility that has so far prevented lawyers to also act as procuradores.

From the cross-border perspective I’d like to recall the draft Bill on Jurisdicción voluntaria. Chapter one (Articles 9 to 12 of the Act) addresses the rules of Private International Law, meaning grounds of international jurisdiction, conflict of law rules, and effects in Spain of foreign decisions adopted on non-contentious proceedings.

Finally, last Friday the Spanish government adopted the Real Decreto that regulates the Registro de Resoluciones Consursales, where the results and the handling of bankruptcy proceedings are to be published in order to ensure transparency and legal certainty. The Real Decreto includes a provision on the interconnection of Bankruptcy Public Registers of the European Union Members States.

So, something is on the move in Spain (although it’s difficult to say whether in the good direction).

On 24 October 2013, the Court of Justice of the European Union delivered its judgment in LBI hf, formerly Landsbanki Islands hf v Kepler Capital Markets SA and Frédéric Giraux (case C-85/12).

The Court issued the following press release:

The moratorium on payments granted to the bank LBI by the Icelandic authorities produces in France the effects which the Icelandic legislation confers on it

The directive on the reorganisation and winding up of credit institutions does not preclude that the effects of that moratorium retroactively cover interim protective measures in France

The directive on the reorganisation and winding up of credit institutions provides that, in the event of insolvency of a credit institution that has branches in other Member States, the reorganisation measures and the winding-up proceedings are part of a single insolvency procedure in the Member State where the institution has its registered office (known as the home Member State). Therefore, in principle, such measures are subject to a single law on insolvency and they are applied according to the law of the home Member State and are effective in accordance with that law throughout the EU, without any further formalities. For that purpose, States party to the Agreement on the European Economic Area, like Iceland, are treated in the same way as Member States of the EU.

In the context of the collapse of the financial system in Iceland following the international financial crisis in 2008, the Icelandic legislature adopted a series of reorganisation measures for various financial institutions established in that country. In particular, a Law of 13 November 20082, first, prohibited proceedings from being brought against financial institutions under a moratorium on payments and, second, ordered the suspension of proceedings pending. By a Law of 15 April 20093, the Icelandic legislature placed financial institutions under a moratorium subject to transitional rules seeking to apply a specific winding-up scheme to their situation, without them being actually wound-up before the expiry of that moratorium.

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