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Are the Chapter 2 General Protections in the Australian Consumer Law Mandatory Laws?
Neerav Srivastava, a Ph.D. candidate at Monash University offers an analysis on whether the Chapter 2 general protections in the Australia’s Competition and Consumer Act 2010 are mandatory laws.
Online Australian consumer transactions on multinational platforms have grown rapidly. Online Australian consumers contract typically include exclusive jurisdiction clauses (EJC) and foreign choice of law clauses (FCL). The EJC and FCL, respectively, are often in favour of a US jurisdiction. Particularly when an Australian consumer is involved, the EJC might be void or an Australian court may refuse to enforce it.[1] And the ‘consumer guarantees’ in Chap 3 of the Australian Consumer Law (‘ACL’) are explicitly ‘mandatory laws’[2] that the contract cannot exclude. It is less clear whether the general protections at Chap 2 of the ACL are non-excludable. Unlike the consumer guarantees, it is not stated that the Chap 2 protections are mandatory. As Davies et al and Douglas[3] rightly point out that may imply they are not mandatory. In ‘Indie Law For Youtubers: Youtube And The Legality Of Demonetisation’ (2021) 42 Adelaide Law Review503, I argue that the Chap 2 protections are mandatory laws.
The Chap 2 protections, which are not limited to consumers, are against:
- misleading or deceptive conduct under s 18
- unconscionable conduct under s 21
- unfair contract terms under s 23
I. PRACTICALLY SIGNIFICANT
If the Chap 2 protections are mandatory laws, that is practically significant. Australian consumers and others can rely on the protections, and multinational platforms need to calibrate their approach accordingly. Australia places a greater emphasis on consumer protection,[4] whereas the US gives primacy to freedom of contract.[5] Part 2 may give a different answer to US law. For example, the YouTube business model is built on advertising revenue generated from content uploaded by YouTubers. Under the YouTube contract, advertising revenue is split between a YouTuber (55%) and YouTube (45%). When a YouTuber does not meet the minimum threshold hours, or YouTube deems content as inappropriate, a YouTuber cannot monetise that content. This is known as demonetisation. On the assumption that the Chap 2 protections apply, the article argues that
- not providing reasons to a Youtuber for demonetisation is unconscionable
- in the US, it has been held that clauses that allow YouTube to unilaterally vary its terms, eg changing its demonetisation policy, are enforceable. Under Chap 2 of the ACL, such a clause is probably void.
If that is correct, it is relevant to Australian YouTubers. It may also affect the tactical landscape globally regarding the demonetisation dispute.
II. WHETHER MANDATORY
As to why the Chap 2 protections are mandatory laws, first, the ACL does not state that they are not mandatory. The Chap 2 protections have been characterised as rights that cannot be excluded.[6]
The objects of the ACL, namely to enhance the welfare of Australians and consumer protection, suggest[7] that Chap 2 is mandatory. A FCL, sometimes combined with an EJC, may alienate Australian consumers, the weaker party, from legal remedies.[8] Allowing this to proliferate would be inconsistent with the ACL’s objects. If Chap 2 is not mandatory, all businesses — Australian and international — could start using FCLs to avoid Chap 2 and render it otiose.
Further there is a public dimension to the Chap 2 protections,[9] in that they are subject to regulatory enforcement. It can be ordered that pecuniary penalties be paid to the government and compensation be awarded to non-parties. In this respect, Chap 3 is similar to criminal laws, which are generally understood to have a strict territorial application.[10]
As for policy being ‘particularly’ important where there is an inequality of bargaining power, both ss 21[11] and 23 are specifically directed at redressing inequality.[12]
Regarding the specific provisions:
- Authority on, at least, s 18 suggests that it is mandatory.[13]
- Section 21 on unconscionable conduct has been held to be a mandatory law, although that conclusion was not a detailed judicial consideration.[14] In any event, it is arguable that ‘conduct’ is broader than a contract, and parties cannot exclude ‘conduct’ provisions.[15] Unconscionability is determined by reference to ‘norms’ of Australian society and is, therefore, not an issue exclusively between the parties.[16]
- Whether s 23 on unfair contract terms is a mandatory law is debatable.[17] At common law, the proper law governs all aspects of a contractual obligation, including its validity. The counterargument is that s 23 is a statutory regime that supersedes the common law. As a matter of policy, Australia is one of the few jurisdictions to extend unfair terms protection to small businesses expressly, for example, a YouTuber. An interpretation that s 23 can be disapplied by a FCL would be problematic. A FCL designed to evade the operation of ss 21 or 23 might itself be unconscionable or unfair.[18] If s 23 is not mandatory, Australian consumers may not have the benefit of an important protection. Section 23 also has a public interest element, in that under s 250 the regulator can apply to have a term declared unfair. On balance, it is more likely than not that s 21 is a mandatory law.
The Chap 2 protections are an integral part of the Australian legal landscape and the market culture. This piece argues that the Chap 2 protections are mandatory laws. Whether or not that is correct, as a matter of policy, they should be.
FOOTNOTES
[1] A possibility implicitly left open by Epic Games Inc v Apple Inc [2021] FCA 338, [17]. See too Knight v Adventure Associates Pty Ltd [1999] NSWSC 861, [32]–[36] (Master Malpass); Quinlan v Safe International Försäkrings AB [2005] FCA 1362, [46] (Nicholson J), Home Ice Cream Pty Ltd v McNabb Technologies LLC [2018] FCA 1033, [19].
[2] ‘laws the respect for which is regarded by a country as so crucial for safeguarding public interests (political, social, or economic organization) that they are applicable to any contract falling within their scope, regardless of the law which might otherwise be applied’. See Adrian Briggs, The Conflict of Laws (Oxford University Press, 3rd ed, 2013) 248.
[3] M Davies et al, Nygh’s Conflict of Laws in Australia (LexisNexis Butterworths, 10th ed, 2019) 492 [19.48], Michael Douglas, ‘Choice of Law in the Age of Statutes: A Defence of Statutory Interpretation After Valve’ in Michael Douglas et al (eds), Commercial Issues in Private International Law: A Common Law Perspective (Hart Publishing, 2019) 201, 226-7.
[4] Richard Garnett, ‘Arbitration of Cross-Border Consumer Transactions in Australia: A Way Forward?’ (2017) 39(4) Sydney Law Review 569, 570, 599.
[5] Sweet v Google Inc (ND Cal, Case No 17-cv-03953-EMC, 7 March 2018).
[6] Home Ice Cream Pty Ltd v McNabb Technologies LLC [2018] FCA 1033, [19].
[7] M Davies et al, Nygh’s Conflict of Laws in Australia (LexisNexis Butterworths, 10th ed, 2019) 470–2 [19.10].
[8] See, eg, Océano Grupo Editorial SA v Murciano Quintero (C-240/98) [2000] ECR I-4963.
[9] Epic Games Inc v Apple Inc (2021) 392 ALR 66, 72 [23] (Middleton, Jagot and Moshinsky JJ).
[10] John Goldring, ‘Globalisation and Consumer Protection Laws’ (2008) 8(1) Macquarie Law Journal 79, 87-8
[11] Historically, the essence of unconscionability is the exploitation of a weaker party. Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1, 36 [81] (Gageler J) (‘ASIC v Kobelt’).
[12] M Davies et al, Nygh’s Conflict of Laws in Australia (LexisNexis Butterworths, 10th ed, 2019) 470–2 [19.10], 492 [19.48].
[13] Home Ice Cream Pty Ltd v McNabb Technologies LLC [2018] FCA 1033, [19].
[14] Epic Games Inc v Apple Inc [2021] FCA 338, [19] (Perram J). On appeal, the Full Court of the Federal Court of Australia exercised its discretion afresh and refused the stay: Epic Games Inc v Apple Inc (2021) 392 ALR 66. That said, Perram J’s conclusion that s 21 was a mandatory law was not challenged on appeal.
[15] Analogical support for a ‘conduct’ analysis can be found from cases on s 18 like Australian Competition and Consumer Commission v Valve Corporation [No 3] (2016) 337 ALR 647 (Edelman J, at first instance). In Valve it was reiterated that the test for s 18 was objective. See 689 [212]–[213]. A contractual term might neutralise the misleading or deceptive conduct, but it cannot be contracted out of. See Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1, 17 [37] (Stone J, Moore J agreeing at 4 [1], Mansfield J agreeing at 11 [17]); Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199, 29–30 [83] (Keane JA, Williams JA agreeing at [1], Atkinson J agreeing at [145]).
[16] Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liq) [No 2] [2017] FCA 709, [60]–[62] (Beach J).
[17] M Davies et al, Nygh’s Conflict of Laws in Australia (LexisNexis Butterworths, 10th ed, 2019) 463 [19.1], 492 [19.48].
[18] M Davies et al, Nygh’s Conflict of Laws in Australia (LexisNexis Butterworths, 10th ed, 2019) 470–2 [19.10]. While a consumer might be able to challenge a proper law of contract clause on the grounds of unconscionability, it would be harder for a commercial party to do so.
A Boost in the Number of European Small Claims Procedures before Spanish Courts: A Collateral Effect of the Massive Number of Applications for European Payment Orders?
Carlos Santaló Goris, Researcher at the Max Planck Institute Luxembourg for International, European and Regulatory Procedural Law and Ph.D. candidate at the University of Luxembourg, offers an analysis of the Spanish statistics on the European Small Claims Procedure.
Until 2017, the annual number of European Small Claims Proceedings (“ESCP”) in Spain was relatively small, with an average of 50 ESCPs per year. With some exceptions, this minimal use of the ESCP fits the general trend across Europe (Deloitte Report). However, from 2017 to 2018 the number of ESCPs in Spain increased 286,6%. Against the 60 ESCPs issued in 2017, 172 were issued in 2020. In 2019, the number of ESCPs continued climbing to 492 ESCPs. This trend reversed in 2020, when there were just 179 ESCPs.
The use of the Regulation establishing the European Payment Order (“EPO Regulation”) experienced a similar fluctuation between 2018 and 2020. Since its entry into force, the EPO Regulation was significantly more prevalent among Spanish creditors than the ESCP Regulation. Between 2011 to 2020, there were an average of 940 EPO applications per year. Nonetheless, from 2017 to 2019, the number of EPO applications increased 4.451%: just in 2019, 29,151 EPOs were issued in Spain. In 2020, the number of EPOs decreased to 21,636. the massive boost in EPO applications results from creditors’ attempts to circumvent EU consumer protection standards under the Spanish domestic payment order.
From Banco Español de Crédito to Bondora
After the CJEU judgment C-618/10, Banco Español de Crédito, the Spanish legislator amended the Spanish Code of Civil Procedure to impose on courts a mandatory review of the fairness of the contractual terms in a request for a domestic payment order. Creditors noticed that they could circumvent such control through the EPO. Unlike the Spanish payment order, the EPO is a non-documentary type payment order. For an EPO, standard form creditors only have to indicate “the cause of the action, including a description of the circumstances invoked as the basis of the claim” as well as “a description of evidence supporting the claim” (Article 7(2) EPO Regulation). Moreover, the Spanish legislation implementing the EPO states that courts have to reject any other documentation beyond the EPO application standard form. Creditors realized that in this manner there was no possible way for the court to examine the fairness of the contratual terms in EPOs against consumers. Consequently, the number of EPO applications between 2017 and 2019 increased remarkably.
In some cases, a claim’s cross-border dimension was even fabricated to access the EPO Regulation. The EPO, like the ESCP, is only applicable in cross-border claims, which means that “at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court seised”(Article 3 EPO Regulation). Against this background, creditors assigned the debt to a creditor abroad (in many cases, vulture funds and companies specialized in debt recovery) in order to transform a purely internal claim into a cross-border one.
The abnormal increase in the number of EPOs did not go unnoticed among Spanish judges. Three Spanish courts decided to submit preliminary references to the CJEU, asking, precisely, whether it is possible to examine the fairness of the contractual terms in an EPO application requested against a consumer. Two of these preliminary references led to the judgment Joined Cases C?453/18 and C?494/18, Bondora, where the CJEU replied positively, acknowledging that courts can examine the fairness of the contractual terms (on this judgment, see this previous post). The judgment was rendered in December 2019. In 2020, the number of EPOs started to decrease. It appears that after Bondora the EPO became less attractive to creditors.
The connection between the EPO and the ESCP Regulation
At this point one needs to ask how the increase in the use of the EPO Regulation has had an impact on the use of the ESCP Regulation. The answer is likely found in the 2015 joint reform of the EPO and ESCP Regulations (Regulation (EU) 2015/2421). Among other changes, this reform introduced an amendment in the EPO Regulation which allows, once the creditor lodges a statement of opposition against an EPO, for an automatic continuation of proceedings under the ESCP (Article 17(1)(a) EPO Regulation). For this to happen, creditors simply need to state their intention by making use of a code in the EPO application standard form. It appears that, in Spain, many of those creditors who applied for an EPO in order to circumvent consumer protection standards under the domestic payment order found in the ESCP a subsdiary proceeding if debtors opposed the EPO.
An isolated Spanish phenomenon?
Statistics in Spain show that, at least in this Member State, the connection between the EPO and ESCP Regulations functions and gives more visibility to the ESCP. The lack of awareness about the ESCP Regulation was one of the issues that the Commission aimed to tackle with the 2015 reform. One might wonder if a similar increase in the use of the ESCP could be appreciated in other Member States. Available public statistics in Portugal, Lithuania, and Luxembourg do not reveal any significant change in the use of the ESCP after 2017, the year the amendment entered into force. In Lithuania, the number of ESCPs even decreased from 2018 to 2019.
Conversely, in Germany, statistics reveal a steady growth over those years. Against the 478 ESCPs issued in Germany in 2017, 2380 ESCP were issued in 2020, standing for an increase of 498%. Perhaps, after an unsuccessful start, the ESCP Regulation is finally bearing fruit.
ECJ, judgment of 10 February 2022, Case 522/20 – OE ./. VY, on the validity of the connecting factor „nationality“ in the Brussels IIbis Regulation (2201/2003) in light of Article 18 TFEU.
Today, in the case of OE ./. VY, C-522/20 (no Opinion was delivered in these proceedings), the ECJ decided on a fundamental point: whether nationality as a (supplemental) connecting factor for jurisdiction according to Article 3 lit. a indent 6 of the Brussels IIbis Regulation (2201/2003) concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility is in conformity with the principal prohibition of discrimination against nationality in the primary law of the European Union (Art. 18 TFEU).
Article 18 TFEU reads: “Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. …”.
Art. 3 lit. a Brussels IIbis Regulation reads: “In matters relating to divorce, legal separation or marriage annulment, jurisdiction shall lie with with the courts of the Member State:”; indent 5 reads: “in whose territory the applicant is habitually resident if he or she resided there for at least a year immediately before the application was made, or”, according to indent 6: “the applicant is habitually resident if he or she resided there for at least six months immediately before the application was made and is either a national of the Member State in question …”.
The case emerged from a request in proceedings between OE and his wife, VY, concerning an application for dissolution of their marriage brought before the Austrian courts (paras. 9 et seq.):
“On 9 November 2011, OE, an Italian national, and VY, a German national, were married in Dublin (Ireland). According to the information provided by the referring court, OE left the habitual residence the couple shared in Ireland in May 2018 and has lived in Austria since August 2019. On 28 February 2020, that is, after residing in Austria for more than six months, OE applied to the Bezirksgericht Döbling (District Court, Döbling, Austria) for the dissolution of his marriage with VY. OE submits that a national of a Member State other than the State of the forum is entitled to invoke the jurisdiction of the courts of that latter State under the sixth indent of Article 3(1)(a) of Regulation No 2201/2003, on the basis of observance of the principle of non-discrimination on grounds of nationality, after having resided in the territory of that latter State for only six months immediately before making the application for divorce, which is tantamount to disregarding the application of the fifth indent of that provision, which requires a period of residence of at least a year immediately before the application for divorce is made. By order of 20 April 2020, the Bezirksgericht Döbling (District Court, Döbling) dismissed OE’s application, taking the view that it lacked jurisdiction to hear it. According to that court, the distinction made on the basis of nationality in the fifth and sixth indents of Article 3(1)(a) of Regulation No 2201/2003 is intended to prevent the applicant from forum shopping. By order of 29 June 2020, the Landesgericht für Zivilrechtssachen Wien (Regional Court for Civil Matters, Vienna, Austria), hearing the case on appeal, upheld the order of the Bezirksgericht Döbling (District Court, Döbling). OE brought an appeal on a point of law against that order before the referring court, the Oberster Gerichtshof (Supreme Court, Austria).”
The Court reiterated, inter alia, that (paras. 18 et seq.) the principle of non-discrimination and equal treatment require that comparable situations must not be treated differently and different situations must not be treated in the same way, “unless such treatment is objectively justified”, further that the comparability of different situations must be assessed having regard to all the elements which characterise them, and thirdly that the (EU) legislature has a broad discretion in this respect. “Thus, only if a measure adopted in this field is manifestly inappropriate in relation to the objectives which the competent institutions are seeking to pursue can the lawfulness of such a measure be affected”.
Against this background the Court held (paras 25 et seq.) that, first, Article 3 meets “the need for rules that address the specific requirements of conflicts relating to the dissolution of matrimonial ties”, secondly that while the first to fourth indents of Article 3(1)(a) of Regulation expressly refer to the habitual residence of the spouses and of the respondent as criteria, the fifth and sixth indents of Article 3(1)(a) permit the application of the jurisdiction rules of the forum actoris, and thirdly that “it is apparent from the Court’s case-law that the rules on jurisdiction laid down in Article 3 of Regulation No 2201/2003, including those laid down in the fifth and sixth indents of paragraph 1(a) of that article, seek to ensure a balance between, on the one hand, the mobility of individuals within the European Union, in particular by protecting the rights of the spouse who, after the marriage has broken down, has left the Member State where the couple had their shared residence and, on the other hand, legal certainty, in particular that of the other spouse, by ensuring that there is a real link between the applicant and the Member State whose courts have jurisdiction to give a ruling on the dissolution of the matrimonial ties concerned (see, to that effect, judgments of 13 October 2016, Mikolajczyk, C-294/15, EU:C:2016:772, paragraphs 33, 49 and 50, and of 25 November 2021, IB (Habitual residence of a spouse – Divorce), C-289/20, EU:C:2021:955, paragraphs 35, 44 and 56).“ And the fact that typically there is such a real link if there is nationality sufficed to justify distinguishing between indent 5 and indent 6, all the more as this cannot be a surprise to the other spouse.
Therefore the Court came to the conclusion:
“The principle of non-discrimination on grounds of nationality, enshrined in Article 18 TFEU, must be interpreted as not precluding a situation in which the jurisdiction of the courts of the Member State in the territory of which the habitual residence of the applicant is located, as provided for in the sixth indent of Article 3(1)(a) of Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000, is subject to the applicant being resident for a minimum period immediately before making his or her application which is six months shorter than that provided for in the fifth indent of Article 3(1)(a) of that regulation on the ground that the person concerned is a national of that Member State.”
The most important take away seems to be that PIL legislation using nationality as a supplemental connnecting factor is still in conformity with Article 18 TFEU as long as it appears “not manifestly inappropriate” (para. 36). Therefore, and reconnecting to older case law (para. 39), legislation is still valid “with regard to a criterion based on the nationality of the person concerned, … although in borderline cases occasional problems must arise from the introduction of any general and abstract system of rules” so that “there are no grounds for taking exception to the fact that the EU legislature has resorted to categorisation, provided that it is not in essence discriminatory having regard to the objective which it pursues (see, by analogy, judgments of 16 October 1980, Hochstrass v Court of Justice, 147/79, EU:C:1980:238, paragraph 14, and of 15 April 2010, Gualtieri v Commission, C-485/08 P, EU:C:2010:188, paragraph 81).”
News
Legal Accountability of Transnational Institutions: Special Issue of the King’s Law Journal
Co-edited by Rishi Gulati and Philippa Webb, the Special Issue of the King’s Law Journal, Volume 34, Issue 3 on “The Legal Accountability of Transnational Institutions: Past, Present and Future” is now out. The 9 articles in this Special Issue are authored by leading experts on the accountability of public international organisations (IOs), MNCs, as well as NGOs.
The Introduction is open access and discusses what may be learnt by comparing the legal accountability of IOs, MNCs and NGOs. In addition to the Introductory article by Rishi Gulati and Philippa Webb, the Special Issue consists of the following contributions. Assessing the Accountability Mechanism of Multilateral Development Banks Against Access to Justice: The Case of the World Bank (Edward Chukwuemeke Okeke); Holding International Organizations Accountable: Recent Developments in U.S. Immunities Law (David P. Stewart); Protecting Human Rights in UN Peacekeeping: Operationalising Due Diligence and Accountability (Nigel D. White); Nature and Scope of an International Organisation’s Due Diligence Obligations Under International Environmental Law: A Case Study of the Caribbean Development Bank (S. Nicole Liverpool Jordan); Civil Liability Under Sustainability Due Diligence Legislation: A Quiet Revolution? (Youseph Farah, Valentine Kunuji & Avidan Kent); Accountability of NGOs: The Potential of Business and Human Rights Frameworks for NGO Due Diligence (Rosana Garciandia); Arbitrating disputes with international organisations and some access to justice issues (August Reinisch); Transnational Procedural Guarantees – The Role of Domestic Courts (Dana Burchardt).
Short-term PostDoc Position(s) at Humboldt University Berlin
The graduate resesarch programme DynamInt (Dynamic Integration Order) of Humboldt University is inviting international PostDocs to apply for a short-term (3 to 6 months), fully paid research stay in Berlin.
The PostDoc is supposed to pursue her/his research project in the field of European Law. She/he is also expected to interact with the group of young researchers, who all work on their dissertation projects within the thematic framework of harmonization and plurality tendencies in the EU
More information is available here.
Private International Law and Sustainable Development in Asia: REMINDER–Still Time to Submit Your Proposals
The United Nations Agenda 2030 with its 17 Sustainable Development Goals (SDGs) seems to have a blind spot for the role of private and private international law. That blind spot is beginning to be closed. A collective volume with global outlook published in 2021 addressed “the private side of transforming our world”: each of the 17 SDGs was discussed in one chapter of the book devoted to the specific relevance of private law and private international law. In 2022, the IACL-ASADIP conference in Asunción, Paraguay discussed sustainable private international law with regard to Latin America; the contributions published in 2023 in a special issue of the University of Brasilia Law Journal – Direito.UnB., V.7., N.3 (2023).
In this occasion the focus is on Asia. The Chinese Journal of Transnational Law invites submissions for its Vol. 2 Issue 2, to be published in 2025, engaging critically with the functions, methodologies and techniques of private international law in relation to sustainability from an Asian perspective, as well as in relation to the actual and potential contributions of private international law to the SDGs in Asia. Read more