OPINION OF ADVOCATE GENERAL

GEELHOED

delivered on 29 April 2004 (1)

Case C-70/03

Commission of the European Communities

v

Kingdom of Spain

(Failure of a Member State to fulfil obligations – Incomplete transposition of Council Directive 93/13/EEC on unfair terms in consumer contracts)

I –  Introduction

1.        In these proceedings under Article 226 EC, the Commission maintains that the Kingdom of Spain has failed fully to transpose into domestic law Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (2) (‘the Directive’) and has consequently failed to fulfil its obligations under the Treaty and the Directive.

2.        The action is founded on two specific charges: that Spain failed to incorporate correctly into national law the rule of interpretation contained in the third sentence of Article 5 of the Directive; and that it incorrectly implemented Article 6(2) on the choice of law. The period allowed for transposition of the Directive expired on 31 December 1994.

II –  The Commission’s first complaint: the third sentence of Article 5 of the Directive

3.        The Commission’s first complaint concerns the transposition into Spanish legislation of the third sentence of Article 5 of the Directive. Article 5 establishes the general rule that where consumer contracts contain terms in writing, such terms must always be drafted in plain, intelligible language; the second and third sentences then lay down the following rule of interpretation:

‘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).’

The procedures in question are collective actions for cessation enabling ‘persons or organisations, having a legitimate interest under national law in protecting consumers, ... [to] 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’. Article 3(1) of the Directive states that a contractual term ‘... shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer’.

4.        The Directive was transposed into Spanish legislation by Law No 7/1998 of 13 April 1998 on general terms in contracts (3) (‘Law No 7/1998’); this amended General Law No 26/1984 of 19 July 1984 for the protection of consumers and users (4) (‘General Law No 26/1984’). Article 10(2) of the amended General Law implements Article 5 of the Directive in the following terms:

‘Where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail.’

The Spanish legislation contains no provision corresponding to the third sentence of Article 5 of the Directive.

5.        The Commission maintains that, by omitting to provide that the rule in the second sentence of Article 5 of the Directive on interpretation favourable to the consumer should not apply in the context of collective actions for cessation, the Spanish legislature failed to implement that provision correctly in national legislation. It argues that a seller might deliberately invoke the interpretation rule in order to ensure that a term was not deemed unfair, thereby undermining a collective action for cessation. Notwithstanding the Spanish Government’s assertion, there is nothing in Article 10(2) of the amended General Law No 26/1984 to justify the inference that the interpretation rule in question applies only to individual actions. Absent any specific provision restricting the application of that rule to individual actions, one must conclude that it governs both types of action.

6.        The Spanish Government points out that the Spanish legislation provides for both individual and collective actions: only in the case of the former does the interpretation rule contained in the second sentence of Article 5 of the Directive apply. If, in a collective action, a term is found to be unclear and unfair on the basis of the normal methods of interpretation, that action will succeed, and no further interpretation favourable to any particular consumer will be capable of detracting from that result. It points out further that Spanish legislation offers protection for the consumer which is more extensive than that provided by the Directive; it also contains a list of terms regarded as being unfair in all circumstances. The mandatory nature of that list ensures that the principle of interpretation favourable to the consumer may not be invoked in order to undermine a collective action for cessation. This is so obviously the case that no discernible purpose would be served by replicating the third sentence of Article 5 of the Directive verbatim in the Spanish legislation. Proper application of the rule is indeed fully guaranteed in the Spanish legal system; moreover, Article 1228 of the Spanish Civil Code provides that ‘the interpretation of unclear terms in a contract may not benefit the party responsible for that lack of clarity’. Furthermore, the case-law of the Tribunal Supremo (Supreme Court) has established that the above rule applies to pre-formulated standard contracts.

7.        On the Commission’s first complaint, what is in dispute between the parties is not so much the substance of any obligation arising under Article 5, as the manner in which such obligations should be enshrined in national legislation. The Commission considers that the limitation, in the third sentence of Article 5, of the scope of the rule requiring interpretation favourable to the consumer – the converse designation, ‘interpretation contra proferentem’, is also current – must be stated in terms within the text of the law. The Spanish Government relies on the fact that it follows from the system of Spanish legislation that the interpretation rule in question applies solely to individual actions; it would for that reason be otiose to enact a specific provision to the effect that the rule does not apply in the case of the collective actions for cessation referred to in Article 7(2) of the Directive. More specifically, it submits that there is also no scope for interpretation favourable to the (individual) consumer in an action seeking the cessation of the general use of particular unfair terms.

8.        The extent to which, under Article 249 EC, Member States are free to choose the form and methods necessary to attain the result prescribed by a directive has been marked out by the Court’s settled case-law. The Court has made clear that the transposition of a directive into national law does not necessarily require that its provisions be incorporated formally and verbatim in express, specific legislation. A general legal context may, depending on the content of the directive, be adequate for that purpose, provided that it does indeed guarantee the full application of the directive in a sufficiently clear and precise manner so that, where the directive is intended to create rights for individuals, the persons concerned can ascertain the full extent of their rights and, where appropriate, rely on them before the national courts. (5) The last-mentioned condition is of particular importance where the directive in question is intended to accord rights to nationals of other Member States, as is always the case in the field of consumer protection.

9.        National law must therefore ensure that the result intended by the directive is actually achieved. The rights accruing to individuals under a directive must be delineated clearly and transparently, and their effective enforcement must be available through the competent national authorities – normally the courts. Where, under national legislation, any uncertainty subsists as to whether the provisions of a directive which seeks to grant rights to individuals have been complied with, such uncertainty cannot be dispelled by invoking the possibility of the schematic interpretation of the provisions in question, or of their interpretation by national judicial authorities in such a way as to ensure conformity with the directive in question. As the Court has held, it is particularly true in the field of consumer protection that, even where the settled case-law of a Member State interprets the provisions of national law in a manner deemed to satisfy the requirements of a directive, that cannot achieve the clarity and precision needed to meet the requirement of legal certainty. (6)

10.      The second sentence of Article 5 of the Directive has been incorporated verbatim in Spanish legislation – but does that legislation make it sufficiently clear that the scope of the interpretation rule is confined to individual actions, and that, as the third sentence of Article 5 itself provides, the rule consequently does not apply in the context of collective actions for cessation? To determine whether the result prescribed by the Directive in this regard is secured, one must first tease out the reasoning behind what may at first sight seem to be a rather paradoxical provision.

11.      The rule of interpretation contained in the second sentence of Article 5 of the Directive is a contingent one: it applies only when doubts as to the meaning of a term still subsist after that term has been assessed on the basis of the usual methods of interpretation. Thus, in a dispute between a consumer and a seller or supplier concerning a contractual term, the term in question will be interpreted in the consumer’s favour. The lack of clarity of the term in question, and the consequences thereof, are ascribed to the seller or supplier. The situations contemplated are those where a contract has already been concluded, and the fairness or otherwise of a term falls to be assessed ex post facto. This rule of interpretation accords with the purpose of the Directive – protecting consumers who enter into (cross-border) transactions.

12.      A collective action for cessation brought by a consumer-protection organisation is inherently different – in a number of critical respects – from proceedings brought by an individual consumer against a seller or supplier. The former is a preventative measure designed to protect consumers generally against the application, in general conditions, of terms which must be considered unfair: the unequal nature of the respective positions of consumer and seller or supplier is negated by external intervention which by-passes the consumer. (7) In such proceedings, the terms at issue are assessed in abstracto, and the party bringing the action has no material or personal interest in the outcome.

13.      In any action under Article 7(2) of the Directive, the competent judicial or administrative authority must apply the usual methods of interpretation under national law in order to determine whether a term should be classified as unfair within the meaning of Article 3(1) of the Directive and, if it does, must prevent its continued use. If it were possible, where the above methods fail to resolve the issue, for the contra proferentem rule to be applied, and the term in question accordingly construed in the consumer’s favour, that term would then be saved – an outcome not ultimately in the consumer’s interest. In order to produce the result which is most desirable from the consumer’s point of view, one must, when assessing a term in abstracto in the context of a collective action for cessation, proceed from a consideration of the adverse effect that term may have on a consumer’s interests. Thus – paradoxically – in the situation I have outlined, a ‘consumer-hostile’ interpretation leads to a greater degree of consumer protection.

14.      That is why the rule of interpretation in the second sentence of Article 5 does not apply in the context of a collective action for cessation. Terms contained in general conditions, intended to govern a multiplicity of contractual relationships, must, as the first sentence of Article 5 stipulates, be completely plain and intelligible to the consumer. Their meaning must not depend on which of a number of possible divergent interpretations is placed on them.

15.      Accordingly, the national legal system must ensure that the assessment of terms intended for general use in the context of the collective actions for cessation referred to in Article 7(2) ultimately leads to the outcome which is most desirable for consumers. Within the system established by the Directive, that is achieved by prohibiting application of the contra proferentem rule in the assessment process, which is therefore carried out using only the usual methods of interpretation under national law.

16.      The Spanish Government maintains that the result prescribed by the Directive is guaranteed by, on the one hand, the consumer protection legislation, and, on the other, the general conditions of contract. It contends that the fact that the second sentence of Article 5 of the Directive is included only in the provisions relating to individual actions (Article 10(2) of General Law No 26/1984, amended by Law No 7/1998) indicates that, as required by the third sentence of Article 5 of the Directive, the rule of interpretation contained therein does not apply in the context of collective actions for cessation. The latter are subject to Chapter IV of Law No 7/1998 – that is, Articles 12 to 20 inclusive). Furthermore, Spanish legislation affords more extensive protection than the Directive, in that the former contains a blacklist of terms which are automatically void. The full effect of the Directive is thus guaranteed, inter alia in regard to the assessment of terms in the context of collective prohibition actions for cessation.

17.      Against that, there are, as the Commission points out, indications in the Spanish legislation that the rule of interpretation in favour of the consumer does indeed apply generally. Thus, Article 10(3) of General Law No 26/1984, amended by Law No 7/1998, (the provision which follows that setting out the rule of interpretation) provides that terms which have the characteristics of a general condition within the meaning of the law on general conditions of contract are ‘similarly’ subject to the provisions of that law. The law in question also contains, at Article 6(2), a rule of interpretation in favour of the consumer: any doubts as to the interpretation of unclear general conditions are to be resolved in favour of the party acceding to the contract. Had the Spanish Government wished to restrict the scope of that rule of interpretation to individual actions it could have done so expressly, either in Article 10(3) of General Law No 26/1984, or in Article 6 of Law No 7/1998. As this was not done, the logical inference is that the rule in question applies to both types of action.

18.      Absent any specific evidence that, contrary to the Directive, the contra proferentem rule is indeed applied to the assessment of terms in the context of collective actions for cessation, one cannot assert categorically that the result prescribed by the Directive is not attained within the Spanish legal system. However, it is apparent from the scope of the relevant legislation that, as the law stands, that rule might be applied in the situations referred to in Article 7(2) of the Directive. Where a rule concerning the interpretation of certain provisions in a set of rules is itself a factor in determining the precise content of those provisions, that rule must be enshrined in the law in the same way as the provisions to which it relates. In the present circumstances, I consider that the Spanish legal system does not provide an adequate guarantee that the interpretation rule in the second sentence of Article 5 of the Directive will not be applied in the context of the actions referred to in Article 7(2) thereof.

19.      The Commission’s first complaint is consequently well founded.

III –  The Commission’s second complaint: Article 6(2) of the Directive

20.      The Commission’s second complaint concerns the manner in which Article 6(2) of the Directive was incorporated in Spanish legislation. That provision states:

‘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 a law of a non-Member country as the law applicable to the contract if the latter has a close connection with the territory of the Member States.’

21.      Article 10a(3) of General Law No 26/1984, as amended by Law No 7/1998, which constitutes the transposition of Article 6(2) of the Directive in Spanish legislation, is couched in the following terms: ‘The rules on protection of consumers against unfair contractual terms shall be applicable, irrespective of the law chosen by the parties to govern the contract, under the terms and conditions provided for in Article 5 of the Rome Convention of 1980 on the law applicable to contractual obligations.’

22.      Article 5(2) of the Rome Convention on the law applicable to contractual obligations (‘the Rome Convention of 1980’) provides – I summarise – that the parties’ choice of law may not result in the consumer losing the protection afforded him by the mandatory rules of the country in which he has his habitual residence, provided that one of the situations listed in that article obtains. Pursuant to Article 5(1), that provision applies to contracts concluded by consumers concerning the supply of goods or services, or the provision of credit for that object.

23.      Article 3(2) of Law No 7/1998 is also significant in this connection:

‘Without prejudice to the provisions of international treaties and agreements, [this law] shall also apply to contracts subject to foreign law when the party agreeing to be bound thereby has given such consent on Spanish territory and is habitually resident there’.

24.      The Commission observes that whereas Article 6(2) of the Directive seeks to protect all consumers concluding all types of contracts with a seller or supplier, Article 10a of the amended General Law No 26/1984 limits that protection to specific types of contracts, namely the contracts referred to in Article 5(1) of the Rome Convention of 1980, and requires certain conditions to be met (namely the conditions set out in Article 5(2) of the Rome Convention of 1980). Those conditions are more restrictive than the sole condition in Article 6(2) of the Directive, which requires a ‘close connection [between the contract and] the territory of the Member States’.

25.      The Spanish Government contends that it follows from ‘una interpretación integradora’ – a holistic, or schematic, interpretation – of the Spanish legislation on the protection of consumers against unfair terms that such legislation is mandatory, applying irrespective of the parties’ choice of the law applicable to the contract. Those provisions take account of both the Directive and the Rome Convention of 1980. The Spanish Government emphasises that Article 3(2) of Law No 7/1998 provides that Spanish law is to apply to contracts subject to foreign law when the party agreeing to be bound thereby has given such consent on Spanish territory and is habitually resident there. That provision fleshes out the requirement that there be a ‘close connection [between the contract and] the territory of the Member States’ in regard to contracts having a connection with Spanish law.

26.      Article 6(2) of the Directive seeks to prevent the protection granted by the Directive from being undermined as a result of the parties to a contract having declared that the law of a non-Member country is to be applicable to the contract. To achieve this, the Directive uses a broad criterion: there has to be a close connection between the contract and the territory of a Member State. Yet Article 10a of General Law No 26/1984, as amended, refers instead to Article 5 of the Rome Convention of 1980; the question that arises is whether or not this results in less protection than the Directive contemplates?

27.      I think that is indeed the case. The criterion in the Directive of a close connection between the contract and a Member State may be satisfied in a variety of ways; there is thus a low threshold for activation of the protective effect of the Directive where the parties to a contract have opted for it to be governed by the law of a non-Member country. The reference to Article 5 of the Rome Convention of 1980 in Article 10a, third subparagraph, of General Law No 26/1984, as amended by Law No 7/1998, introduces criteria the effect of which is that application of the provisions of the Directive in the Spanish legal system cannot be guaranteed in all the cases intended to be covered by Article 6(2) of the Directive.

28.      This is because Article 5 of the Rome Convention of 1980 states that, notwithstanding the parties’ choice of law, the mandatory rules of the law of the country in which the consumer has his habitual residence are to apply, subject to certain conditions not contained in the Directive. These conditions are that (a) the conclusion of the contract was preceded by a specific invitation addressed to the consumer or by advertising, and that he had taken in that country all the steps necessary on his part for the conclusion of the contract, or (b) the other party received the consumer’s order in that country, or (c) the seller arranged a journey for the consumer in order to induce him to buy. The effect of these conditions is that the protection afforded falls short of what is required by Article 6(2) of the Directive. Furthermore, the scope of Article 5 of the Rome Convention of 1980 is limited to the contracts referred to in the first paragraph of that article. Broad though the material scope of that provision may be, the Directive covers all contracts which a consumer concludes with a seller or supplier; it is therefore entirely possible that particular categories of contract might be wrongfully excluded from the scope of the third paragraph of Article 10a.

29.      The Spanish Government has referred to Article 3(2) of Law No 7/1998. That provision – apart from the fact that it concerns only general contractual conditions, and thus not consumer contracts specifically – contains two further limitations which sit ill with the system of protection established by the Directive: the consumer must be habitually resident on Spanish territory, and (the conditions are cumulative) he must have given his consent there. These requirements further restrict the protection provided by Article 6(2) of the Directive.

30.      Finally, the Spanish Government claims that the result pursued by the Directive may be attained by a schematic or holistic interpretation of the relevant provisions of Spanish law. In response, one need only point to the Court’s case-law on the Directive, (8) which indicates unequivocally that the rights which individuals derive from the Directive must be set out clearly and precisely in national legislation. Here, as my foregoing observations may have demonstrated, that is far from being the case as far as Article 6(2) of the Directive is concerned.

31.      Accordingly, the Commission’s second complaint is also well founded.

IV –  Conclusion

32.      I therefore suggest that the Court:

–        declare that, by failing to transpose fully into its national law Articles 5 and 6(2) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, the Kingdom of Spain has failed to fulfil its obligations under the Treaty and that directive; and

–        order the Kingdom of Spain to pay the costs.

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1 – Original language: Dutch.

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2 – OJ 1993 L 95, p. 29.

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3 – Ley 7/1998, de 13 de abril, sobre Condiciones Generales de la Contratación, Boletin Oficial del Estado No 89, of 14 April 1998, p. 12304.

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4 – Ley 26/1984, de 19 de julio, para la Defensa de los Consumidores y Usuarios, Boletin Oficial del Estado N o 176, of 24 July 1984, p. 21686.

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5 – See inter alia Cases C-361/88 Commission v Germany [1991] ECR I-2567, paragraph 15, and C-433/93 Commission v Germany [1995] ECR I-2303, paragraph 18.

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6 – Case C-144/99 Commission v Netherlands [2001] ECR I-3541, paragraph 21.

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7 – Cases C-240/98 to C-244/98 Océano Grupo Editorial and Salvat Editores [2000] ECR I-4941, paragraph 27, and C-372/99 Commission v Italy [2002] ECR I-819, paragraphs 14 and 15.

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8 – Cited in footnote 6.