Summary

The aim of European harmonisation of consumer law is to reduce the differences between national mies, so as to afford consumers and traders greater legal certainty and thereby promote the internal market. Legal certainty is not only served through harmonisation on paper, but also demands harmonisation in the interpretation and application of legal rules. This book discusses the practical significance of including open clauses in directives for the harmonisation of consumer law. Specifically, the open clauses in the Directive on unfair terms in consumer contracts (the UTD; Chapters 2 through 6) and the Directive concerning unfair business-to-consumer commercial practices in the internal market (the UCPD; Chapters 7 through 11) are looked at in the context of two case studies. The extent to which there is, or could be, a harmonised interpretation and application of these directive clauses is investigated. The book examines how the two directive clauses are interpreted and applied under European (Chapters 2 and 7), Dutch (Chapters 3 and 8), French (Chapters 4 and 9) and English (Chapters 5 and 10) law. A concluding chapter at the end of each case study describes the degree to which the interpretation and application of the clause has been harmonised, and, if there has not been harmonisation, what has precluded this. The findings from the two case studies are brought together in a general concluding chapter (Chapter 12), to determine whether a harmonised interpretation and application of the open clauses in the two directives is even possible.

Chapter 1 addresses the goal of harmonising consumer law within the EU and the extent to which this goal has been impeded by general clauses. The chapter describes the presumed tension between using general clauses and harmonising consumer law. One advantage of general clauses is that they can be adjusted to changed circumstances and allow for customised approaches. Their vagueness, however, leads to legal uncertainty and differences in application. As a result, harmonisation and general clauses are not easily compatible. Moreover, directive clauses must be implemented in national law and sufficient and practical European reference points are not always available to interpret and apply the clauses at the national level.

Chapter 2 introduces the first part of the research. This chapter tries to come up with an autonomous interpretation of the unfairness clause in the UTD. It is not very clear, though, how this general clause should be interpreted (or review under this clause should be interpreted). A distinction is made between the method, nature and system of review under the clause.

The methodology concerns the marmer of ascertaining whether there is a `significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer' as referred to in Article 3.1. An analysis of various European sources shows that three methods can be applied: (1) a comparison with the national or European legal framework; (2) a balancing between the parties' rights, duties and/or interests; and (3) a determination of the consumer's reasonable expectations.

The nature of the review concerns the nature of the disputed detriment and of the circumstances taken into account (procedural versus substantive, and generalised versus particularised). The role that the circumstances surrounding the formulation of the conditions and formation of the contract play within the review under Article 3.1 is largely undetermined. In addition, although the review under the clause is intended to be a circumstantial one (Article 4.1 and the Hofstetter decision, C-237/02), the possibility for 'abstract review' has not been excluded (Article 7 and the Océano decision, C-240/98-244/98). A more abstract marmer of review also simplifies the obligation imposed by the European Court of Justice (ECJ) to apply the clause ex officio, as it makes the courts less dependent on the facts put forward by the parties.

Finally, the system of review against the clause is analysed based on three models, characterised as the `exclusive', `alternative' and `cumulative' models. A decisive element for the system of review is the way in which the relationship between the two criteria under the test — the good faith and contractual imbalance — is viewed and the significance (abstract or specific, procedural or substantive) given to those criteria in terms of their interrelationship. Must `good faith' be tested separately, and, if so, is this an `alternative' or `cumulative' (procedural) criterion? Although the one model is more plausible than the other, all three models might be applied in practice.

Chapter 3 discusses the open unfairness clause in the UTD as this has been transposed into Dutch law. With the exception of the lists in Articles 6.236 and 6.237 of the Dutch Civil Code, there are few safeguards in the Netherlands for ensuring that the clause in Article 6.233.a of the Dutch Civil Code, is applied in a consistent marmer. The assessment method has not been streamlined. In the Dutch case law, (1) the review against the legal framework, (2) the balancing of the interests and (3) the reasonable expectations test determine, in combination with one another or not, whether a contractual term is `unreasonably burdensome'. The Dutch circumstantial test is mainly substantive in nature, but also allows the procedural circumstances to be considered. These procedural circumstances are rarely determinative, however. As a rule, and in line with the doctrine of the limiting effect of the principle of reasonableness and fairness giving rise to Article 6.233.a of the Dutch Civil Code, substantive review involves a broadbased test with lots of attention for the personal and particular circumstances. The outcome of the review of similar contract terms under the clause can therefore differ considerably. A more abstract review under the open clause becomes more significant, however, due to the ex officio review obligation and the European list, which Dutch courts frequently utilise. The Dutch assessment only entails one specific criterion to be applied: whether the terms are unreasonably burdensome. The judicial review does not include any `alternative' or `cumulative' steps. The system of review adheres to the `exclusive' model.

Chapter 4 concentrates on the French clause transposing the unfairness clause in the UTD. The French unfairnesstest merely consists of the significant imbalance criterion (the good faith criterion has not been transposed). The French method of review is characterised by (1) attention to the contract term itself in light of the legal framework and (2) a strong focus on assessing the contractual balance. The court evaluates whether there is a contractual balance or imbalance based on the presence or absence of a reciprocal obligation, consideration for the term or a provision lessening or cancelling the effect of the term. This formal approach leaves little room for examining the circumstances surrounding the contract's formation. The review is very substantive in nature. The ambiguity or indecipherability of contractual terms is crucial, though, with respect to the significant imbalance test. The French unfairnesstest is predominantly abstract as well: the test is generally limited to a small number of objective circumstances. Consequently, the French test, which, in line with the `exclusive' model, usually consists of a single step (review against the significant imbalance criterion), is fairly predictable. That French courts do not need many facts to be convinced that a term is fair or unfair comes in handy when they carry out their ex officio review obligation, which had long been curbed by the Cour de cassation 's jurisprudence.

Chapter 5 explains how the English clause transposing the unfairness clause under the UTD has been interpreted and applied. The English clause is a verbatim reproduction of Article 3.1 of the directive. While the Office of Fair Trading (OFT) (1) looks carefully at the European list, the court engaging in review against the standard typically (2) balances the interests concerned or (3) ascertains what the reasonable expectations were. The court relates the imbalance criterion to the good faith criterion to assess the substantive fairness or unfairness of the term in question. It also uses the good faith principle to flesh out the procedural unfairness aspects. In the second situation, there is not much difference with the approach to consumer terms under common law, but, in the first situation, the substance of the contract is scrutinised in depth, which is new under English law. Hence, the conclusion is that it is not the good faith principle, which has been codified for the first time, but rather, the transposition of the significant imbalance criterion which has brought about the biggest change. Transposition of the notion of good faith, in combination with the transition from 'formal reasoning' to `substantive reasoning', ensures that the circumstantial test will be applied broadly when general terms and conditions are reviewed. In addition, English law gives ample attention to the specific circumstances of the case, even in connection with the collective test. In practice, the specific determinations of `substantive unfairness' and `procedural unfairness' usually represent the two `cumulative' steps under the English test.

Chapter 6 concludes the first part of the research. The various legal systems investigated are compared to each other. The observation is made that, with regard to review against the national clause transposing the directive clause, there are clear differences concerning the method applied, the importance placed on procedural unfairness, the degree of specificity/abstraction of the test, and the system of review. An explanation for these differences is then sought. This explanation is found in the direct and indirect effect of national or European law on the interpretation and application of the open clause. The direct effect has to do with the extent to which the court and regulatory authority are guided by national or European law in applying the clause. The indirect effect concerns the impact of national and European law on the marmer of transposition and the choice of an enforcement system.

With respect to the 'direct effect', the differences between the Member States can be attributed to the fact that the openness of the directive clause is coupled with very few practical 'European reference points'. The interpretation and application have not been harmonised, because the national courts mainly stick to the national paradigms, in the absence of, as well as at the expense of, a more European interpretation. When European reference points are available (such as lists or decisions by the ECJ), they are hardly unequivocal and allow complete discretion for an interpretation of the clause which is coloured by national law. Harmonisation is also lacking, because national courts typically do not take advantage of tools for achieving a more uniform interpretation (referring questions for preliminary rulings or looking at issues from a comparative law perspectine).

With respect to the 'indirect effect', the choice of transposition and enforcement methods, which is driven mostly by national considerations, also largely ensures that national views concerning the clause continue to be relevant. The existence of various enforcement forums at the national level and the relatively big importance of the individual test frustrate harmonisation as well. The ECJ's case law on the ex officio review obligation, which has resulted in a more abstract test and has put the European list in the spotlight, has, however, fostered harmonisation. Lists make a streamlined practice of review easier, although the European list is merely indicative in nature.

Reference points which provide legal certainty at the national level — decisions by the highest national courts, a fixed approach to certain types of standard terms (for example; see the LOVCK1 report, recommendations and lists) — could promote harmonisation. Such national reference points, however, must be coordinated with reference points in the other Member States, in connection with the comparative law aspects and consultation by the courts and regulatory authorities from the different Member States. Without increased practical coordination, formulating 'more stringent' European standards does not seem feasible, either (compare the failed attempt to create a European grey and black list in connection with the Draft Directive on Consumer Rights). Regulatory authorities, which rely heavily on the contractual imbalance criterion and the European list, could play an especially important role in streamlining such matters.

The second portion of the research deals with the unfairness clause in the UCPD. Chapter 7 does this from a European perspective. The chapter follows the directive's structure and investigates the extent to which the various layers of review are interpreted uniformly under European law. The unfairness clause in the UCPD is detailed, refers to objectified standards and a list of prohibited practices, and situates itself outside contract law directed at the individual business-toconsumer relationship. At first glance, then, this standard is more susceptible to harmonisation than the clause in de UTD. Yet, the directive includes one grand general clause and three small general clauses (`misleading actions', `misleading omissions' and `aggressive commercial practices'), thereby making the content and system of review, which are, for the most part, determined by vague concepts, capable of different interpretations.

It is unclear under the directive how broadly or strictly and how abstractly or specifically the general clauses should be interpreted. In addition, the directive's objectives — a high level of consumer protection and the promotion of the internal market — may, as with the UTD, steer the result of the review against the clauses in the opposite direction. With a view to a harmorlised interpretation and application of the directive, clear direction from the ECJ is necessary. Such direction has been difficult to obtain, however, because of the small number of preliminary rulings requested with regard to general clauses. Curiously, though, the Commission has closely supervised the transposition of the directive and recently issued a guidance document with several, non-binding indicators for interpreting the national clauses in conformity with the directive. Still, the direction available from Europe is insufficient to achieve the directive's goal of maximum harmonisation.

Chapter 8 takes a look at how the general clauses have been interpreted and applied under Dutch law, whether this interpretation/application has been divergent at the national level and what determines this interpretation/application. As in Chapter 7, each general clause is delved into comprehensively. First, the chapter describes how the text of the directive has been transposed into Dutch law. Although the Dutch legislature did not want to anticipate any decisions of the ECJ and adopted the directive almost verbatim, it added a layer of interpretation here and there. This chapter also discusses the enforcement system chosen and the marmer in which the clauses have been interpreted in practice. The Dutch general clauses have been incorporated into private law, but are applied by both the civil court (in individual and collective actions) and the administrative court. Doctrines which may guide the courts in applying the many new clauses or which converge with the new regulation emanate from private law and will, I expect, primarily affect the civil courts. Proper coordination between these courts is essential for ensuring a consistent legal trend. It is apparent from the initial decisions regarding the new standards that the regulatory authorities (the Dutch Consumer Authority and the Netherlands Authority for the Financial Markets) and, by extension, the administrative courts, are being led strongly by the existing self-regulation and coregulation. Further, as shown by the first applications of the general `misleiding' clause, their decisions are friendlier to the consumer than the decisions by the civil courts. Because of the choice of the legal ground `wrongful act' and the objectified standards, individual consumers, it is expected, will not, though, readily invoke the open directive standards in civil actions. This will somewhat limit the differences in application at the national level and will boost harmonisation. After all, enforcement in individual cases carries the risk of differing specific applications and piecemeal development of the clauses.

Chapter 9 is devoted to the French treatment of the general clauses in the UCPD. The chapter examines at length the difficult, step-by-step transposition process. This process has been infiuenced by the strong desire to stick to the existing practice and statutory system. The Commission has monitored this process closely, and the last word has not been uttered yet about the incorporation of the directive into French law. Because the text of the French law still deviates in several respects from the directive's text, and the literature has primarily discussed the directive in terms of the national law, whether the harmonisation goal is accomplished will depend strongly on direction from Europe and the willingness of French courts to interpret the national law consistent with the directive. The French courts have shown such a willingness for now, giving consideration to the directive's text and the ECJ's case law. The general clauses are being enforced both under criminal and civil law. Besides actions brought by the regulatory authorities, prosecutors and consumer organisations, business-to-business and business-to-consumer cases are also being decided based on the directive clauses. The multitude of enforcement forums in which the clauses are interpreted and applied has precluded uniform interpretation and application at the national level.

Chapter 10 focuses on the interpretation and application of the general clauses in the UCPD under English law. Implementation of the directive in England has been characterised by a strong need by businesses and the regulatory authority (OFT) to clarify the meaning of the general clauses adopted verbatim. The lack of familiarity with certain terms at the national level (such as 'professional diligence' and an `invitation to purchase') has caused uncertainty. Out of a fear that the common law might be affected by the directive clauses, no rights have been granted to individual consumers in England. Enforcement mainly occurs through the OFT. In the literature, a link is largely sought with the existing law in regard to the interpretation of the UCPD general clauses. While legal scholars have, with unfamiliar standards, looked to functional equivalents, and, with similar standards, to substantive differences, the government has tried as much as possible to ascertain and stress the independent European significance of the directive and its system. Such a pro-European orientation is typical, too, for the High Court, which, in the first court decision on the directive standards (OFT/Purely Creative [2011] EWHC 106), expressly did not consider the common law and dared to provide an autonomous interpretation. The court, however, was confronted with a lack of European guidance in this respect.

Chapter 11 concludes that, despite the detailed and objectified nature of the general clauses in the UCPD, these clauses are already being interpreted in different ways at the national level. The reference points offered by the directive and EU case law are not clear enough to counter the interpretation and application differences. For now, the ECJ has primarily emphasised the specificity of the review against the open standards. Thus, by analogy to the UTD, a great deal of latitude has, relatively speaking, been created for an interpretation of the general clauses which is directly and indirectly coloured by national law (cf. chapter 6). Harmonisation is impeded not only by the influence of national views and the contextual nature of the test, but also by the not always accurate translation of the directiees into national law and the existence of various enforcement forums at the national level with different methods of assessment. Incorporating the general clauses into national law and opting for a certain enforcement system can moreover heighten the impact of national views and make obtaining European guidance through preliminary rulings more difficult. Harmonisation is fostered, though, through the detailed nature of the directive (in comparison to the UTD) and the fairly literal transposition of it into national laws. The directive contains a lot of ambiguities, but also furnishes something to go by with its many lists. Likewise, harmonisation is benefited by the factuality of the unfairnesstest being reduced by the predominantly collective and preventive application of the test and the objectified character of the standards. This ought to simplify the mutual coordination of decisions by courts and regulatory authorities.

Finally, Chapter 12 answers the question whether uniform application of the unfairness clauses is possible. Chapters 6 and 11 stressed that the interpretation, transposition and enforcement of the general clauses is usually directed by the national context. European sources do not provide enough of a counterbalance to the strong national influence. The concurrence of the two unfairness clauses may also have negative consequences for harmonisation. The differences between the clauses and the way they are interpreted on the national and the European level mean that reviewing the same set of facts against the two standards may lead to different results. In light of the objectives for the interaal market, too little attention is given at the European level to substantive coordination and consistency in the application of the clauses. At this point, the EU has not fulfilled its ambitions.

What might help achieve a harmonised interpretation and application of the unfairness clauses? Harmonisation requires increased European influence, or at least reduced national control of both the interpretation and application of the clauses by national courts and regulatory authorities as well as the choices made by national legislatures concerning transposition and enforcement of the general clauses. For there to be greater European influence, there must be more direction from the ECJ (and, hence, preliminary rulings on questions and infringement proceedings), careful transposition of more stringent European regulations and a more tightly managed enforcement system which encourages abstract methods of assessment (which can be geared to each other more easily). Moreover, European harmonisation is aided by a greater appreciation of comparative law considerations and increased coordination between national courts and regulatory authorities. This approach would be made easier by a more coherent (and thus less circumstantial) application of the directive clauses at the national level, clear guidance documents, well-functioning databases, more self-regulation at the European level, a commission for unfair terms in consumer contracts and a European consumer authority. The extent to which the UTD seeks to combat procedural unfairness must become clear, too.

In a concluding section, I express doubts about the feasibility of the proposed series of measures and therefore about coming up with a harmonised interpretation and application of the general clauses in the UTD and UCPD. Existing national paradigms and assessment practices are deeply embedded, while in both the directiees analysed the influence of national sources of law is inherent to the role given to national law (`default rules') and national codes of conduct. The proEuropean approach to the UCPD by the French and English courts and the adherence in the Netherlands to the ex officio review obligation under the UTD provide some hope, however.