The effects of abstract review of contract clauses – legislative and judicial framework

building-79221_1920

In the resolution of seven judges of 20 November 2015 (III CZP 17/15) the Supreme Court faced the question of the precise scope of erga omnes effect of in abstracto abusiveness of contract clauses. Under Art. 47943 of the Code of Civil Procedure the judgment declaring (abstract) abusiveness of a clause is “effective towards third persons”, from the day of listing this clause in the public register administered by the President of the Office of Protection of Competition and Consumers. Although the provisions in question have been repelled from the Polish legal system in April 2016 (and replaced with in abstracto administrative review of clauses), the resolution in question still have a profound significance for framing the underlying premises of abusiveness control in the EU, as well as the interplay between consumer protection and fundamental rights sphere.

The question of the First President and the resolution of the Supreme Court

In a motion of 16 February 2015, BSA I-4110-1/15, the First President of the Supreme Court presented the legal issue:

“Does an entry of a provision of a model agreement, which provision is considered to be prohibited into the register referred to in Article 4794.2 of the Code of Civil Procedure lead to such result that extended efficiency of the final judgement provided for in Article 47943 of the Code of Civil Procedure being the basis for such entry comes into conflict with the proceedings into the subject of the control of the provision of the same content, contained in a different model agreement used by the entrepreneur against whom such judgement has been issued or any other entrepreneur?

 On 20 November 2015 (case file No. III CZP 17/18), the Supreme Court composed of seven justices passed the following resolution:

“1. Substantive validity of the judgement considering a provision of the model agreement to be prohibited excludes an action for considering the provisions of the same normative content to be prohibited, used by the entrepreneur who is a defendant in the case in which this judgement was issued (Article 365 and 366 of the Code of Civil Procedure).

2. Substantive validity of the judgement considering a provision of the model agreement to be prohibited – also after entering such provision into the register (Article 4794.2 of the Code of Civil Procedure) does not exclude an action for considering the provisions of the same normative content to be prohibited, used by the entrepreneur who is not a defendant in the case in which the judgement was issued (Article 365 and 366 in conjunction with Article 47943 of the Code of Civil Procedure)”.

Dependable on the way of making the question and the decision of the Court, the resolution can be made by various compositions of judges (from a board of three to the complete set of the Supreme Court), which is reflected in the various binding power of the interpretation given in the resolution. 

The decision of the Supreme Court of 20 November 2015 was taken in a form of resolution (of a board of seven judges) – i.e. a particular type of judgment not settling any particular dispute, but resolving a problem of interpretation (i.e. expressing the Court’s opinion on how the particular provision of domestic law should be understood). Resolutions are taken upon a question, which can be asked to the Supreme Court both by a court of a lower instance, regarding a particular case, as well as by a limited number of authorised bodies (including the Frist President of the Supreme Court) can refer to the Court with the general problem to be resolved.

In principle, in the case of preliminary questions of ordinary courts, the resolution is formally binding only upon the Court that made the inquiry. However, due to the authority of the Supreme Court and its competence to review other courts’ decisions, the standpoint adopted in the resolution is usually followed de facto by the entire judiciary. Therefore, the resolution of 20.11.2015 involved only interpretation of legal provisions in abstracto, without making a reference to any factual circumstances.

The problem to be resolved

The discussed problem arose upon the particular procedural regulation allowing a specialised judicial body – Court of Protection of Competition and Consumers – to review (on demand of the specified set of persons and entities) the fairness of standard contract terms used on the market.

 The control in question is carried out in abstracto – i.e. regardless of integrating them into any actually concluded contract.

This specific procedure has been introduced to implement Art. 7 of 93/13/EC directive. Standardised in Article 47936-45 of the Code of Civil Procedure the proceedings in question are designed for a purpose of abstract control of standard terms and to protect the collective consumers’ interest. Introduction of these proceedings is an element of transposition of Directive 93/13 on abusive clauses in the consumer agreements. If an action for acknowledgement that a provision of the model agreement is prohibited is granted, the court cites the content of the provisions of the model agreement in an operative part of the judgement and prohibits using them. A copy of the final judgement, with the cause of action granted, is sent to the President of the Office of Competition and Consumer Protection [Prezes Urzędu Ochrony Konkurencji i Konsumentów], who maintains a public register of the provisions of model agreements considered to be prohibited. A final judgement granting the action has an effect for third parties when a provision of the model agreement considered to be prohibited is entered into this register. The Court orders that every final judgement be published in the “Court and Commercial Gazette” [Monitor Sądowy i Gospodarczy] (Article 47942-45 of the Code of Civil Procedure).

At the same time, Article 24.2.1 of the Act on the Protection of Competition and Consumers of 16 February 2007 prohibits application of practice infringing upon the collective consumers’ interests, consisting in application of the provisions of model agreement entered into the register of the provisions of the model agreement considered to be prohibited. This regulation is designed for transposition of Directive 98/27/EC on injunctions for the protection of the consumers’ interests replaced by Directive 2009/22/EC of the European Parliament and of the Council on injunctions for the protection of consumers’ interests.

The case-law

The case-law addressed so far the object-related limits of extended validity of a judgement in divergent ways, adopting narrow and broad approach. The first understanding – i.e. limitation of erga omnes effect to specific provision contained in a particular set of standard terms – has been supported e.g. in a resolution of 7 October 2008 (III CZP 80/08) and in a judgement of 13 May 2010 (III SK 29/09). The Supreme Court’s resolution of 13 July 2006 (III SZP 3/06) or a judgement of 5 June 2007 (I CSK 117/07), in turn, opted for broad understanding of the extended substantive validity. i.e., with the extension to include provisions containing the content equivalent to or similar to the provision considered to be prohibited, provided that their application has the same effect as the application of the provision considered to be prohibited.

A distinction between narrow and broad interpretation also applies to the subjective limits of validity. Under these approaches, the validity works in one direction, only for the benefit of all third parties (the Supreme Court’s resolution of 7 October 2008, III CZP 80/08, a resolution of 13 December 2013, III CZP 73/13) or in two directions, i.e. also against all third parties, including all entrepreneurs other than the entrepreneur who was a defendant in a given case (the Supreme Court’s resolution of 13 July 2006 r., III SZP 3/06, a judgement of 20 June 2006, III SK 7/06).

Detailed issues

Subject-related limits of the substantive validity may be understood narrowly, which means that a specific provision from a specific model agreement is a subject of the proceedings and that validity pertains solely to this particular provision. However, in support of the adoption of broad understanding of the validity limits, it is argued that making any amendments to the provision that was formerly acknowledged to be prohibited implies a necessity of initiating another action for acknowledging that the “amended” provision is also prohibited. It would often make this protection illusory as it would facilitate circumventing its effects.

In favour of a one-way operation of the abusiveness extended rations personae, it has been raised that Article 47943 of the Code of Civil Procedure, as an exception to the principle of operation of the substantive validity of inter partes judgements, should be construed in a narrow way. Article 7.3 of Directive 93/13 requiring that the national law should enable institution of an action against more than one entrepreneur would be redundant assuming that the judgement issued against one entrepreneur should have effects also for entrepreneurs who do not participate in the proceedings.

 Expanding the substantive validity against the entrepreneurs who did not participate in the proceedings would constitute a limitation of their right to protection and to be heard and therefore, exercising the right to the trial by court (Article 45.1 of the Constitution). Moreover, it would aim at giving a judgement the nature of a general standard which would be in conflict with the closed catalogue of the sources of law (Article 87 of the Constitution). 

The view that the substantive validity expanded by the subject-matter works in two directions is supported by the wording of Article 47943 (it mentions the effects “for the benefit” of the third parties only) and a possibility of avoiding several proceedings in relation to identical provisions of the model agreements applied by various entrepreneurs. The law-making operation of the court is not mentioned here, but there is a classical application of law; out of the legislator’s will, a final judgement finding that a given provision of the model agreement is prohibited, upon its being entering into the register, is effective against third parties.

In the Polish legal system, the operation of the substantive validity of the judgement in negative terms means an exclusion of repeated proceedings on the validly-adjudicated case. The operation of substantive validity of the judgement in positive terms means that assessment of the issue that was a subject of the judgment becomes binding (preliminary ruling effect). A provision of standard terms more specific by its normative content, determined on basis of its wording, possibly in conjunction with other provisions of the model, but not merely by its wording and its linguistic context within the model. Acknowledging the clause as prohibited and prohibition of its use, refers therefore to its substantive, rather than formal meaning.

A collective consumers’ interest is represented and exercised on its active side, whereas the individual interest of the defendant-entrepreneur is represented and exercised on its passive side. It is explicitly indicated by a regulation pertaining to locus standi as a plaintiff in the analysed proceedings (actio popularis). An entrepreneur who has applied or applies the challenged provisions has the right to locus standi as a defendant. Defending itself against the claims of the lawsuit, this entrepreneur represents and enforces its own interest. Such position is consistent with a postulate to guarantee the right to be heard and a postulate of Article 71 of Directive 93/13 that the means adopted at the national level should be adequate and effective.

The text is an outcome of the project “Active Charter Training through Interaction of National Experiences” (ACTIONES), managed by the Centre for Judicial Cooperation (European University Institute, Florence) and supported by the European Commission, DG Justice.

Posted on by Karolina Rokita-Kornasiewicz in Civil Procedure, Consumer Law

About the author

Karolina Rokita-Kornasiewicz
Karolina Rokita-Kornasiewicz

Ph.D., Judge of the District Court in Przemyśl, author of publications on competition and consumer law