If your business sells goods to consumers across the EU, you may need to review your standard terms of sale following the recent ruling of the Court of Justice of the European Union (CJEU) in the case of Verein für Konsumenteninformation v Amazon EU Sàrl.
The CJEU decided that Amazon’s 'choice of law' clause in its standard terms of business was unfair under the Unfair Terms in Consumer Contracts Directive because it gave consumers the impression that only that law would apply.
Businesses need to make it clear in their standard terms and conditions that consumers will still benefit from mandatory consumer protections which apply in their own country.
Amazon EU, which is incorporated in Luxembourg, had provided in its standard terms of sale that contracts with consumers in Austria would be governed by the law of Luxembourg.
A local consumer protection organisation, Verein für Konsumenteninformation (VKI), brought an action against Amazon EU with the aim of challenging the fairness of these terms and prohibiting their use. After a number of appeals, the case was brought before the Austrian Supreme Court, which referred various questions to the CJEU and requested a preliminary ruling.
The CJEU held that, in principle, consumer contract terms can stipulate that the governing law will be the law of the member state where the supplier is established. However, the court went on to say that these terms would be unfair if they led the consumer into believing that only the law of that member state applied to the contract.
The Advocate General said that the issue of the unfairness of the terms must be decided in accordance with Article 6(2) of the Rome I Regulation, which states that parties may choose the law governing a consumer contract, provided that the consumer may also benefit from the protection afforded to them by provisions in their own jurisdiction. In this case, as the terms adopted Luxembourg law, Luxembourg law would govern the fairness of the terms. Drawing on the fairness test included in the Unfair Terms in Consumer Contracts Directive, the court concluded that a standard term designating the governing law of the contract is not automatically unfair unless it misleads consumers by suggesting that only the law of that member state would be applicable.
Despite finding against Amazon, the CJEU ruling is likely to be welcomed in some quarters for shedding light on what can be a confusing area for businesses that sell to consumers across multiple EU member states.
The headline point for businesses to take from the case is that they can continue to select the governing law that they wish to apply to B2C contracts regardless of the member state in which the customer is based. Businesses that wish to make their consumer contracts subject to the law of England and Wales may do so.
For businesses that wish to use a single set of standard B2C terms and conditions across multiple EU jurisdictions, the Amazon case also provides some helpful guidance on how to comply with EU consumer protection law. The main lesson learned is that governing law clauses should be caveated by a clear statement to the effect that consumers will continue to benefit from any mandatory provisions of the law of the country in which they are resident.
Contributor: Richard Collie
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.