In a request for a preliminary ruling requested by District Court of Warsaw, Poland to the European Court of Justice ("ECJ"), three Polish citizens brought an action against Provident Polska relating to agreements entered into between them and Provident Polska. Each of them requested a declaration that the terms of the agreement concluded with Provident Polska which relate to non-interest credit costs are not enforceable against them on account of their unfairness, the fees and commission in question being excessive and unreasonable.

In its defence, Provident Polska contends that the actions brought by the borrowers should be dismissed and makes a counterclaim against each of them, seeking an order requiring them to pay sums corresponding to part of the fees and commissions due under the loan agreements.

The referring court requested the ECJ to interpret whether Article 3(1) of the Directive1 must be interpreted as permitting a contractual term which grants a seller or supplier a fee or commission that is disproportionately high in relation to the service offered to be regarded as an unfair contractual term.

Additionally the referring court also requested the ECJ to interpret whether Article 7(1) of the Directive, and the principle of effectiveness are to be interpreted as precluding provisions of national law or a judicial interpretation of those provisions under which the consumer must have a legal interest in bringing proceedings in order for an action brought by the consumer against a seller or supplier, or a declaration that a contract or part thereof that contains unfair terms is void or ineffective to be upheld. Thirdly, in addition to the principle of effectiveness, whether the principles of proportionality and legal certainty must be interpreted as permitting the finding that a loan agreement whose sole term providing for the manner of loan repayments has been found to be unfair must not continue in force after that terms has been excluded therefrom and is therefore void.

The ECJ made reference to the minimum harmonisation effected by the Directive in that Member States are to provide that unfair terms used in a contract concluded with a consumer by a seller or supplier are not, as provided for under their national law, to be binding on the consumer and that the contract is to continue to bind the parties upon the same terms if it is capable of continuing in existence without the unfair terms. Member States must also ensure that judicial and administrative bodies have adequate and effective means to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers. In principle, EU law does not harmonise the procedures for examining whether a contractual term is unfair, and those proceedings would fall within the domestic legal systems of the Member State. In accordance with the principle of procedural autonomy, it is for the Member State to define the detailed rules under which unfairness of a contractual term is established and the actual legal effects of such a finding are produced.

Member States are however required to ensure that national law must be interpreted in conformity with EU law and that this required national courts to do whatever lies within their jurisdiction, taking the body of domestic law into consideration and applying the interpretive methods recognised by it, with a view to ensuring that the directive in question is fully effective and to achieving an outcome consistent with the objective pursued by it.

The Court further noted that a contractual term is regarded as unfair if it causes a significant imbalance in the parties' right and obligations arising under the contract, to the detriment of the consumer. Such an imbalance may arise from the sole fact that the non-interest costs charged to the consumer are clearly disproportionate in relation to the amount loaned and the services supplied in exchange, connected with the grant and management of a loan. However, as a general rule the unfairness terms of a contact can be determined only if they do not define the main subject matter of the contract or relate to the adequacy of the price and remuneration as against the services or goods supplied in exchange.

In concluding its interpretation of Article 6(1) and Article 7(1) of the Directive the ECJ concluded that these articles must be interpreted as precluding provisions of national law and any judicial interpretation thereof according to which an action brought by a consumer for a declaration that unfair contractual terms are unenforceable, followed by a counterclaim by the seller or supplier for payment of sums due under those same terms, will be dismissed and the consumer ordered to pay the costs on the ground that the consumer has no legal interest in bringing the action because another legal remedy is available whereby the sums already paid to the seller or supplier pursuant to those terms may be recovered.


1. Council Directive 93/13/EEC of 5 April 1993

This article was first published on The Malta Independent on 13/12/2023.

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