Finland, Supreme Court, 15 September 2015 S2014/652 (KKO 2015:60)

Identification of the case

• Code of Judicial Procedure, Chapter 5 Section 13
• Interest Act, Section 4
• Consumer Protection Act, Chapter 4 Section 1 and 2

• Council Directive 93/13/EEC on unfair terms in consumer contracts Art. 4.2. and 6.1.

Summary of the case

Person A had concluded a consumer credit agreement with L Ltd via the internet (“instant loan”). The maximum overdraft of the loan was EUR 2 000. The credit terms were based on general consumer credit terms drawn up by L Ltd. They included the interest rate (9,9 % monthly), withdrawal fees and other expenses. The interest for late payment was according to the Finnish Interest Act.

A had withdrawn the maximum amount of EUR 2 000. The credit agreement was discontinued and the credit balance had been due for payment. L had transferred the debt to G Ltd..

G brought an action for payment of the sum of EUR 2 836,94 (capital, interest and withdrawal fees) and expenses EUR 45 before the district court. G also claimed interest for late payment for the capital at the annual rate of 118,80 % (the same rate as during the credit arrangement) from the due date for 180 days, and after that according to Section 4.1 of the Finnish Interest Act. The claim was based on Section 4.2 of the Finnish Interest Act according to which in consumer credits the interest for late payment must be paid in accordance with the same grounds as prior to the due date for a maximum of 180 days from the date when the debt became due in full.

In the district court the case was dealt with in a summary procedure available for actions involving limited amounts of money. A did not answer to the claims before the court (he was passive throughout the proceedings in the higher level courts as well).

In its default judgment the district court ordered A to pay the capital and the expenses. The court, however, considered that the interest rate for late payment was manifestly without a basis as provided in Chapter 5 Section 13 in the Code of Judicial Procedure. Thus, it dismissed the claim insofar as it exceeded the rate stipulated in Section 4.1 of the Interest Act.

The court of appeal upheld the district court’s ruling.

The district court and the court of appeal applied only national legislation and neither one referred to relevant EU law.

• Civil judicial enforcement

Annulment of the lower court decisions (claim).

The issues before the Supreme Court were 1) whether the district court had had the competence to dismiss the claim of its own motion, and 2) the unfairness of the interest rate for late payment.

1) Competence

The Supreme Court stated that in Finland the competence of the courts to examine the case of its own motion in civil cases is very limited and there are no explicit exceptions to this rule in national legislation. The Court, however, noted that this competence is affected by the consumer protection legislation of the EU, in particular the Council Directive 93/13/EEC on unfair terms in consumer contracts, and the established case law of the CJEU.

The Supreme Court went on to explain the CJEU’s case law as concerns Article 6 of the Directive. It referred i.a. to the imbalance between the consumer and the supplier, and the demands of the principle of effectiveness in the context of consumer law. The Supreme Court quoted the key statements of the CJEU in cases Océano Grupo Editorial and Salvat Editores C-240/98–C-244/98, Cofidis C-473/00, Mostaza Claro C-168/05, Pannon GSM, C-243/08, Asturcom Telecomunicaciones C-40/08, VB Pénzügyi Lízing C-137/08, Pohotovost´ C-76/10, Pereničová and Perenič C-453/10, Aziz C-415/11 and Banco Español de Crédito C-618/10.

In its summary of the case law the Supreme Court stated that a national court is obliged to ascertain of its own motion whether a contractual term which is the subject of the dispute before it falls within the scope of the Directive. If that is the case, the court must examine the unfairness of the term ex officio where it has available to it the legal and factual elements necessary for that task. If need be, the court must request further clarification. The obligation to examine is not dependent on the fact whether the defendant pleaded his position as a consumer or the unfairness of the term. The Supreme Court also referred to Faber C-497/13 and stated that the court must fulfill the obligation notwithstanding rules of domestic law to the contrary.

As a conclusion the Supreme Court stated that due to the demands posed by EU law, the general national procedural rules must be interpreted in a manner that takes into account the rights of the consumer. This means i.a. that the relevant provisions of the Finnish Code of Judicial Procedure on claims that are manifestly without a basis shall be interpreted so that they also cover such claims that are based on terms that are contrary to Directive 93/13/EEC. As the obligation to examine the unfairness of the terms in cases falling within the scope of the Directive is not dependent on the initiative of the consumer this also constitutes an exception to the general procedural rule in civil cases according to which a court shall not pass a judgment on something more than what has been claimed by a party (Chapter 24 Section 3 of the Code of Judicial Procedure).

2) Unfairness

Due to its procedural position the Supreme Court could not examine the unfairness of the actual credit interest rate. This, however, did not prevent the Court from examining the unfairness of the late payment interest even though the claim was based on national legislation (Interest Act, Section 4.2), and, as such, outside the scope of the Directive (Barcleys Bank C-280/13, paras. 39-45; in this context the Court also referred to RWE Vertrieb C-92/11, Kusionová C-34/13, Cofidis C-473/00 and Unicaja Banco and Caixabank C-482/13). This was due to the fact that the high interest rate of the late payment was in reality a consequence of the actual credit interest rate that was included in the general consumer credit terms of the agreement.

The Supreme Court then examined the unfairness of the interest rate of the late payment in the light of Article 4.2 of the Directive and the relevant case law of the CJEU (Pohotovost’, Pereničová and Perenič, Caja de Ahorros y Monte de Piedad de Madrid C-484/08). It first stated that the examination of the unfairness of the court’s own motion presupposes that the terms are not in plain intelligible language. The Court emphasised that failure to indicate essential terms of the agreement can be decisive in this assessment (Pohotovost’ para. 71, Pereničová and Perenič para 41). The Court also referred to the requirements of good faith, balance and transparency laid down in the Directive and stated that a national court is obliged to determine whether the terms, having regard to the particular circumstances of the case, meet those requirements (Pannon para. 37 and 42, Van Hove C-96/14 para. 27).

As to the consequences of unfairness the Supreme Court stated that a national court is required only to exclude the application of an unfair contractual term in order that it does not produce binding effects with regard to the consumer, without being authorised to revise its content (Banco Español de Crédito para. 65 and Asbeek Brusse de Man Garabito C-488/11 para. 57). The provisions of the Finnish Consumer Protection Act (Chapter 4 Section 2) should be interpreted in conformity with this requirement in spite of its wording which also allows the adjustment of the terms.

In its conclusions the Supreme Court noted that the terms concerning the interest of late payment had not been expressed in plain intelligible language as they, i.a., failed to mention the annual percentage rate. The Court examined the late payment interest rate and stated that it was unfair. The claim was manifestly without a basis.

Role of the Charter and role of the general principles on enforcement

• Equivalence
• Effectiveness

The Supreme Court explained the general characteristics of the principle of equivalence, national procedural autonomy and effectiveness in the light of CJEU’s case law (van Schijndel and van Veen C-430/93 and C-431/93, J. van der Weerd C-222/05-C-225/05).

It, however, stated that those principles are to a certain extent different/modified when the case falls within the scope of the Unfair Terms Directive.

See above. The Supreme Court emphasised the ex officio power/obligation of national courts to examine the unfairness of the terms of a consumer credit agreement.

Elements of judicial dialogue

• Direct dialogue between CJEU/ECtHR and National court (out of preliminary reference procedure)
• Dialogue between high court - lower instance court at national level

• van Schijndel and van Veen C-430/93 and C-431/93
• J. van der Weerd C-222/05-C-225/05
• Océano Grupo Editorial and Salvat Editores C-240/98–C-244/98
• Cofidis C-473/00
• Mostaza Claro C-168/05
• Pannon GSM, C-243/08
• Asturcom Telecomunicaciones C-40/08
• VB Pénzügyi Lízing C-137/08
• Pohotovost´ C-76/10
• Pereničová and Perenič C-453/10
• Aziz C-415/11
• Banco Español de Crédito C-618/10
• Faber C-497/13
• Barcleys Bank C-280/13
• RWE Vertrieb C-92/11
• Kusionová C-34/13
• Unicaja Banco and Caixabank C-482/13
• Caja de Ahorros y Monte de Piedad de Madrid C-484/08
• Van Hove C-96/14
• Asbeek Brusse de Man Garabito C-488/11

Conform interpretation with EU law as interpreted by the CJEU.

Disapplication of national law in favor of EU law (or rather: interpretation of national law in conformity with EU law).

To express that EU law is relevant in order to determine the case.

To solve the case so that EU law requirements are taken into account.

Legislative reform.

Additional notes on the decision

The Consumer Protection Act (Chapter 4 Section 2) was amended so that it will no longer be possible for a court to revise an unfair term of the contract but only exclude the application of an unfair contractual term in case the consumer has not had an opportunity to influence the contents of the agreement (in force: 1 September 2019).

The Code of Judicial Procedure (Chapter 5 Section 3) was supplemented by a new provision in which it is required that the plaintiff in his complaint informs the court about the exact terms of the consumer credit agreement (i.a. ALR) (in force: 1 September 2019).

The national courts have applied national legislation in conformity with EU law after the decision.