Spain, Commercial Court n. 9 of Barcelona, 27 June 2014 nº 722/13-D2

Identification of the case

• Article 43 and Article 222 of the Code of Civil Procedure (Ley de enjuiciamiento civil; “LEC”)

• Directive 93/13/EEC on unfair terms in consumer contracts

Summary of the case

Mr S. S. concluded an agreement for the novation of a mortgage loan with Caixabank in 2005, which contained a ‘floor’ clause (cláusula suelo). The latter consisted of a minimum interest rate below which the interest rates could not fall, independently of market rate fluctuations. In 2013, Mr S. S. brought an individual action seeking the annulment of the clause before the Juzgado de lo Mercantil nº 9 in Barcelona due to its (alleged) unfair nature.

In 2010, a collective action had been initiated by a consumer protection association, ADICAE (Asociación de Usuarios de Bancos Cajas y Seguros), against 72 banking institutions, including Caixabank, seeking (inter alia) an injunction that prohibits the continued use of ‘floor’ clauses in loan agreements (the proceedings ultimately resulted in a judgment of Juzgado de lo Mercantil nº 11 de Madrid of 7 April 2016, ECLI:ES:JMM:2016:53). Spanish procedural law allows individual consumers to ‘opt-in’ during a two-month period after the collective action has been initiated (Article 15.3 LEC). Apart from an injunction, the court can give a declaration in the collective action that (i) the unfair terms at issue are null and void and (ii) the defendant(s) must pay damages, i.e. pay back the amounts paid by consumers on the basis of those unfair terms. Individual consumers can invoke this declaration at the enforcement stage to claim restitution before the same court (Article 519 LEC). An example is the judgment of the Tribunal Supremo of 9 May 2013 [discussed more extensively in the template about Gutiérrez Naranjo], the res judicata effect of which has (subsequently) been limited by the TS itself to only consumers who are explicitly addressed by that judgment (i.e. the consumers who have ‘opted-in’). Caixabank was not a party to the collective proceedings leading up to the judgment of 9 May 2013.

Back to the case at hand: Caixabank requested a suspension of the individual action brought by Mr S. S., pending final judgment in the collective action. The court in Barcelona found that the applicable procedural rules – or rather: the interpretation of those rules by the Audiencia Provincial de Barcelona (Court of Appeal, Barcelona) – required it to suspend the individual action, which would lead to a subordination of the individual action to the collective action as regards both the course of the proceedings and the outcome. First, the consumer would be necessarily linked to the outcome of the collective action, even if he had decided not to participate in it, which would prevent the court from analyzing all the circumstances in the individual action. Secondly, the consumer would be dependent on the period within which a final judgment in the collective action was to be given. That could take years, during which the consumer would have to continue paying interest based on the (potentially unfair) ‘floor’ clause. Thirdly, even if the consumer would wish to participate in the collective action, he would be subject to constraints relating to the determination of the competent court and to the pleas that may be put forward.

Regarding the first issue, the referring court observed that the fact that individual actions must be stayed awaiting the outcome in the collective action meant that it would also affect consumers who have not been party to the collective proceedings, even if the final judgment would not produce a res judicata effect.

As the referring court doubted the compatibility of those procedural rule with EU law, it referred the case to the CJEU for a preliminary ruling.

• Civil judicial enforcement
• Collective enforcement (other)

Mr S. S. sought annulment of the ‘floor’ clause in the mortgage agreement. Under Spanish law, terms that have found by a court to be unfair are automatically null and void, which gives rise to a right to full restitution (of amounts overpaid on the basis of those terms), including interest (Article 1303 of the Código Civil).

Caixabank requested a suspension of the proceedings (Article 43 LEC) pending final judgment in the collective action.

The Court asked the CJEU the following questions:

“Can it [i.e. the applicable procedural rules] be considered an effective means or mechanism pursuant to Article 7(1) of Directive 93/13?

To what extent does the suspensory effect of a stay of proceedings preclude a consumer from complaining that unfair terms included in a contract concluded with him are void, and, therefore, infringe Article 7(1) of Directive 93/13?

Does the fact that a consumer is unable to dissociate himself from collective proceedings constitute an infringement of Article 7(3) of Directive 93/13?

Or, on the other hand, is the suspensory effect of a stay of proceedings provided for in Article 43 of the Code of Civil Procedure compatible with Article 7 of Directive 93/13 in that the rights of consumers are fully safeguarded by collective actions, the Spanish legal system providing for other equally effective procedural mechanisms for the protection of consumers’ rights, and by the principle of legal certainty?”

The CJEU joined all the questions presented by the referring court and addressed the protection afforded by the Directive 93/13 under Article 7, affirming that the imbalance between the individual consumer and sellers/suppliers cannot be found in the relation between consumer associations and sellers, nor in the proceedings involving them. The CJEU also distinguished the deterrent nature and dissuasive purpose of actions for an injunction, together with their independent (abstract) character.

Under the principle of effectiveness, the CJEU assessed the effects of the suspension of the individual action in the national (Spanish) context and acknowledged that, on the one hand, the outcome of the collective action could be binding for the individual consumer, even if he has decided not to participate in it; and on the other hand, it may prevent the national court from analysing in particular the individual negotiation of alleged unfair clauses. In addition, the national court could not examine the relevance of suspension of the individual action. Thus, the applicable procedural rules appeared to be incomplete and insufficient, and did not constitute “adequate and effective means” in the sense of Article 7 of Directive 93/13. The CJEU considered that the need to ensure consistency could not justify those rules, because of the difference in nature between collective and individual actions; thus, there is no risk of incompatible decisions. The effective exercise of subjective rights conferred by Directive 93/13 cannot be called into question by reference to the organization of the Member State’s judicial system.

Then, the CJEU held that:

“Article 7 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as precluding a provision of national law, such as that at issue in the main proceedings, which requires a court, before which an individual action has been brought by a consumer seeking a declaration that a contractual term binding him to a seller or supplier is unfair, automatically to suspend such an action pending a final judgment concerning an ongoing collective action brought by a consumer association on the basis of Article 7(2) of Directive 93/13 seeking to prevent the continued use, in contracts of the same type, of terms similar to those at issue in that individual action, without the relevance of such a suspension from the point of view of the protection of the consumer who brought the individual action before the court being able to be taken into consideration and without that consumer being able to decide to dissociate himself from the collective action.”

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

Not cited, but the case clearly falls within the scope of the Charter; it concerns Directive 93/13 and the principle of effectiveness (national procedural rules making the exercise of EU rights practically impossible or excessively difficult).

• Right to an effective remedy before a tribunal

No explicit reference to the Charter, but the consumer’s right to effective judicial protection (right to adjudication within a reasonable time, right to an effective remedy before a court of law) could be prejudiced if he would be forced to await the outcome in the collective action.

The referring court does mention CJEU 27 June 2013, Case C-93/12 (Agrokonsulting) in its decision, in which it was held that Article 47 of the Charter constitutes a reaffirmation of the principle of effective judicial protection in EU law. The CJEU also held that under the principle of effectiveness, the principle of legal certainty and the proper conduct of the proceedings must be taken into consideration. 

• Equivalence
• Effectiveness

According to the CJEU, there is no indication that the Spanish procedural rules would be subject to a different application in disputes concerning rights arising under national law and in those concerning rights arising under EU law.

In its preliminary reference, the referring court explicitly mentioned the principle of effectiveness (vs. the principle of legal certainty), as well as the need to prevent contradictory judgements and the economic costs involved with litigation scattered all over the country.

The individual and collective redress mechanisms, although included in the same article within the Directive 93/13, serve a different purpose and have a different nature. The CJEU clarified that the imbalance between consumers and sellers/suppliers is not the same in the relationship between consumer protection associations and sellers; consumer protection associations do not have an inferior position. The fact that the consumer cannot dissociate its claim ex ante and is bound to the effect of the collective redress ex post hampers the effective exercise of consumers rights.

Elements of judicial dialogue

• Direct dialogue between CJEU and National court (preliminary reference)

• CJEU C-413/12 Asociación de Consumidores Independientes de Castilla y León v Anuntis Segundamano España SL

The referring court sought guidance from the CJEU in a situation where (1) the case law at national level was not unanimous and (2) it was not sure whether the approach taken by its own Court of Appeal was compatible with EU law. A similar issue was already a matter of dialogue between Spanish courts and CJEU as the latter evaluated the unfairness of jurisdiction clauses to be applied to collective claims in C-413/12 (Asociación de Consumidores Independientes de Castilla y León v Anuntis Segundamano España SL). Thus, the referring court seems to rely on the use of preliminary reference in order to trigger an intervention of the CJEU in favour of the interest of individual consumers. The preliminary reference is structured as a request to indicate the means to solve the conflict.

Additional notes on the decision

The CJEU’s judgment has been interpreted in different ways by national courts in Spain. Roughly speaking, there are two interpretations:

-        Individual actions are not connected in any way to collective actions. Individual consumers do not have to wait for the outcome in collective actions, but they also cannot rely on that outcome. This could be considered as a complete ‘opt-out’ for the good and the bad. This is the approach taken by e.g. the Audiencia Provincial in Barcelona.

-        While the difference between individual and collective actions must be acknowledged, an abstract assessment of unfair terms in a collective action could/should help individual consumers. This is the approach taken by the Juzgado de lo Mercantil in Barcelona, see e.g. Juzgado de lo Mercantil nº 9, decision nº 413/14-D3 of 11 July 2016: if certain terms are found to be unfair in a collective action, the claim for annulment in an individual action should be awarded without further formalities; if the term is found to be valid, the individual consumer is still entitled to an assessment of his personal and specific circumstances. The judgment involved Catalunya Banc, which had also been a party to the collective proceedings initiated by ADICAE.

For example, STS 9 May 2013 (see above) deems ‘floor’ clauses to be not illegal or intransparent as such, but the way they have been incorporated into the contract could lead to a lack of transparency. If the second interpretation were to be followed, consumers should be able to rely on that judgment even if they are not explicitly addressed by it.

After CJEU 21 December 2016 C-154/15 (Gutiérrez Naranjo), one of the question is what should happen in case consumers have already brought individual proceedings, which have resulted in a final and binding judgment. The CJEU appears to have recognized the principle of res judicata as a possible limitation to consumer protection. On 5 April 2017, the TS held that judgments rendered before 21 December 2016 are not affected, even if they violate EU law. Those judgments cannot be revised, and the proceedings cannot be reopened.

Consumers are therefore effectively ‘punished’ for swiftly bringing their claims. Not all Spanish courts were ready to suspend the proceedings awaiting the outcome of the preliminary ruling. The Tribunal Constitutional has held that from a constitutional perspective there was no obligation to stay or suspend, with a view to individual rights protection (STC 148/2016, 19 September 2016). In its judgment the TC explicitly referred to S. S. and used it to emphasize that a suspension was not mandatory. (See for a more extensive analysis F. Cordon Moreno, ‘Acción colectiva y acción individual para la tutela de los derechos de los consumidores: Relación entre ambos procesos’, 2 December 2016).