In Banca B. SA v A.A.A (Case C 269/19) ECLI:EU:C:2020:954 the First Chamber of the Court of Justice of the European Union (CJEU) has held that National Courts can facilitate negotiations to replace an unfair term where the removal of the term would result in the annulment of the contract, if the annulment would result in unfavourable consequences for the consumer.
Previous EU case law had established that the National Courts could not modify a consumer contract because such an option would not adequately discourage traders from including unfair terms. However, the facts of this case has prompted the CJEU to reverse that position in order to protect the consumer, but only where certain conditions are met.
This case came before the Romanian Courts when the consumer, A.A.A., applied to Court to declare that the terms of a loan agreement concerning the variable interest rate were unfair and therefore void. Under those terms the Bank was able to arbitrarily change the level of the interest rate, which was found to have undermined A.A.A.’s interests as a consumer. The Bank appealed and the Romanian Appeal Court referred it to the CJEU, who were asked:
- Should Article 6(1) of the Unfair Contract Terms Directive (93/13/EEC) (the Directive) be interpreted as meaning that where a term was found to be unfair and the contract could continue after its removal but there was no supplementary provisions under national law that could replace it, the Directive prevented the national court from establishing a new method of calculation of the interest rate or from inviting the parties to negotiate a method of calculation?
The CJEU held in order to ensure that high level of consumer protection was in place, the Directive demanded that National Courts take all measures necessary to protect the consumer from the particularly unfavourable consequences which could result from the annulment of a loan agreement, i.e. the supplier could immediately claim the debt from the consumer. Therefore, nothing precluded the National Court from, amongst other things, inviting the parties to negotiate a method calculating the interest rate provided it set out the framework for those negotiations.