Ireland warned about breach of directive

The European Commission has sent Ireland a second reasoned opinion asking it to fully implement a directive concerning common rules for the internal market in electricity.

Member states were required to implement Directive 2009/72 (the Electricity Directive) into national law by March 31st, 2011 (other than certain provisions such as those in respect of the unbundling of vertically integrated entities, where member states were granted an extra 12 months).

The Commission sent Ireland its first reasoned opinion on its failure to implement the directive in June 2012. This second reasoned opinion, announced on April 25th, clarifies the Commission’s views regard transposition of the unbundling provisions in the Electricity Directive.

Failure by Ireland to respond satisfactorily to the Commission’s reasoned opinion within two months means that the Commission can refer Ireland to the European Court of Justice (ECJ).

Other developments

In other EU law developments, agreement was reached on April 23rd between the Commission, European Parliament and Council of the EU on the proposed directive on residential mortgages.

The parliament is expected to vote on the proposed directive at its plenary session to be held from June 10th-13th, 2013. The council will then formally adopt it at one of its forthcoming meetings.

The key topics covered by the directive relate to advertising and marketing, pre-contractual information, creditworthiness and suitability assessments, early repayment regulation of credit intermediaries and regulation of non-credit institutions providing mortgage credit.

Compensation claim

On March 14th, the ECJ gave its decision on a compensation claim for the decrease in value of a house that was built close to Vienna-Schwechat airport. After the airport was extended without an environmental impact assessment (EIA), the claimant argued that the failure to carry out an EIA gave rise to compensation for the decrease in value of the house due to aircraft noise.

The ECJ decided that the fact that an EIA had not been carried out did not give the claimant a right to compensation for pecuniary damage but the national court could decide if the requirements of EU law relating to compensation had been met (including if there was a causal link between the EU law breach and the damage caused).

Separately, the commission has informed suppliers of smart card chips of its initial view that they may have participated in a cartel in breach of EU antitrust rules. Smart card chips are frequently used by consumers such as in mobile phone SIM cards, passports, identity cards, bank cards and Pay TVs. The commission initially agreed to explore the possibility of a settlement with the chips companies involved but has now discontinued the talks due to a reported lack of progress.

*Alan McCarthy is a member of the Irish Society for European Law

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Only ‘fair’ mortgage contract terms can be enforced – EU ruling

Debtors facing mortgage foreclosure proceedings may have a powerful defence weapon in the Unfair Contract Terms Directive 1993, in light of a recent EU ruling. This comes at a time when pressure mounts on EU member states to restructure and expunge bad debts from their banking systems.

On March 14th, the Court of Justice of the European Union handed down a judgment in a case taken by a Spanish mortgage holder, Mr Aziz, against the bank which granted him a 33-year mortgage in 2007 and began foreclosure proceedings against him in 2009.

The court held that Spanish mortgage enforcement legislation contravened EU law, since the grounds on which a debtor could object to mortgage foreclosure proceedings did not include a claim that terms of the relevant mortgage contract were unfair and unlawful under the 1993 directive, or that the proceedings should be staying pending resolution of a separate court action based on the 1993 directive.

The judgment is noteworthy not only because of the topical nature of its subject matter in Spain, as well as Ireland and Europe as a whole, but also because of new legal guidance provided by the court on the definition of an “unfair term”.

In assessing whether a term in a consumer contract is “unfair”, the 1993 directive states that two important factors are whether there is a “significant imbalance” between the positions of the contracting parties or a clear absence of “good faith”.

The court provided new guidance on the meaning of each of these terms. It held that an assessment of the significance of any imbalance should consider the counterfactual situation for the debtor (ie, the situation which would apply under normal national law rules) and the nature of the protections that remain available to the debtor where the mortgage term applies.

In relation to the meaning of “good faith”, the court found that an appropriate test would be whether the debtor would have accepted the relevant mortgage term in hypothetical circumstances where the contract had been negotiated individually between the debtor and the bank.

The Spanish authorities responded to this decision by announcing that the required changes form part of a wide-reaching reform of Spanish mortgage enforcement legislation that is already underway. It remains to be seen if and when any follow-on impact will be felt in Irish litigation or policy-making on this issue. The upcoming merger of the Competition Authority and the National

Consumer Agency can be expected to lead to greater national focus on how the 1993 directive interacts with the statutory rights of defaulting mortgage holders, as well as consumer law.

*Kate Leahy is a member of the Irish Society for European Law

© 2013 irishtimes.com – Click here to view this article on the Irish Times website

Fifty years since Van Gend en Loos judgment

EU law update:February 3rd was the 50th anniversary of the judgment of the European Court of Justice (ECJ) in the landmark case of Van Gend en Loos. The narrow point at issue in the case was whether the provisions of the then EEC Treaty precluded Dutch authorities from increasing tariffs applicable to imports from other member states ahead of the eventual abolition of such tariffs.

The ECJ found that it did. However, the importance of the case is its recognition that private individuals and businesses (Van Gend en Loos was a Dutch distribution company) could directly rely on the terms of the treaty when litigating disputes before their national courts.

Core principle

This concept (referred to as the direct effect of treaty provisions) is now recognised as a core principle of EU law. However, at the time it marked a very significant departure insofar as traditional international treaties had created legal obligations between signatory states. The question of whether such treaties created rights for the individual citizens of those states was a matter to be determined by national law.
The ECJ’s finding that the EEC constituted “a new legal order of international law for the benefit of which states have limited their sovereign rights … and the subjects of which comprise not only member-states but their nationals” may well have come as news to the authorities of some of those member states, two of which (Belgium and the Netherlands) had argued before the ECJ that the treaty had no such effect.

It is not unusual for superior courts to interpret the founding documents of states in ways which might have surprised those who originally drafted and adopted them. The ruling of the US Supreme Court in Brown v Board of Education that segregated schools were a breach of a constitution adopted over 70 years prior to emancipation is unlikely to have been anticipated by its drafters.
Similarly, the Irish Supreme Court’s 1973 decision in McGee that the constitution provided for a right to marital privacy, including a right to use contraception, might have surprised many of those who voted for its adoption in 1937.

Remarkably, Van Gend en Loos’ revelation that the treaty was of an entirely different legal nature to those governed by the standard principles of international law came a mere six years following its signing.

Whether one celebrates the decision for establishing that the European project was based not only on law but also on the rights of individuals, or mourns it as an early example of a European institution overreaching at the cost of state sovereignty, it remains a significant milestone.

* Donogh Hardiman is chairman of the Irish Society for European Law

© 2013 irishtimes.com