Fees for the use of PayPal or Sofort­überweisung – Is the decision by Munich Higher Regional Court in the Flixbus case a step towards greater legal clarity?

Fees for the use of PayPal or Sofortüberweisung – Is the decision by Munich Higher Regional Court in the Flixbus case a step towards greater legal clarity?

Great anticipation surrounded the appeal court decision recently handed down regarding the judgment of Munich I Regional Court of 1 December 2018 (17 HK O 7439/18), with which the court had prohibited the company Flixbus, upon request by the Centre for Competition, from agreeing with its customers on a fee for the use of the payment methods PayPal and Sofortüberweisung. Munich Higher Regional Court set aside this judgment with its decision of 10 October 2019 (case no. 29 U 4666/18), thus ruling in favour of Flixbus. According to the appeal court decision, a trader does not breach section 270a German Civil Code if it agrees with its customers on a fee for the use of the payment methods Paypal and Sofortüberweisung. The last word has not yet been spoken in the matter, however, since Munich Higher Regional Court has allowed an appeal on points of law and thus Germany’s Federal Court of Justice is likely to rule on this important legal question for practitioners.

Content

Section 270a German Civil Code – Agreements on fees for the use of non-cash payment instruments
PayPal
Sofortüberweisung
Conclusion

 

Section 270a German Civil Code – Agreements on fees for the use of non-cash payment instruments

Under section 270a, 1^st sentence, German Civil Code, an agreement by which the customer of a trader is obliged to pay the trader a fee for the use of a SEPA basic direct debit, a SEPA company direct debit, a SEPA transfer or a payment card is void. The term of payment covers payment instruments in the four-party card payment procedure and thus the most common debit cards (formerly known as EC cards in Germany) and credit cards (see section 270a, 2^nd sentence, German Civil Code). The ban on surcharging in section 270a German Civil Code transposes Art. 62(4) of Directive (EU) 2015/2366 (PSD2) into German law. In line with EU standards, section 270a German Civil Code aims to prevent surcharges for the most common methods of non-cash payment – SEPA direct debits and card payments.

In the Flixbus case, a total of four payment methods were available to customers: they could choose one of the two free payment methods, EC card or credit card, or a fee-based payment option – PayPal or Sofortüberweisung. The question to be answered by Munich I Regional Court and now by Munich Higher Regional Court was thus whether the payment methods PayPal and Sofortüberweisung were also covered by section 270a German Civil Code and should therefore also have been offered free of charge by Flixbus.

PayPal

Munich I Regional Court considered PayPal to be covered by section 270a German Civil Code: in the case of PayPal, ultimately a payment is made via the SEPA direct debit system/bank transfer or credit card. With this view, Munich I Regional Court deviated not only from the prevailing opinion in the legal literature, which emphasises the e-money nature of PayPal payments, but also from that of the explanatory memorandum on section 270a German Civil Code, according to which PayPal payments are specifically not meant to be covered by section 270a German Civil Code.

Even if probably few users of PayPal realise it, PayPal may constitute the most important individual application in practice for e-money within the meaning of section 1(2), 3^rd sentence Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG). According to the legal definition therein, e-money is any monetary value stored electronically, including magnetically, in the form of a receivable with respect to the issuer which is issued in return for payment of a monetary sum in order to make payments within the meaning of section 675f(4) 1^st sentence German Civil Code (i.e. every provision, transfer or withdrawal of a sum of money), and which is also accepted by natural persons or legal entities other than the issuer.

If a customer selects PayPal as the payment method, the corresponding sum is deducted from the customer’s e-money account managed by PayPal and credited to the payment recipient (e.g. the company Flixbus) to its e-money account also managed by PayPal within a few seconds. Thus e-money is transferred from one PayPal account (the customer’s) to another PayPal account (the trader’s). The customer’s e-money account is ‘topped up’ via direct debit, credit card or bank transfer. But that does not necessarily have to take place in temporal connection with the e-money payment concerned. Instead, the customer can reserve a balance on their e-money account, from which the payment concerned is made. The balance on their e-money account also does not have to have been ‘initiated’ by the customer; it can also come from a third party, for instance from a refund by another trader after a return of goods by the customer. The issuing of new e-money or ‘topping up’ the e-money account via direct debit (initiated by PayPal) or credit card charge on the occasion of the specific payment (e.g. to Flixbus) is then not necessary in each case. A direct money transfer from the (main) bank account of the payer to the (main) bank account of the trader (Flixbus) accordingly does not occur when there is an e-money transfer. That is the difference between a payment via e-money and the payment methods covered by section 270a German Civil Code of bank transfer, direct debit or credit card payment.

Contrary to Munich I Regional Court, Munich Higher Regional Court correctly recognised this system or the e-money nature of PayPal payments and held the view that PayPal payments are not covered by section 270a German Civil Code. In practice, this viewpoint of the Munich Higher Regional Court will certainly have only limited significance. This is partly because prior to the expected decision of the Federal Court of Justice (FCJ), there is not yet any legal certainty about the scope of application of section 270a German Civil Code. Also, at present it is forbidden in the Paypal General Terms and Conditions for traders working with Paypal to agree with customers on a fee for the use of PayPal. The legal consequence, which on closer inspection section 270a German Civil Code specifically does not impose, is thus achieved by PayPal by way of a contractual agreement with the traders.

Sofortüberweisung

While it is not surprising that Munich Higher Regional Court assesses PayPal payments differently from Munich I Regional Court, it was not necessarily to be expected that Munich Higher Regional Court would set aside the decision of the lower instance in relation to the payment method of Sofortüberweisung as well. With its decision to apply section 270a German Civil Code to Sofortüberweisung, Munich I Regional Court followed the line taken by practically all the legal literature. In addition, Berlin Regional Court in its judgment on the flight reservations website opodo dated 21 March 2019 (52 O 243/18) adopted the line taken by Munich I Regional Court.

Sofortüberweisung is a payment instigation service within the meaning of section 1(1) 2^nd sentence no. 7 Payment Services Supervision Act, via which the payments in online retailing are instigated via the customer’s online bank account. A transfer is instigated from the account of the paying customer to the account of the trader as payee. Berlin Regional Court describes Sofortüberweisung in its opodo ruling as a ‘direct transfer system.’ Customers use their personalised security features for online banking by allowing the payment service provider (Sofort GmbH) offering the payment method Sofortüberweisung access to the account-holding bank so that this payment service provider checks the account has a sufficient balance and can initiate the payment in favour of the online retailer.

In opposition to the applicability of section 270a German Civil Code to the Sofortüberweisung payment type, the Munich Higher Regional Court held that the service of Sofort GmbH is not the execution of the transfer (the customer’s account-holding bank does that), but the release of the payment and the notification of it to the payee. However, the payment instigation service is aligned to a payment procedure carried out with a payment method covered by section 270a German Civil Code. Therefore in that respect there is a difference from the Paypal situation, in that the e-money payment connected with PayPal from a technical legal perspective is something different from a SEPA direct debit or SEPA transfer, while in the case of Sofortüberweisung as a payment instigation service, only the procedure for the instigation of the payment is modified. This explains why the Sofortüberweisung payment type is often not differentiated selectively from a SEPA transfer in the general view. Munich Higher Regional Court apparently takes a more nuanced view, even if only the grounds not yet published will reveal the key considerations of the court.

Conclusion

The decision of Munich Higher Regional Court represents an important step towards clarifying the still-unresolved legal question of the scope of application of section 270a German Civil Code. It does not provide legal certainty in the meantime, because it is to be assumed that the Centre for Competition bringing the action will continue the proceedings before the FCJ. It is also conceivable that the FCJ will refer the legal question to the CJEU for a decision. It thus remains to be seen whether it is still the case even in the further judicial proceedings that payment methods like PayPal and Sofortüberweisung are to be removed from the scope of application of section 270a German Civil Code. Even if this were desirable in view of the legal text and materials, this is by no means self-evident in view of the increasingly consumer-friendly case law.