EU online trading | ECJ confirms choice of law in general terms and conditions

The eagerly awaited decision of the European Court of Justice (ECJ) on the law governing the review of general terms and conditions and choice-of-law clauses (judgment of 28 July 2016, C-191/15) is of great significance for cross-border e-commerce. European online traders should make it a priority to check whether their choice-of-law clause is correctly worded based on the ECJ’s standards. Otherwise, the all-clear can now be given (at least for the time being).

Wording of choice-of-law clauses

In the proceedings initiated by an Austrian consumer protection association against Amazon EU, Luxembourg, the ECJ affirmed the high requirements regarding the transparent wording of a choice-of-law clause in an online retailer’s general terms and conditions. These must contain an explicit reference to the priority of the law of the consumer’s home country, which is possibly more favourable for the consumer, as already decided by the Federal Court of Justice in 2012.

Effect in proceedings by consumer protection associations

In contrast to the Advocate General’s proposal, however, the ECJ also made clear that a review of general terms and conditions as such in response to a complaint brought by a consumer protection association (collective action) ultimately has to be classified under Rome I Regulation No 593/2008 on the law applicable to contractual obligations (Rome I) for contract-law purposes in just the same way as a complaint brought by a consumer (individual action). As a result, the ECJ is essentially opening up the choice-of-law option in Article 6(2) sentence 1 Rome I which is so important for EU online retail for the abstract review of general terms and conditions in intra-Community proceedings brought by associations as well. However, the question of whether a “favourability check” under the terms of Article 6(2) sentence 2 Rome I, referring to the home law of the consumer, also has to be carried out during the abstract review of general terms and conditions still exists, as this issue was not relevant for the decision in the specific case. This is ultimately the key issue, and the correct answer would be no.

Applicable data protection law in company groups

The ECJ also decided which law is applicable inside a company group pursuant to Article 4(1) of Data Protection Directive 95/46/EC if the group has branches in various Member States. It seems as if the ECJ wishes to extend the principles developed in the Google judgment (of 13 May 2014, C-131/12) for taking into account the markets “targeted” under market and consumer protection law if a branch exists in the relevant state to cover intra-Community processing of data. When the General Data Protection Regulation (GDPR) comes into force on 25 May 2018, data protection law will be harmonised across the EU. In relation to third states, the targeting of markets can also be sufficient for European data protection law to be applicable even if no branch exists in the EU (“lex loci solutionis”, or law of the place of performance, Article 3(2) GDPR).

Further article: EU online trading at risk – the ECJ rules on choice-of-law clauses in general terms and conditions