Consumers buying direct can sometimes sue in home courts, rules ECJ

Out-Law News | 10 Sep 2012 | 1:39 pm | 4 min. read

Consumers who buy goods direct from traders abroad can sue the traders in their home country's courts if certain conditions are met, the European Court of Justice (ECJ) has ruled.

The ECJ said that consumer contracts do not have to be concluded "at a distance", such as over the phone or online, in order for consumers to be allowed to take action in home courts against traders in other EU countries.

Home courts can be used by consumers if the business directs sales into that home country, the Court said.

Whether consumers have the right to sue traders in their home courts should be determined on the basis of whether a trader "pursues" or "directs ... commercial or professional activities" to consumers in other EU member states from the one in which they are based and whether the disputed contract concerns related activities, the ECJ said.

The EU's Brussels Regulation determines which courts have jurisdiction to hear and decide cases between EU citizens. Generally, those being sued have the right to have the cases heard in courts in their home country. However, there are many instances in which that general rule does not apply.

Under the Regulation there is a specific derogation from the general rule in respect of contracts which means that someone can sue you about a contractual issue in the country in which a contract is performed. In cases where the contract is performed in more than one jurisdiction cases are heard at the place most connected to the issue at dispute. For instance if a business in the UK contracted a German firm to construct a building for them but a dispute arose over defective building work, the case would be heard in the UK.

A further derogation from the general rule is set out under Articles 15 and 16 of the Regulation. Under those sections consumers have the right to sue EU businesses in courts in the member state in which they live, rather than where the trader is based.

This rule applies if "the contract has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer’s domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities."

German car retail business owners Ahmad and Wadat Yusufi had argued that the rules about consumer contract jurisdiction only applied in cases where contracts had been concluded "at a distance". However, the ECJ rejected that argument.

The ECJ was ruling in a case referred to it from the Austria Supreme Court after a consumer in the country appealed against the decision of lower courts to prevent her suing the German car retailer in Austria.

Daniela Mühlleitner bought a car from the Yusufi's car retail business in Hamburg after discovering the firm on the internet. Upon her discovery Mühlleitner had phoned the company to enquire about the car she sought and then travelled to Germany to sign a contract for, and drive away, another vehicle she had been offered during that phone call.

However, the Austrian subsequently discovered the car was "defective" and asked the retailer to "repair" it, according to the ECJ's ruling. When the retailer refused Mühlleitner initiated legal action in Austria, claiming that the company had abrogated its contractual responsibilities to her as a consumer.

The retailer argued, though, that Mühlleitner had no right to bring an action against it in Austria and said that any legal proceedings should be heard in Germany. The retailer said that because Mühlleitner had travelled to Germany to conclude the contract for the car in person, that she did not have the right to sue it in Austria

A court in Austria initially agreed with the retailer, ruling that Austrian courts had no jurisdiction to hear Mühlleitner's case. Mühlleitner appealed the verdict but a second court too threw out her argument.

However, the Austrian Supreme Court, upon hearing another appeal from Mühlleitner, decided to refer a question relating to the scope of the consumer contract provisions of the Brussels Regulation to the ECJ before determining the outcome of the case. It asked the ECJ to determine whether contracts had to be "concluded at a distance" in order for consumers to have the right, under the Brussels Regulation, to sue traders from other EU member states in courts in their own country.

The ECJ said that the wording of the Regulation shows that contracts between consumers and traders do not necessarily have to have been concluded at a distance in order for consumers to take advantage of being able to sue in courts based in the country they live in.

The ECJ also said that if it was a condition that contracts had to be concluded at a distance in order for consumers to be able to sue traders in their own country, then that would "run counter to the objective of [the section of the Brussels Regulation on consumer contract jurisdiction] ... in particular the objective of protecting consumers as the weaker parties to the contract."

In a previous case ruled on by the ECJ, the Court deemed "ineffective" arguments that claimed that consumer contracts had to be concluded at a distance in order for a consumer to be able to sue a hotel in the country in which the consumer was based.

Although the findings were only relevant to the particulars of that one case, the ECJ said that the "essential condition" for determining jurisdiction in consumer contract dispute cases was not in establishing whether contracts had been concluded at a distance. Instead, it must be determined whether traders have directed "commercial or professional activity" to the country in which the consumer is based, it ruled.

"In that respect, both the establishment of contact at a distance, as in the present case, and the reservation of goods or services at a distance, or a [greater reason] the conclusion of a consumer contract at a distance, are indications that the contract is connected with such an activity," it said. "[The consumer contract provisions of the Brussels Regulation] must be interpreted as not requiring the contract between the consumer and the trader to be concluded at a distance."