Concept of “consumer” financial products CJEU

Consumidor

The value of the investment, the risks assumed and the knowledge and experience are irrelevant to a consumer

 

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Only it will no longer be “consumer” when the activity is so profesional.

That is the criterion of the TJUE expressed his Judgment 3 October 2019, in Case C-208/2018.

The Supreme Court of the Czech Republic raised a cuestión prejudicial to the European Court of Justice of the Union, about the rating to be give to the concept of "consumer"Under holding a financial instrument, when one party is individual.

The issue was the interpretation to be given by the ECJ to the concept of "consumer",  considering the article 17, paragraph 1 del Reglamento 1215/2012 (R1215, onwards) and if such should be classified as a natural person who, under a financial contract for differences concluded with a brokerage firm, performs operations in the FOREX market, regardless of the volume of investment. Also if for that classification, They are relevantfactors as:

  • the value operations made under such contracts,
  • the importance of the risk of loss economic underwrite these contracts involving,
  • the possible knowledge or experience that person in the field of financial instruments or their active behavior in conducting such operations,
  • and the fact that the article 6 theRome I Regulation It does not apply to financial instruments or that person is a "Retail customer" in the sense of thearticle 4, paragraph 1, punto 12, of laDirective 2004/39.

Antecedentes

The 2 October 2014, Ms.. Petruchová, residing in Czech Republic, held a framework contract Remote with FIBO, a brokerage firm in Cyprus operating as a professional in the field of securities. In that framework contract, introduced purchase orders and selling the base currency, they should be executed by FIBO through its online trading platform.

In that framework contract, stipulated formalization of individual contracts between the parties, rated "Financial contracts for differences”, que son financial instruments, which aims at the realization of benefits resulting from the difference between the rates applicable to the purchase and sale of base currency relative to the currency listed.

Even it is able to carry out operations in the FOREX market with equity capital, the plaintiff, It operated using 'lots”, worth 100.000 American dollars (USD), To the change, about 88.000 euros, each batch, using the leverage effect. This allowed him to negotiate more funds at his disposal, so that, when you are opening a position buying base currency, He hired a loan with FIBO, that reimbursed the closed position with the sale of the base currency.

In the framework contract, there was a clause, the number 30, including a agreement conferring jurisdiction in favor of the courts of Cyprus.

The 3 October 2014, FIBO the applicant concluded with a financial contract for difference, introducing a purchase order 35 batch to a fixed exchange rate in relation to the Japanese yen (JPY).

FIBO, meanwhile, that, at the time the applicant made the order, and because a significant accumulation of these in your trading system, the run with 16 second delay, producing a fluctuation in the exchange rate of US / JPY in the FOREX market. With this, The order was sought by the defendant to a different type of change that she had accepted the purchase order confirm. If the purchase order had not been done with those second delay, Ms.. Petruchová would have pocketed triple the benefit actually obtained.

The 12 October 2015, Ms.. Petruchová filed demand before the Regional Court of Ostrava, in Czech Republic. He alleged unjust enrichment by FIBO. The lawsuit was filed with the court of the place of residence, because it considered "consumer" as established by the article 17 paragraph 1 R1215, understanding, also, the agreement conferring jurisdiction clause 30 of the contract concluded between both parties, it was ineffective, by applying the article 19 punto 1 and 25, paragraph 4 of the same Regulation.

Through Auto de 29 September 2016, Ostrava Regional Court inadmitió demand, therefore concluded that the agreement conferring jurisdiction clause 30 of the agreement between both parties was valid, the Court of lacking international jurisdiction to hear the matter. Also, for the Tribunal, the plaintiff It could not be classified as "consumer" for the purposes of the article 17 paragraph 1 del Reglamento 1215/2012why He held no financial contract for differences to suit your personal needs, but, also, possessed knowledge and experience sufficient to subscribe, acting for the sole purpose of pocketing a profit, having been warned of the risks contained such contracts to "retail clients", (art. 4, paragraph 1, punto 12 Directive 2004/39).

It also considered the Court, thatarticle 17, paragraph 1, of the R1215 should be interpreted in the same way as the article 6 theRome I Regulation, intended to be uniformity of legal regimes relating to conflict of law rules and the determination of international jurisdiction over consumer contracts. The Court held that the financial instruments is it so excluded the scope the Rome I Regulation.

Later, Olomouc High Court, He confirmed the Order of the Regional Court of Ostrava, through Auto de 17 January 2017.

By the applicant, It was filed appeal against the order of the Regional Court de Ostrava before the Supreme Court of Civil and Criminal of the Czech Republic. He concluded that, if you considered to Dña. Petruchová "consumer", as it established the article 17, paragraph 1, del Reglamento 1215/2012, Clause 30 of the contract concluded between both parties, be ineffective.

In your car, He recalled that, according to him article 25, paragraph 4 R1215, will not take effect the agreements on jurisdiction that is contrary to the provisions of the article 19 of the same Regulation. will priority implementation sobre los articles 17 a 19, as regulating competition in respect of contracts concluded by the consumers, the following agreements:

  • those who are after the birth of litigation,
  • which allow consumers to formulate claims before different courts of those indicated in these articles,
  • which, concluded between the consumer and contracting, both domiciled or habitually resident in the same Member State at the time of the conclusion of the contract, confer jurisdiction on the courts of that Member State.

For Supreme Court, the agreement conferring jurisdiction included in the clause 30, did not meet any of the requirements to give valid, by the following reasons:

  1. The contract was concluded before the birth of litigation.
  2. The agreement conferring jurisdiction deprived the applicant, of the right to request custody of the courts of his domicile (art. 18, paragraph 1 del Reglamento 1215/2012).
  3. When the contract is held, the parties were domiciled and registered office in different These Members.

For these reasons, uncertainty about the part of the applicant "consumer", as defined by article 17, paragraph 1 R1215, considering that the lower courts had misinterpreted this concept.

The Supreme Court considered that the article 17, paragraph 1 R1215 and article 6, paragraph 1 of the Rome I Regulation, They could not be interpreted in the same direction, because Regulations They not have the same object. The first regulates the Jurisdiction International, as which courts and which country are competent to hear the matter, while the second, regulates the law applicable to contractual obligations. In this case, the contract between the two parties is financial instrument and investment, to be applicable to Regulation 1215/2012.

Last, established that in order to qualify the applicant as "consumer”, It was irrelevant whether operations were carried out a large amount, I had knowledge and experience or the contract was complex, atypical or implied risks, of those who had been warned.

In this situation, the Supreme Court decided to stay the proceedings and refer to the CJEU one cuestión prejudicial, with the following content:

"Must Article 17, paragraph 1, of Regulation 1215/2012 in the sense that it must qualify consumer for the purposes of that provision also to a person, as the applicant in the main proceedings, participating in operations carried out in the FOREX market on the basis of their own orders but actively launched through a third party who is professionally engaged in this activity?”

Legal arguments of the ECJ to resolve the question referred

The question referred to the ECJ, It is asked if it can be termed one of the contracting parties, in this case, the individual, as "consumer".

For jurisprudence of the ECJ, It applies the article 17, paragraph 1 R1215, where three conditions are met cumulatively:

  1. One of the parts of the contract has the status of consumer, operating in a context outside professional activity.
  2. It has concluded the contract between the consumer and professional.
  3. The contract belongs to one of the categories set out in article 17, paragraph 1, letters to) a c) R1215.

If you do not give these three requirements, for jurisprudence of the ECJ, competition can not be determined under the rules concerning contracts concluded by consumers (STJUE de 23.12.15 Hobohm, C-297/14, EU:C:2015:844).

The importance of this statement focuses on interpretation which it is given to the concept of "consumer" in this case, by the contractual party it is acting as plaintiff in the prosecution of the Member State.

For TJUE, the concept of "consumer" (Arts. 17 and 18 R1215) has to interpreted of restrictively, in relation to the position of this person in a particular contract and the nature and purpose of this, and not to the subjective situation of the same. A person may be considered consumer for certain operations and economic operator with respect to other.

The TJUE has inferred that "Only to contracts concluded outside and independently of any professional activity or purpose, with the sole purpose of satisfying the specific needs of an individual's private consumption, applies them to the specific regime established by the R1215, for the protection of the consumer as the party deemed to be economically weaker " (in this sense, the STJUE of 25.01.2018, Schrems, C-498/16, EU:C:2018:37, paragraph 30 and case-law cited). It is not applicable to them contracts aimed at a professional activity.

The articles 17 a 19 R1215 only apply when the contract between the parties is for a non-professional use of the good or service that the same question.

In this case, the issues by lies the question arises whether it can be classified as "consumer” (as art. 17, paragraph 1 R1215) to natural person who, under a financial contract for differences concluded with a brokerage firm, performs operations in the FOREX market risk high amount.

Notably, nothing indicated by the national authorities that the conclusion of the contract between the parties or financial contract for difference, took place in the context of a professional activity exercised Dña. Petruchová. In fact, He stated that at that time was college and working part-time student, holding such contracts with brokerage, to the margin of his professional activity.

In this case, the CJEU has held that the R1215 applied to consumer contracts, extending to all types of contracts, except the transport contract, with exceptions. Here It is included, therefore, financial contract for differences. He also stated that the Mentioned Regulation was not limited to certain amounts.

In fact, and the Advocate General stated in its conclusions that "If the R1215 were interpreted in the sense that it does not apply to the substantial financial investments, the investor would have no way to know if you could benefit from the protection afforded by that provision, to the failure to set any amount that Regulation above which it is considered that an operation is important in view of its amount, which would be contrary to the will of the legislature of the Union, expressed in recital 15 of that Regulation, according to which the rules of jurisdiction must be a high degree of predictability. "

The fact that a financial contract for differences may pose a significant risk of economic losses, irrelevant to the possibility of qualifying to the investor as a "consumer", under Article 17, paragraph 1 R1215.

As to whether the knowledge and experience a person in the subject matter of the contract held, as possessing Dña. Petruchová, in relation to financial contracts for difference, They can prevent a characterization of "consumer”, according to him article 17, Paragraph 1R1215, the TJUE says, so you can recognize a person such condition, enough that enters into a contract for a purpose outside his trade or profession. Regulation also establishes requirements in this regard.

The concept of "consumer"as regulated in the R1215 It is independent of knowledge and information held by such person. According to the jurisprudence of the ECJ, to qualify the individual "consumer", It is to simply examine its position in the contract concluded between both parties.

That the individual act FOREX market through an intermediary company, it is also Irrelevant to qualify it as "consumer".

Para el TWENTY, "Factors such as the value of transactions under financial contracts for difference, the importance of the risks of financial losses involved underwrite such contracts, the possible knowledge or experience of the individual in the sector of financial instruments, or even, its active behavior in performing such operations, irrelevant, by themselves, for the purposes of that classification. "

On the other hand, the ECJ also examines the concept of "retail client" in the sense of the article 4, paragraph 1, punto 12 Directive 2004/39, as it can be incoherent with the concept of "consumer" Article 7, paragraph 1 R1215.

The concept of "consumer" It defined in the article 6, paragraph 1 of the Rome I Regulation in virtually the same terms as in the R1215. However, on Rome I Regulation Excluding consumer contracts which constitute a financial instrument, among the listed financial contracts for differences, as provided in Article 4 of la Directive 2004/39, stating that "retail customer" is "any client who is not a professional client". Although the exclusion of financial instruments is done in the Rome I Regulation It is irrelevant when it comes to qualify a person as a "consumer" for the purposes of the R1215.

On Annex II of Directive 2004/39, which states "they should be regarded as professionals in all investment services and activities and financial instruments:

  1. Entities which must be authorized or regulated to operate in financial markets, as credit institutions or investment firms;
  2. large companies that meet two of three criteria:
    1. a total balance 20 million,
    2. one net turnover of 40 million
    3. and equity of 2 million;
  3. entities or public institutions and national governments, central banks and the World Bank,
  4. institutional other investors. "

However, the entities understood in one of these four categories may request non-professional treatment, and nonprofessionals, They may be treated as if they were request. For this, It should not be considered possessor of knowledge and experience comparable to professional customers, It must undergo appropriate prior assessment, fulfilling two of the three following criteria:

  • Operations have performed significant volume with an average frequency of 10 per quarter over the previous four quarters;
  • Owning a portfolio of financial instruments of a higher value 500.000 euros,
  • have occupied, at least one year, a professional position in the financial sector.

The ECJ has interpreted that "cliente”, regardless understood as "profesional" The how "retail”, It defined in the Directive 2004/39 as "Any natural person or legal entity to whom an investment firm provides investment services or ancillary services". A retail customer can also be a legal person. The rating of a person "Retail customer", in the sense of the article 4, paragraph 1, punto 12 Directive 2004/39, It is in itself irrelevant for the qualification of that person as "consumer", for the purposes of the article 17, paragraph 1 R1215.

Ratio decidendi part TWENTY: Consumer concept

Ultimately, the ratio decidendi the TJUE that focuses on:

"The AArticle 17, Paragraph 1,the Reglamento1215 / 2012, must be interpreted as meaning that a natural person who, under a contract entered into with a company CFD brokerage, performs operations in the international currency market FOREX(Foreign Exchange) through that company it must be regarded as 'consumer' within the meaning of that provision if that contract has not been concluded within the framework of the professional activity of the person concerned, end corresponding to verify the national court. For this rating, on the one hand, in principle, irrelevant, by themselves, factors such as the value of transactions made under financial contracts for differences, the importance of the risks of economic losses involving subscribe such contracts, the possible knowledge or experience of the person in the field of financial instruments or its active conduct in carrying out the operations referred, y por otro lado, It is in itself irrelevant, in principle, the fact that theArticle 6theRegulation Roma I) It does not apply to financial instruments or that person is a "retail client" within the meaning of thearticle 4, paragraph 1, punto 12 Directive 2004/39/EC, modifying theDirectives 85/611 / EEC, 93/6/CEE and 2000/12 / EC and repealingDirective 93/22 / EEC.”

Ultimately, much volume is handled, risk of losses or take experience and knowledge of the customer, as long as I don't act professionally, the customer will have the status of consumer with all the consequences.

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