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The Challenges Posed by the Implementation of the Directive into Domestic Law—a UK Perspective

CHRISTIAN TWIGG-FLESNER AND DEBORAH PARRY

1. INTRODUCTION

THE DIRECTIVE ON Unfair Commercial Practices (UCPD)1 is, undoubtedly, a significant contribution to the developing field of European consumer law. However, as with all the other consumer law measures adopted at the European level, the success of the UCPD will depend on how it is implemented and applied by the Member States. The burden is therefore on the Member States to give effect to the UCPD in their national legal order as fully as possible. The purpose of this chapter is to consider some of the challenges which the Member States may face in the process of transposing the UCPD. It will start with a short overview of the key principles regarding the implementation of directives, as refined by the European Court of Justice (ECJ). It will then turn to specific aspects of the Directive which may cause particular difficulties, in particular the UCPD’s status as a maximum harmonisation measure, and the use of a broad general clause2 supplemented by two ‘smaller’ general clauses. These two aspects make it particularly challenging for a Member State such as the UK, which has not previously relied on a general clause to regulate unfair commercial practices, to implement the Directive effectively. This chapter does not attempt to provide any particular suggestions as to how the UK should implement the Directive, although it does attempt to identify a number of different possibilities regarding the general approach that

could be adopted. It also does not offer an analysis of the UCPD itself.3

1 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer practices in the internal market (‘the Unfair Commercial Practices Directive’) [2005] OJ L 149/22.

2Art 5 of UCPD.

3See eg H Collins, ‘The Unfair Commercial Practices Directive’ [2005] European Review of Contract Law 417; J Stuyck, E Terryn and T van Dyck, ‘Confidence through Fairness?

216Christian Twigg-Flesner and Deborah Parry

2.IMPLEMENTING DIRECTIVES—BASIC OBLIGATIONS

Before turning to an examination of the particular challenges thrown up by the UCPD, it is first appropriate, as a preliminary issue, to recall the requirements imposed by European Community (EC) law with regard to the obligation on the Member States when implementing a directive. The starting point is Article 249 EC, according to which a directive is ‘binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods’. A directive therefore specifies only a result, ie, the domestic laws of the Member States need to be adapted so as to ensure that their legal frameworks produce the same outcome as the directive would. The ‘form and methods’ by which this result can be achieved are a matter for the Member States. Undoubtedly, the easiest way of doing so is to adopt domestic legislation which incorporates the text of the directive verbatim, but this may not be the most attractive option. One reason for not wishing to do this may be that the terminology employed by a particular directive would be at odds with established notions in domestic law, and a different wording may be preferable to avoid causing terminological confusion. In addition, and irrespective of whether there are terminological problems, the provisions of a directive may not fit into the existing domestic framework without some adjustment of the latter. It is usually the case that a directive will deal with only selected aspects in respect of which there was a perceived need to adopt harmonising legislation, but related matters will not be covered. A verbatim transposition could make it much more difficult to apply existing domestic law and thereby undermine the objective pursued by a directive. A further reason for departing from the exact wording of a directive is that there may already be domestic legislation in place which corresponds in substance with that directive, making it unnecessary to take further steps to implement that directive.4

The rather general statement in Article 249 EC regarding the Member States’ freedom of ‘form and methods’ has been given a sharper focus by the ECJ through a number of judgments handed down in the context of Article 226 proceedings.5 From these cases, the scope of the phrase ‘form and methods’ in Article 249 EC can be defined more clearly. With regard to the use of terminology which differs from a directive, it seems that a terminological

The New Directive on Unfair Business-to-consumer Commercial Practices in the Internal Market’ (2006) 43 CMLRev 107; G Howells, HW Micklitz and T Wilhelmsson, European Fair Trading Law—The Unfair Commercial Practices Directive (Aldershot, Ashgate, 2006).

4Cf Case 29/84 Commission v Germany [1985] ECR 1661.

5This is the provision which permits action to be taken against a Member State for failing to fulfil its obligations under the EC Treaty, and this includes not implementing a directive properly.

A UK Perspective on Implementation 217

difference in the domestic provisions which does not produce a substantive departure from that directive is permissible.6 Moreover, the ECJ has repeatedly confirmed the point made above that:

the transposition of a directive into domestic law does not necessarily require that its provisions be incorporated formally and verbatim in express, specific legislation,7

but has also emphasised that domestic legislation must:

guarantee the full application of the directive in a sufficiently clear and precise manner so that, where the directive is intended to create rights for individuals, the persons concerned can ascertain the full extent of their rights . . .8

Not only may this not require a specific domestic measure, but it also seems unnecessary to adopt exactly the same words as are used in a directive; indeed, the ‘general legal context’ may suffice if the directive is applied in a sufficiently clear and precise manner.9 This position has been repeated, confirmed and refined in many judgments, and over the last five years or so, there have been a string of rulings specifically in the field of consumer protection. The decision which had perhaps the biggest impact was Commission v Netherlands,10 a case involving a shortcoming in the Dutch implementation of the Unfair Contract Terms Directive.11 The Netherlands had argued that the relevant provisions of Dutch law were capable of interpretation in accordance with the Directive, and therefore not problematic. The ECJ gave this rather short shrift, holding that:

even where the settled case-law of a Member State interprets the provisions of national law in a manner deemed to satisfy the requirements of a directive, that cannot achieve the clarity and precision needed to meet the requirement of legal certainty [which] is particularly true in the field of consumer protection.12

This judgment could be of particular concern to a Member State such as the UK, where case law and the doctrine of precedent (stare decisis) have a particularly strong position, because they appear to say that case law, even where this is settled, may not be enough to satisfy the requirements of a directive and that, as a result, legislation may be required.13 This seems

6Case 363/85 Commission v Italy [1987] ECR 1733.

7Eg Case C–59/89 Commission v Germany [1991] ECR I–2607, para 18.

8Ibid.

9Case C–58/02 Commission v Spain [2004] ECR I–00621.

10Case C–144/99 Commission v The Netherlands [2001] ECR I–3541.

11Council Directive 93/13/EEC of 5 Apr 1993 on unfair terms in consumer contracts [1993] OJ L 95/29.

12Case C–144/99 Commission v the Netherlands [2001] ECR I–3541, para 21.

13See also H Beale, ‘Unfair Terms in Contracts: Proposals for Reform in the UK’ (2004) 27

Journal of Consumer Policy 289 at 302–3.

218 Christian Twigg-Flesner and Deborah Parry

somewhat at odds with other judgments which have accepted that case law interpreting domestic legislation is relevant when considering whether that legislation complies with EC law,14 and that a breach of EC law would only then exist where such case law was not unanimous or sufficiently well established to ensure an interpretation in conformity with EC law.15 In an area such as consumer protection, it would appear that the demands of legal certainty set by the ECJ are such as to require legislation which is sufficiently clear and precise to give effect to a directive; however, this does not appear to entail that the terminology drawn from a directive needs to be transposed verbatim to achieve this, nor does it seem necessary to adopt specific legislation reflecting the requirements of a directive. To take a different view would be moving down the road of making the verbatim transposition of directives mandatory, effectively turning them into regulations. This view therefore seems unlikely to be in accordance with EC law.16

With regard to the specific question of transposing the UCPD, the short review of the demands of EC law suggests that it is not a requirement of EC law simply to copy out a directive verbatim, and to replace all the existing domestic measures with one single law in identical terms to the directive. Instead, the Member States are merely obliged to achieve a particular result, that is, the prohibition of unfair commercial practices in the manner prescribed by the UCPD. The Member States are free (to an extent) to choose how this will be achieved. This, for example, means that it should be perfectly possible to continue to use concepts familiar to domestic law, rather than unfamiliar notions introduced by a directive, if functionally equivalent notions can be identified in domestic law.17 This point will be explored further below.

Of course, the jurisprudence of the European Court of Justice appears to have interpreted the freedom of choice and method given to the Member States under Article 249 EC rather strictly. There have certainly been instances where the ECJ has been critical of Member States which had not transposed consumer protection measures in a clearly identifiable manner, citing a lack of legal certainty as a main objection. It is submitted that in those particular instances the ECJ may have been entitled to conclude that the implementation in a particular Member State was deficient, but that these rulings do not have the effect of altering the fundamental character of directives, nor of the requirements imposed on the Member States by Article 249.

Having considered the basic obligations of the Member States under EC law, it is now appropriate to turn to the specific challenges thrown up by the UCPD.

14See, in particular, Case C–300/95 Commission v UK [1997] ECR I–2649.

15Case C–372/99 Commission v Italy [2002] ECR I–819.

16Cf Beale, above n 13.

17Cf Law Commission, LC 292, Unfair Terms in Contracts Cm 6464 (London, Law Commission, 2005).