In the tiny Grand Duchy of Luxembourg is a tiny branch of the corporate king, Amazon. It subjects its customers to buying their goods under Luxembourg law. Is that fair? And what happens to Amazon’s choice of law after it is has been forced through the latticed-meshes of six pieces of EU legislation which determine the applicable national law?
Amazon is one of the world’s largest mail order companies. It has a subsidiary tucked away in the tiny grand Duchy of Luxembourg.
For consumers who read German, Amazon runs a German-language website. This reaches its customers in Luxembourg, Germany, and even as far afield as Austria.
However, whenever a customer buys goods through Amazon, the transaction is governed by Amazon’s unilaterally imposed standard terms and conditions. One term in the agreement is that the law applicable to the contract is that of Luxembourg.
This term has troubled an Austrian consumer protection Association known as the Verein für Konsumenteninformation. It believes that EU law does not allow Luxembourg law to prevail over the existing (and better) legal protection which Austrian consumers enjoy under the Austrian Consumer Protection Act, the Austrian Payment Services Act, and the Austrian Data Protection Act.
Consequently, the Association sought an injunction to stop Amazon from using specific terms in the contract when trading with consumers living in Austria. It brought its action against Amazon in the Austrian courts – the Association thinking it was entitled to do this in accordance with the EU’s Directive 2009/22/EC on injunctions for the protection of consumers’ interests (OJ  L110/30).
Amazon has always denied any wrongdoing; it has no legal connection with Austria either in terms of having a commercial seat there or indeed a subsidiary.
The dispute has escalated up the various levels of the Austrian court system and has arrived at the Austrian Supreme Court.
At the Austrian Supreme Court
The key problem is determining the applicable national law, which is set down in several pieces of EU legislation.
The first difficulty was the EU’s ‘injunction for consumers’ interests’ Directive. Article 2 governs ‘Actions for an injunction’ and provides:
1.Member States shall designate the courts or administrative authorities competent to rule on proceedings commenced by qualified entities within the meaning of Article 3 seeking:
2.This Directive shall be without prejudice to the rules of private international law with respect to the applicable law, that is, normally, either the law of the Member State where the infringement originated or the law of the Member State where the infringement has its effects.
The application of international private law would generate an immediate problem in this case; namely, the Association would not be permitted bring an anticipatory, preventative injunction because it had no contractual link with Amazon.
That said, Article 2(2) also seemed to leave the choice of the applicable law rather open to the extent that either Luxembourg’s laws or those of Austria might still apply.
Consequently, the Austrian Supreme Court took the view that the issue of the applicable law should be determined by the relevant EU legislation, the so-called Rome Regulations.
Rome I governs contractual obligations (Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I) (OJ  L177/6).
In contrast, Rome II governs non-contractual obligations (Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II) (OJ  L199/40).
It might be thought that since this case was all about the interpretation and application of contract law, Rome I should apply. Rome I is significant because of Article 6(2). The Article means that in a consumer contract, a choice of law clause may not be enforceable if this deprives a consumer of protection he would otherwise have enjoyed.
However, the Austrian Supreme Court thought Rome I did not apply here. The reason was that the Association was seeking preventative injunction; accordingly, Rome II should apply. That was the approach which the German Supreme Court had already adopted in a judgment docketed as BGH Xa ZR 19/08.
Yet the Austrian Supreme Court was aware of the fact that there were also opinions in legal commentary suggesting it might still be possible to govern the issue of the applicable law under the Rome I Regulation rather than Rome II. Hence, Question 1 would be asked of the CJEU.
On the assumption that Rome II applied, which were the relevant articles? The Austrian Supreme Court took the view that Article 14 should not apply. For whereas Article 14 applied to situations in which the parties had expressed a choice for a particular law, the Article could be displaced, and indeed should be in circumstances such as those in the present case where the contested clauses in the contract were capable of affecting the interests of consumers living in Austria.
With Article 14 displaced, the starting point should be the ‘general rule’ as that is set out in Article 4 of Rome II. The General Rule provides:
1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.
2. However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.
3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.
Might Luxembourg law apply by dint of Article 4(3) of Rome II? After all, Amazon was claiming that it had a manifestly ‘closer connection’ to the law of Luxembourg given that this was where it was established and its standard terms and conditions made plain that Luxembourg law applied.
However, in a similar situation of standard terms and conditions in a cross-border transaction, the German Supreme Court had taken the opposite view and had deemed that Article 4(3) of Rome II should not be applied (BGH Xa ZR 19/08, a decision subsequently criticised and commented upon in German legal literature). Thus, it was not clear what the Austrian Supreme Court should do, hence Questions 2.2 and 2.3. Perhaps other criteria altogether were applicable, hence Question 3.
The fourth issue troubling the Austrian Supreme Court was that of the EU’s ‘unfair terms in consumer contracts’ Directive 93/13/EEC (OJ  L95/29).
Article 3 of the unfair terms in consumer contracts Directive allows a court to set aside a choice of law clause if it is unfair.
In that context, it was pertinent to recall that the CJEU in Case C-240/98, Océano Grupo Editorial ECLI:EU:C:2000:346 had reasoned:
24. It follows that where a jurisdiction clause is included, without being individually negotiated, in a contract between a consumer and a seller or supplier within the meaning of the Directive and where it confers exclusive jurisdiction on a court in the territorial jurisdiction of which the seller or supplier has his principal place of business, it must be regarded as unfair within the meaning of Article 3 of the Directive in so far as it causes, contrary to the requirement of good faith, a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.
Was that the case here? Opinion in legal literature also seemed divided.
In that context, there was also the issue of data processing law and the protection of privacy. The consumer Association had observed that there were clauses in Amazon’s standard terms and conditions which indicated that data might be exchanged with credit-risk assessment and financial services companies in Germany and Switzerland. The Association thought that Austrian data protection law should apply.
They relied on the EU’s Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data. The Directive too has an applicable national law provision.
Article 4 states:
National law applicable
1. Each Member State shall apply the national provisions it adopts pursuant to this Directive to the processing of personal data where:
(a) the processing is carried out in the context of the activities of an establishment of the controller on the territory of the Member State; when the same controller is established on the territory of several Member States, he must take the necessary measures to ensure that each of these establishments complies with the obligations laid down by the national law applicable; …
However, the Austrian Supreme Court disagreed with the Association. It was minded to find that the applicable law should be where the data processing takes place and where the defendant company has its corporate seat. However, whether that was the right approach was also not certain and consequently clarification would need to be sought from the CJEU on this point too.
According to the Curia website, the Austrian Supreme Court has asked:
 In an action for an injunction within the meaning of Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers’ interests […] must the law applicable be determined in accordance with Article 4 of Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) […] where the action is directed against the use of unfair contract terms by an undertaking established in a Member State that in the course of electronic commerce concludes contracts with consumers resident in other Member States, in particular, in the State of the court seised?
 If Question 1 is answered in the affirmative:
2.1. Must the country in which the damage occurs (Article 4(1) of the Rome II Regulation) be understood as each country towards which the commercial activities of the defendant undertaking are directed, with the result that the clauses challenged must be assessed according to the law of the court seised if the entity qualified to bring an action challenges the use of such clauses in commerce with consumers resident in that country?
2.2. Does a manifestly closer connection (Article 4(3) of the Rome II Regulation) to the law of the country in which the defendant undertaking is established exist where that undertaking’s terms and conditions provide that the law of that country shall apply to contracts concluded by the undertaking?
2.3. Does a choice of law clause of that kind entail on other grounds that the contractual clauses challenged must be assessed in accordance with the law of the country in which the defendant undertaking is established?
 If Question 1 is answered in the negative:
How then must the law applicable to the action for an injunction be determined?
 Regardless of the answers to the previous questions:
4.1. Must a term included in general terms and conditions specifying that a contract concluded in the course of electronic commerce between a consumer and a trader established in another Member State shall be governed by the law of the country in which that trader is established be regarded as unfair within the meaning of Article 3(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts? […]
4.2. Is the processing of personal data by an undertaking that in the course of electronic commerce concludes contracts with consumers resident in other Member States, in accordance with Article 4(1)(a) of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, […] and regardless of the law that otherwise applies, governed exclusively by the law of the Member State in which the establishment of the undertaking is situated in whose framework the processing takes place or must the undertaking also comply with the data protection rules of those Member States to which its commercial activities are directed?
Regulatory control over a website and the interpretation of Article 4(1) of the data processing Directive is currently at stake in Weltimmo, see further, Case C-230/14, Weltimmo – regulatory competence over websites.
The application of one Member State’s data protection law over a citizen in another Member State is at stake in both Case C-362/14, Schrems – does a ‘safe harbour’ shelter states that deprive EU citizens of their EU Charter rights? and Case C-192/15, Rease – secretly spied on, medical data leaked, and left unprotected by the Dutch regulator.
Update – 8 February 2016
The Third Chamber is due to hear Case C-191/15, Verein für Konsumenteninformation on 2 March 2016.