In proceedings concerning a collective action brought by Verein für Konsumenteninformation (Association for consumer information, “the VKI”) versus Amazon EU S.à.r.l. (“Amazon”), the Court of Justice of the European Union had to decide whether certain terms used by Amazon in its General Terms and Conditions (“GTC”) until 2012 were unfair to consumers residing in Austria.

The VKI had objected to the GTC, most specifically to the choice-of-law clause generally establishing Luxembourg law as the applicable law irrespective of whether Austrian regulations provided better protection in individual cases. It had also claimed that this choice of law clause was invalid merely due to the fact that it made cross-border lawsuits of a collective nature impossible.

In its order for reference of 9 April 2015 (2 Ob 204/14k), the Austrian Supreme Court (Oberster Gerichtshof, “the OGH”) stated a need for clarification by the Court of Justice of the European Union in respect of (i) the application of the Rome II Regulation (on the law applicable to non-contractual obligations, mostly meaning damage claims based on tort) on preventive action for an injunction brought by a consumer protection association and (ii) the law specifically applicable to the contractual terms objected to. Furthermore, the OGH requested the Court to examine which data protection law was applicable.

In the judgment given on 28 July 2016 (Case C-191/15), the Court of Justice of the European Union held that the law applicable to an action for an injunction must be determined in accordance with Article 6(1) of the Rome II Regulation (law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected generally), where what is alleged is a breach of a law aimed at protecting consumers’ interests with respect to the use of unfair terms in GTC. On the other hand, where an assessment of a particular contractual term is being made, the applicable law must be determined pursuant to the Rome I Regulation (on the law applicable to contractual obligations).

According to the judgment pronounced by the Court of Justice of the European Union, it is necessary to draw such distinction, when determining the applicable law, between the assessment of the terms concerned, on the one hand, and the collective action, on the other hand, because only the uniform application of the Rome I and Rome II Regulations ensures that the applicable law does not vary according to the kind of action chosen (individual action versus collective action).

In the case at hand, the term complained about was unfair because it leads the consumer into error by giving him the impression that only the law of that Member State applies to the contract, without informing him that he also enjoys the protection of the mandatory provisions of the law of his country of residence. In principle, article 6(2) of the Rome I Regulation allows the parties to choose the law applicable to a consumer contract, provided that the consumer is not deprived of the protection which the consumer is afforded by those provisions of the law of his country that cannot be derogated from by agreement.

Practitioners of law welcome the clarification provided by the Court of Justice of the European Union with regard to the applicable data protection law. The Court leaves no doubt that the data protection law of the country where the data is processed must be applied. If an undertaking merely “directs its activities” to a country (without performing any data processing, for instance in the context of the activities of an establishment situated there), this is not sufficient to create a connection to the respective law.