The enforceability of governing law clauses in cross-border B2C contracts

The case

Amazon EU, incorporated in Luxembourg, entered into sales contracts with consumers in Austria. The sales contracts stated that Luxembourg law would govern the contracts. Verein für Konsumenteninformation, a consumer group in Austria, brought an action in the Austrian courts to challenge the fairness of certain terms of the sales contracts. The Austrian court referred certain questions to the ECJ.

Amongst its answers, the ECJ stated that EU law in principle allows traders to stipulate the governing law in B2C contracts.  Under Article 6(2) of the Rome I Regulation, parties may choose the law applicable to a consumer contract. But the choice of law 'may not… have the result of depriving the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law' of that consumer's member state. The ECJ stated that a governing law clause will be unfair (under the fairness test imposed under Article 3(1) of the Unfair Terms in Consumer Contracts Directive (93/13/EEC), transposed into English law under Part 2 of the Consumer Rights Act 2015) if it misleads consumers by suggesting that only one member state's laws will apply to the contract.

Practical effect

It is a relief for consumer-facing businesses that they can continue to select the law that applies to their consumer-facing contracts. It is clear, however, that a standard governing law clause (ie, selecting the law of the seller's jurisdiction to govern the contract) may be unfair, and therefore unenforceable, unless the contract makes it clear that a consumer can continue to rely on any mandatory consumer protection provisions in their jurisdiction. We therefore suggest that clients add an additional clause into the governing law clause of their cross-border B2C contracts along the following lines:

'As a consumer, you will benefit from any mandatory provisions of the law of the country in which you are resident.  Nothing in these terms and conditions, including [reference to the choice of law clause], affects your rights as a consumer to rely on such mandatory provisions of local law.'

Whilst the ECJ did not rule on this point, the opinion of the Advocate General states that a general caveat (as suggested above) should be sufficient without listing each mandatory provision.

The ECJ's position in this case follows the general trend in consumer law of making B2C contracts more accessible for consumers without a legal background. We recommend that consumer-facing businesses keep abreast of developments in consumer law, as many provisions that are standard in B2B contracts may be unenforceable against consumers if not drafted in a way that is fair and transparent. If you would like more information about this case, or assistance with your consumer-facing contracts more generally, please contact Robert Turner.