Insights

In December of last year, the European Court of Justice (“ECJ” or the “Court”) ruled against Vodafone’s standard charges levied on their customers for using certain payment instruments when paying for their cable or internet services, when such services are regulated by contracts which were concluded before the implementation of Directive 2015/2366 (the “Payment Services Directive” or “PSD2”).

In the case of Vodafone Kabel Deutschland GmbH v Bundesverband der Verbraucherzentralen und Verbraucherverbände – Verbraucherzentrale Bundesverband eV. Judgment of the Court (Ninth Chamber) of 2 December 2021, the ECJ secured a win for consumers against Vodafone’s interpretation of the prohibition of charges on the use of payment instruments and services. The German Federal Union of Consumer Organisations (“Federal Union”) had opposed certain charges by Vodafone to its customers and consequently brought forth legal proceedings to seek remedy on such matter. The presiding case stemmed from a preliminary ruling request, from the Oberlandesgericht München, based on Article 62(4) of the PSD2, whereby the Federal Union was concerned with the application of the standard charge by Vodafone in Germany, in respect of the use of certain payment instruments for the execution of payment transactions arising from contracts, concluded between Vodafone and its consumers.

In its deliberations, the ECJ was to consider primarily Article 62(4) of the PSD2 which dictates on ‘Applicable Charges’ in payments services as follows:

“…Member States shall ensure that the payee shall not request charges for the use of payment instruments for which interchange fees are regulated under Chapter II of Regulation (EU) 2015/751 and for those payment services to which Regulation (EU) No 260/2012 applies.”

The ECJ mainly held that the relevant date for the purpose of applying the ban, is the date on which an individual payment transaction is effected and not the date of the contractual obligation leading to that transaction.  In a nutshell, the prohibition on surcharging by payees (in this case Vodaofne) is applicable to transactions initiated on or after the 13 January 2018 (the implementation of PSD II), and irrespective of the date when the contract had been concluded.

Vodafone Kabel Deutschland GmbH provides cable network and internet access to its customers in Germany. Following the transposition of PSD2 into German law in January 2018, the operator has been drawing a discrepancy between telecommunications service contracts and cable service contracts concluded before that date and those concluded on or after that date. To contracts pre-2018, Vodafone held a contractual clause with a standard fixed charge, called a ‘Selbstzahlerpauschale’ of €2.50 per transaction applicable to customers who pay by means of a SEPA credit transfer, rather than authorising Vodafone to make automatic direct debits.

Vodafone’s argument was that they were always able to apply charges on payment transactions initiated for contracts concluded before 13 January 2018 and therefore could continue to levy a fixed charge to transactions even after this date – also particularly in light of Paragraph 270a of the German Civil Code (BGB) which specifies that the ban applies only to contracts of indefinite duration concluded from 13 January 2018 onwards. Vodafone argued that since Article 229(45)(5) of the Introductory Act of the Civil Code (EGBGB) refers to arising obligations on or after 13 January 2018, retroactive application of paragraph 270a BGB, before that date is not possible, even if the payment transactions founded on those contracts are introduced on or after the 13 January 2018.

On the other hand, the Federal Union opposed, arguing that Article 62 (4) PSD2 intends to create the same conditions across the internal market for payment services and that the new rules would apply to all payment transactions initiated on or after that date and even contracts that were concluded before that date. The Oberlandesgericht München (Higher Regional Court, Munich, Germany), noted that paragraph 270a of the BGB does in fact apply to contractual obligations underlying the payment transactions which have arisen before 13 January 2018, irrespective of the date of when the contracts of indefinite duration where performed. The same Court affirmed that a uniform charging system was now established in the payment market throughout the European Union.

The ECJ, in its final ruling, emphasised the need for the final decision to be based not simply on just wording of the law but also in context of the objectives that the legislation is trying to pursue. The Court clarified that when Member States implement such a directive, those measures become applicable only from that date, 13 January 2018, with Member States urged not to maintain or introduce provisions other than those laid down in the first subparagraph of Article 115(2) of the directive from that date, to ensure harmonisation.

Importantly, the Court highlighted that within the context of Article 4(5) PSD2, ‘irrespective of any underlying obligations between the payer and the payee’, the relevant date, for the purpose of applying that prohibition, is the date on which the payment transaction has been introduced and not the date on which the obligation underlying that transaction arose. Therefore Article 62(4)  applies to all payment transactions initiated on or after 13 January 2018.

The Court rejected the Vodafone’s arguments relating to the principles of non-retroactivity and of the protection of legitimate expectations. The Court added that such wording found in Article 62(4) “furnishes no clarification relating to the temporal application of that prohibition.”

The Court highlighted that with the inception of PSD2, the goal was the further integration of internal market, as well as to offer a high level of protection to consumers. The Court highlighted that any application of provision that differs to this, according to whether the obligations underlying payment transactions initiated from 13 January 2018 onwards arose before or after that date, would undermine the harmonisation at EU level which is purported by PSD2.

The author wishes to thank Rebecca Iversen for her support during the preparation of this article.

This article was first published in The Malta Independent.