The Court of First Instance n. 3 of Castellon rejected the objection of a consumer regarding the enforcement of a bailiff act that allowed a bank (Banca Bilbao) to demand payment of the entire loan together with ordinary and default interest and the enforced sale of the mortgaged property.
The decision was appealed before the Audiencia Provencial. Although neither the consumer nor the First Instance Court had raised the existence of unfair terms, the Audencia Provencial deemed that the relevant provisions applicable to the case - namely, Art. 695.4 CCP (which at the time permitted to bring an appeal for appeal only in case of dismissal of the execution based on the unfairness of the title) – could be incompatible with the objective of consumer protection pursued by Directive 93/13, and with the right to an effective remedy as guaranteed by Art. 47 CFR.
Despite similar questions were pending before the Constitutional Court, on 2 April 2014 the Audiencia Provencial de Castellon made a preliminary reference to the CJEU, asking the following:
“[whether] it is compatible with Article 7(1) of Directive 93/13 a procedural rule, such as that laid down in Article 695(4) CCP, which, as regards the right to an appeal against a decision determining the outcome of an objection to enforcement proceedings in relation to mortgaged or pledged assets, to permit an appeal to be brought only against an order discontinuing the proceedings or disapplying an unfair clause and to exclude an appeal in other case.
[Whether] the principle of the right to an effective remedy, to a fair trial and to equality of arms, guaranteed by Article 47 of the Charter, precludes a provision of national law, such as that laid down in Article 695(4) CCP”.
The CJEU decided the case in a very short time (the decision was indeed published on 17 July 2014).
The Court, which examined the two questions together, focussed on whether the national procedural provisions at issue respected the fundamental right to effective judicial protection, as laid down by Article 47 CFR. The Court affirmed that, although EU law does not generally require a second level of jurisdiction, in the specific case at issue the right to appeal should be granted. This was due to the fact that the foreclosure proceeding had as its object the consumer’s family home, and it was based on an enforceable bailiff instrument that was not subject to an ex ante judicial scrutiny.
It is important to note that the CJEU analysed the Spanish procedural system as a whole: first, it considered that the national judge, pursuant Art. 552(1) CCP, had only a discretionary power to examine of its own motion the unfairness of contract clauses; secondly, it acknowledged that the consumer could claim the unfairness of the clause in a separate declaratory proceeding, but these proceedings may not affect the foreclosure proceedings in the absence of the possibility for the judge to make an order for interim relief with suspensive effect of the latter. The result of this system was that the consumer could only be granted a purely compensatory remedy, which, according to the CJEU, could not be deemed as providing effective judicial protection to the consumer.
The Court also stressed that the limitation of the consumer’s right of appeal “accentuate[d] the imbalance existing between the parties to the agreement” (para. 43), and that remedying such an imbalance was the objective sought by the Unfair Contract Terms Directive, in particular through judicial scrutiny of unfair contract terms.
Thus the CJEU decided that:
“Article 7(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, read in conjunction with Article 47 [CFR] must be interpreted as precluding a system of enforcement, such as that at issue in the main proceedings, which provides that mortgage enforcement proceedings may not be stayed by the court of first instance, which, in its final decision, may at most award compensation in respect of the damage suffered by the consumer, inasmuch as the latter, the debtor against whom mortgage enforcement proceedings are brought, may not appeal against a decision dismissing his objection to that enforcement, whereas the seller or supplier, the creditor seeking enforcement, may bring an appeal against a decision terminating the proceedings or ordering an unfair term to be disapplied”.