Unfair Commercial Practices Directive, Chapter 1, Article 2, (f)

Compliance by a trader with the provisions set out in a professional code of conduct, applicable to all traders in an economic sector, does not exclude the possibility for that trader to have breached the prohibition on unfair commercial practices.

The defendant, a credit institution, used general terms and conditions, applicable to its services. The Prosecutor’s Office initiated investigative procedures as it was of the opinion that some of the clauses of the general terms and conditions were invalid. Particularly the clauses regarding the right of the defendant to unilaterally change the terms and conditions  were deemed to be unlawful, as for example, it gave the defendant the right to unilaterally change the applicable interest rate.

All judicial instances before which this case was brought, including the court of appeal, were of the opinion that the clauses concerned were invalid.

The defendant  on his part referred to the fact that the clauses incorporated in its terms and conditions were in line with the so-called Code of Conduct, applicable to the sector in which the defendant is active. As a result, the defendant stated,  incorporating provisions in the terms and conditions that would breach such Code of Conduct would in any case be considered to be an unfair commercial practice. Moreover, not only would such practice be considered unfair, a non-implementation of the Code of Conduct would have exposed the defendant to sanctions imposed by the Financial Supervisory Authority. In short, the defendant argued that it could not have breached the provisions on unfair commercial practices, as it complied with the provisions of the Code of Conduct applicable in its economic sector.

 

The Supreme Court rejected the arguments of the defendant and reminded that full compliance with a code of conduct does not exclude the possibility of having breached the prohibition on unfair commercial practices. In this case, the fact that a contractual clause must be considered invalid in accordance with the applicable national legal provisions, cannot be contested merely on the basis that such clause is in line with a professional code of conduct.

Furthermore, the Supreme Court established that in this case, the affected clauses were not even taken from the code of conduct word by word, despite the defendant’s claim.

The Supreme Court further ruled that a code of conduct is not a legal act, hence only binds the parties that admitted to the use thereof. As a result, compliance with a code of conduct by no means limits a court’s competence to assess the validity of contractual clauses based on the implementation of such code.

The Supreme Court rejected the arguments of the defendant and reminded that full compliance with a code of conduct does not exclude the possibility of having breached the prohibition on unfair commercial practices. In this case, the fact that a contractual clause must be considered invalid in accordance with the applicable national legal provisions, cannot be contested merely on the basis that such clause is in line with a professional code of conduct.

Furthermore, the Supreme Court established that in this case, the affected clauses were not even taken from the code of conduct word by word, despite the defendant’s claim.

The Supreme Court further ruled that a code of conduct is not a legal act, hence only binds the parties that admitted to the use thereof. As a result, compliance with a code of conduct by no means limits a court’s competence to assess the validity of contractual clauses based on the implementation of such code.

 

Does compliance by a trader with the provisions set out in a professional code of conduct, applicable to all traders in an economic sector, exclude the possibility for that trader to have breached the prohibition on unfair commercial practices?

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The Supreme Court held the affected clauses invalid, according to the lower courts’ decisions.