ECJ Schulte/Badenia: Reverberations of EC consumer legislation in national private law

The ECJ's Grand Chamber gave judgment last wednesday in the case of Schulte v. Deutsche Bausparkasse Badenia AG (case C-350/03). The case is of special interest for the way it highlights some of the difficulties that arrise when selective rules of EC legislation have to be 'embedded' in wider systems of national law.

The preliminary reference by the Landgericht (first instance court) in Bochum, Germany, concerned the application of the EC's Doorstep selling Directive (85/577/EEC of 20 December 1985). In general terms, this directive grants a right of cancellation to consumers for contracts concluded during a visit to their home by a trader, where this visit has not occurred following the consumers' own specific request. The Court had held earlier that this right - normally granted for 7 days - remains active until the consumer learns about the possiblity, in cases where he or she has not been duly notified by the trader. Importantly also, the Directive holds that the precise consequences of exercise of the right of cancellation are to be governed by national law. Finally, the contracts for the sale of immovable property are explicitly excluded from the scope of application of the directive.

The Schultes had entered into an investment scheme, sold to them in their home, involving both a purchase of real estate from an agent and the simultaneous conclusion of a credit facility with a bank to finance the purchase. They cancelled their credit arrangement some time after the conclusion of the contract only, as they had not been properly notified initially by the agent. The German law implementing this right of cancellation stipulates the basic rule that "in the event of cancellation, each contracting party shall return to the other whatever it has received". The Schulte's, however, were now confronted with (a) the impossiblity of cancelling the real estate purchase, due to the restricted scope of the directive, (b) a significant loss of value of the real estate in the intervening period and (c) a demand for immediate repayment of cancelled loan by the bank. Serious financial trouble loomed.

The Court held that, yes standard case law precludes directives imposing obligations on individuals, and yes, the directive explicitly leaves the consequences of cancellation to German law. However, in a situation where, had the seller (Bank) complied with its obligation to inform the consumer, this consumer would have been able to avoid certain risks inherent in investments, the directive still requires Member States to "ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks."

The case illustrates the apparent impossiblity of inserting specific, foreign (EC) rules in national legal systems without having to expect wider, systemic reverberations. These effects are made more accute by the teleological nature of much of EC (consumer) legislation. Even those areas of law surrounding the inserted rights but still explicitly excluded from harmonisation, will, as the judgment shows, clearly be affected by the underlying reasons for legislation. Against the fundamental backgroundprinciple of maximum effectiveness for EC rules, it is not immediately obvious where these systemic reverberations will end.

The Pocket Part & Juris Novus

Thanks to Pablo Asbo (Brussels) for notifying this new website. It's called The Pocket Part and is a 'companion to the Yale Law Journal'. The site provides a forum for discussion and up-to-date additional information on articles published in the YLJ.

Current discussion on The Pocket Part is on property and federalism in the US. The issues raised seem highly relevant for the European Community, in which the implications of differences in property regimes for the free movement of goods and capital are receiving more and more attention.

Interesting also is the relatively new Juris Novus site, providing an extensive index of topics discussed on legal weblogs. Very useful for keeping track of postings on a range of quality blogs.

Duxbury vs. Leitner on 'American' Jurisprudence

LSN has notified publication as a University of Texas Law School Working Paper of the 1997 (!) review article by Brian Leitner of Neil Duxbury's Patterns of American Jurisprudence, which provides me with an excellent excuse to bring the paper - and the book - to your attention at this time.

Professor Duxbury's book has (in its first, and to me most interesting, part) an elaborate and convincing discussion of the origins and development of legal realism in America. Professor Leitner's critical review then - equally convincing, I thought - takes apart many of Duxbury's central premises and arguments, as its title "Is there an 'American' jurisprudence?" indicates. I do not know nearly enough about the subject to take sides, but the debate is in any event highly informative for the study of comparative legal discourse.

Neil Duxbury, Patterns of American Jurisprudence, (OUP 1995)

Brian Leitner, Is there an 'American' Jurisprudence? (SSRN 2005)

Standing Up by Stitting Down: Rosa Parks

The Detroit News, the Detroit Freepress and the New York Times, among others, have obituaries for Rosa Parks, the African-American woman whose defiance in 1955 of a local law forbidding African-Americans to take certain seats on busses, sparked the Montgomery Bus Boycot that ultimately lead to Civil Rights legislation in America. Rosa Parks was later awarded the Congressional Gold Medal, America's highest civil distinction. She died in Detroit, aged 92.

Recent Blog Initiatives: LawProfessors & Chicago Faculty

Two new blogging initiatives well worth informing you about.

One is the fast-growing LawProfessorBlogs network (US). Have a look at their homepage for an overview of the participating profs and their subjects. No comparative law or constitutional law as of yet, but many traditional subject areas (contract, property) and some more exotic ones (chinese law, elder law and white collar crime, to name a few). All the blogs are updated very regularly (how these people find time to do anything else besides is a mystery to me!) and could be a good standard blog-reference in your field of interest.

Since September 26th, the University of Chicago's School of Law has been maintaining a collective FacultyBlog. Have a look here for posts by faculty members, including professors Levmore, Stone, Sunstein, Posner (2x) and Nussbaum. For a taste, you could check out professor Cass Sunstein's discussion of a recent US study finding a predominance of Democratic (left-leaning) faculty among US law schools, from the perspective of the phenomenon of 'group polarization'.

Courts and Terror

The Guardian reports the first media briefing of the new Lord Chief Justice for England and Wales, Lord Phillips of Worth Matravers, in which the country's new senior judge promisses to support judges in their interpretation of anti-terror legislation, even when such rulings would be inconvenient for government and police. Encouraging!

The newspaper's website also has this handy comparative overview of anti-terror legislation, prepared by the Foreign Office.

Economic Models for Choice of Law in Tort (Michaels)

Recommended: Ralf Michaels' (Duke University) Research Paper "Private or International? Two Economic Models for Private International Law of Torts" (Duke Law School Legal Studies Research Paper Series No. 73, August 2005, just notified through SSRN). Great as an introductory overview of law and economics approaches to tort choice of law and interesting in its presentation of a 'private' and an 'international' (public) models for such analysis. The author focuses on possible consequences of the choice between these models - looking either at the interests of litigants or the interests of involved States - for the subsequent efficiency analysis . From the introduction:

"I want to test the hypothesis that different paradigms lead to different outcomes, that the different results within economic paradigms are congruent with the different views within traditional doctrinal private international law, and that therefore the debate whether private international law is 'private' or (public) 'international' law, is replicated in the economic analysis of private international law."

Hirst v. UK : Grand Chamber of the ECHR Rules on Voting Rights for Prisoners

The Grand Chamber (17 judges) of the European Court of Human Rights has given its judgment today in the case of Hirst v. The United Kingdom (no. 2) (appl. 74025/01), on appeal from a Chamber jugment dating from March 30 2004 and confirming that earlier decision. The Court holds that a blanket denial of voting rights to prisoners cannot satisfy the proportionality requirement inherent in art. 3 of the First Protocol to the Convention which reads:

“The High Contracting Parties undertake to hold free elections at reasonable intervals by secret ballot, under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature.”

The Chamber had ruled earlier that, although the case concerned an area in which a wide margin of appreciation should be given to national authorities, an absolute ban on voting by any serving prisoner could not fall within such a margin. Especially relevant to the Court was the fact that there was no evidence that the UK legislature had at any time sought to weigh the competing interests involved or to assess the proportionality of the ban. The Chamber had also attached importance to two rulings from other jurisdictions - Canada and South Africa - upholding prisoners' rights.

This use of comparative law was criticised by the UK government on the grounds that the Canadian decision was decided by a narrow 5-4 majority within a very different institutional context and the South African decision concerned different kinds of obstacles to voting. The UK government also laid stress on the fact that among the countries party to the Convention, there was no consensus as to how to deal with this issue (13 countries, a bit less than 1/3rd of the total, apparently have bans, some of which go further than the UK rules).

The Grand Chamber again mentions as important the apparent absence of a proportionality assessment in the UK Legislature. Of this argument, a powerful joint dissenting opinion of five judges including the Court's president, says that it is not for the Court to dictate how national legislatures should deliberate on proposed laws. It must be assumed, according to the dissenters, that the Election Law at issue "reflects political, social and cultural values in the United Kingdom".

With regard to the lack of consensus among Convention States, the Grand Chamber holds that only a minority of Contracting States have laws similar to those in the UK and that in any event the absence of consensus cannot be determinative of the issue. It concludes by holding that a "general, automatic and indiscriminate restriction on a vitally important Convention right must be seen as falling outside any acceptable margin of appreciation, however wide that margin might be, and as being incompatible with Article 3 of Protocol No. 1".

An important and far reaching judgment by any standard. Given such a sparse-worded basic provision (art. 3 basically only says Member States should organise free elections), such a politically sensitive issue, and the noted clear absence of consensus among Convention States, one could argue that the Court should be highly deferential in this area. Whether or not one agrees with the outcome, two aspects of the Court's decision seem especially vulnerable to critique. (1) The use of comparative reasoning seems suspect. The Court only mentions two favourable third-country judgments in face of an important absence of consensus among Member States. No attempt is made to form a comprehensive survey of rulings and laws (!) in and outside Europe. (2) The argument based on the absence of proportionality analysis in the UK parliament. Here the fallacy of "false conflicts", well known in the field of private international law, comes to mind. This fallacy shows that the fact that an issue is not explicitly legislated for (or even debated upon) does not mean that the country involved does not have an interest in the matter (or a position on the issue). In any event, the Court's consistent emphasis on the need for national authorities to internalise Convention requirements, including proportionality analysis of rights-infringing measures, is, generally speaking, very valuable. However, and as the dissenters argue, to require a national parliament to debate issues of the kind involved in a certain way, according to a certain model, seems to go very far indeed.

Added 14/10/2005: Have a look also at the post by Roger Alford on Opinio Juris

Mediating Norms and Identity: Waters on Transnational Judicial Dialogue

Notified through LSN (SSRN) last week: Melissa A. Waters, "Mediating Norms and Identity: The Role of Transnational Judicial Dialogue in Creating and Enforcing International Law" Georgetown Law Journal, Vol. 93, No. 2, January 2005. This is the abstract:

This article proposes a new theory for understanding the emerging transnational judicial dialogue among the world's domestic courts, as well as U.S. courts' potential participation in that dialogue. Existing scholarship has focused almost exclusively on the role of domestic courts in internalizing international legal norms into domestic legal systems. I argue that the relationship between international and domestic legal norms is in fact a co-constitutive, or synergistic, relationship in which domestic courts are becoming active participants in the dynamic process of developing international law. Under this view, transnational judicial dialogue is the engine by which domestic courts collectively engage in the co-constitutive process of creating and shaping international legal norms and, in turn, ensure that those norms shape and inform domestic norms. Domestic courts participating in judicial dialogue thus play an increasingly important role as mediators between the international and domestic legal systems: They function not merely as norm internalizers, but also as creators of international legal norms.

In this article, I explore transnational judicial dialogue in both the death penalty and transnational speech contexts, arguing that such dialogue has had a powerful impact in shaping emerging international legal norms in both contexts. I utilize co-constitutive theory to develop a model for domestic court participation in judicial dialogue. I apply the co-constitutive model to the emerging debate over the proper role of foreign and international law in U.S. courts, discussing in detail the U.S. Supreme Court's recent decisions in Lawrence v. Texas and Roper v. Simmons. I argue that in shaping the debate, U.S. judges and policymakers should take into account the co-constitutive nature of transnational judicial dialogue and the emerging role of the world's domestic courts as key mediators between domestic and international norms.

Full-text can be found here on SSRN.