Background
Two Romanian consumers entered contracts for mobile telephone and internet services. After they failed to pay monthly charges, the providers invoked contractual terms imposing daily late-payment penalties. Digi România sought penalties of 0.2% of the principal debt per day from VK, while Orange România, whose claim against PN was later assigned to Investcapital, had imposed penalties of 0.5% per day.
PN’s contracts also required payment of the charges remaining in a 24-month minimum commitment period when the contracts were terminated early for a reason attributable to the consumer. Romanian first-instance courts held the disputed terms unfair, and the providers or assignee appealed. The Regional Court, Arad, asked the CJEU whether Directive 93/13 applied, how the penalty terms should be assessed, whether a court could reduce an unfair penalty, and whether the early-termination charge was insulated from review as part of the contract’s main subject matter.
The Court’s Holding
The CJEU held that Directive 93/13 applies to late-payment penalty terms in consumer electronic-communications contracts even when national legislation imposes no sector-specific cap. Where national law expressly classifies disproportionately high compensation terms as unfair, a materially equivalent term may be treated as unfair without a further assessment under Article 3(1), provided equivalence is determined through adversarial proceedings under national procedural rules. If a late-payment penalty term is found unfair, the national court must disapply it entirely and may not merely reduce the penalty.
The Court also held that a term requiring a consumer to pay all remaining monthly instalments after early termination attributable to the consumer is not shielded from unfairness review under Article 4(2). Subject to the referring court’s verification, such a term penalizes breach rather than defines the contract’s essential obligations. Its classification as consideration for a taxable supply under EU VAT law does not change that conclusion because the VAT and unfair-terms directives pursue different objectives.
Finally, Directive 93/13 permits a term in a 24-month telecommunications contract to be declared unfair when it requires the consumer, upon attributable early termination, to pay the amount due for the remaining commitment period, including discounts granted on services and goods. The ultimate application of those principles to the disputed terms remains for the Romanian court.
Key Takeaways
- Consumer-protection review under Directive 93/13 applies to telecommunications penalty clauses even without a sector-specific statutory cap.
- A court finding a late-payment penalty term unfair must disapply the term in full, not rewrite it by reducing the penalty.
- An early-termination charge equal to the remaining instalments may be reviewed for unfairness despite being treated as consideration under VAT law and despite including promotional discounts.
Why It Matters
The judgment confirms that electronic-communications providers cannot avoid EU unfair-terms scrutiny merely because national telecom rules do not cap default penalties or because an early-termination charge receives a particular classification for VAT purposes.
It also reinforces Directive 93/13’s deterrent remedy: an unfair penalty clause is excluded rather than judicially adjusted to a permissible amount. Providers and debt purchasers therefore face the risk of losing the entire benefit of an unfairly drafted penalty term.