week 6 Flashcards
legal challenges (EU consumer law)?
- need for effective consumer protection, particularly in the digital age
- importance of effective enforcement of consumer law
- purely ‘national’ solutions do not suffice
- neither does a purely public or private enforcement mode
division of labor between EU and member states?
=> traditionally, regulatory standards defined by EU law, while enforcement a duty of MSs
=> since 1980s => procedural autonomy of MSs limited
=> further Europeanisation of enforcement after 2007-2008 financial crisis
=> in the field of consumer law, MSs must ensure:
- public enforcement by public authorities through administrative law means
- private enforcement by private parties through private law means
=> distinction between public and private law as such is not recognized in EU law BUT not entirely irrelevant
=> when designing enforcement mechanisms, MSs must implement specific provisions of EU secondary law and observe three principles of EU law (found in EU secondary law and case law):
- effectiveness
- proportionality
- dissuasiveness
relevance of three principles of EU law for the enforcement of consumer law?
- content of a single remedy or sanction
- combination between different remedies or sanctions
- coordination between different enforcement modes
principle of effectiveness?
=> national law should not make it practically impossible or excessively difficult to exercise rights conferred by EU law
=> remedial response to a violation of EU consumer law must be adequate in terms of:
- the remedy’s ability to perform the function for which it is designed
- the absence of obstacles for the exercise of these functions
principles of proportionality?
=> a three-step test to assess the proportionality of a given measure:
- is it suitable for the pursued objective?
- is it necessary?
- is it proportionate?
principle of dissuasiveness?
- a sanction should discourage infringements and neutralize the effects of misbehavior (deterrent effect)
- encourage compliance
potential conflict between three principles (effectiveness, proportionality, dissuasiveness)?
=> proportionality vs. dissuasiveness
- e.g. a consumer may claim reimbursement or refuse payment without any duty to return goods or compensate for services if the trader has, among others:
—> falsely claimed that a product is able to cure illness;
—> created the false impression that the consumer has won or will win a prize;
—> demanded immediate payment for products supplied but not solicited by the consumer
enforcement modes in the field of EU consumer law?
=> public enforcement:
- through administrative law
- through criminal law
=> private enforcement:
- through private law means
- coordination between public and private enforcement?
=> hybrid enforcement
public enforcement => impact of EU law?
=> establishment of administrative agencies with the task of consumer protection:
- administrative law as a primary means
- criminal law occasionally used at national level
=> minimum powers of administrative agencies
=> requirements as to the appropriate administrative sanctions
general ‘minimum powers’ of national administrative agencies?
- have access to any relevant documents, data or information
- carry out necessary on-site inspections
- purchase goods or services as test purchases
- adopt interim measures to avoid the risk of serious harm to the interests of consumers
- order or bring about the cessation or the prohibition of infringements
- impose penalties
specific powers of national administrative agencies?
=> e.g. EU product safety regime:
- restrict or prohibit the supply or marketing of (potentially) dangerous products
- conduct market surveillance
- order withdrawal or recall of dangerous products
appropriate administrative sanctions?
- as a rule, the maximum amount of such fines must be at least 4% of the trader’s annual turnover in the MS or MSs concerned
- if information on the trader’s annual turnover is unavailable, the maximum amount must be at least 2 million EUR
how to ensure administrative enforcement or private law-oriented EU measures?
=> Option 1: to implement such directives entirely in national public law
=> Option 2: to implement (some) substantive rules in national private law and to include a reference to them in public law
=> Option 3: to implement such directives in a special legislative act combining elements of public and private laws
private enforcement: types of actions?
=> individual action:
- civil courts
- alternative dispute resolution
=> collective action:
- civil courts
private enforcement: impact of EU law?
=> individual action:
- fostering ADR
- special venues for cross-border disputes
=> collective action:
- qualified entities may bring a representative action before a civil court or an administrative authority to seek injunctive or redress measures
=> national courts have an ex officio obligation to apply consumer law
private enforcement: injunctive measures?
provisional or definitive measures to cease or prohibit a certain practice
private enforcement: redress measures?
- compensation
- repair
- replacement
- price reduction
- contract termination
- reimbursement of the price paid
=> in the case of collective action, the qualified entity and the trader may reach a redress settlement
coordination between public and private enforcement?
=> currently underdeveloped
- civil courts are generally not bound by administrative decisions, with a notable exception of competition law
=> but some coordination between administrative agencies/courts and civil courts is emerging
- the final decision of an administrative agency or court can be used as evidence in civil proceedings
hybrid enforcement => manifestations?
=> an administrative agency may refrain from imposing a fine or reduce its amount if an infringer has compensated the aggrieved consumers on its own initiative
BUT
—> consumer protection authorities generally have no explicit powers to order a trader to provide compensation against his will
=> an administrative agency may initiate redress settlements and/or bring a collective action before civil courts
legal challenges in EU financial law?
=> need to ensure financial stability, orderly functioning and integrity of financial markets, consumer/client protection
=> importance of effective enforcement of financial law
=> purely ‘national’ solutions do not suffice
=> neither does a purely public or private enforcement mode
=> how to regulate and supervise financial markets given their:
- complexity
- uncertainty
- fragmentation
- ungovernability
- dynamism
=> what do EU law principles of effectiveness, proportionality and dissuasiveness entail the enforcement of financial law?
enforcement modes?
=> public enforcement:
- through administrative law
- through criminal law
=> private enforcement:
- through private law means
- coordination between public and private enforcement
=> hybrid enforcement
public enforcement => main building blocks of financial regulation?
=> prudential regulation
- concerned with the safety and soundness of individual financial institutions and with systemic risks to the financial systems as a whole
- micro- and macro- prudential regulation complement each other in ensuring financial stability
- tools: requirements on authorization; capital and management bodies
=> conduct of business regulation
- concerned with the orderly functioning of financial markets and consumer/client protection
- increasingly covers not only product distribution but also product development
- tools: product regulation; information requirements; duties of care and loyalty
financial supervision: three models?
=> twin-peak model:
- prudential supervision and conduct of business supervision in the hands of two separate authorities
=> integrated model:
- one authority in charge of both prudential and conduct of business supervision
=> sector-based model:
- different authorities in charge of different sectors of financial services, combining prudential and conduct of business supervision
impact of EU law on financial law?
=> establishment of the European system of financial supervision
=> establishment of national administrative agencies to supervise the financial industry:
- administrative law as a primary means
- criminal law occasionally used at national level
=> minimum powers of administrative agencies
=> extensive requirements as to the appropriate administrative sanctions
European system of financial supervision => ESMA’s mission?
ESMA = European Securities and Markets Authority
=> improve functioning of internal market, including in particular a sound, effective and consistent level of regulation and supervision
=> ensure the integrity, transparency, efficiency and orderly functioning of financial markets
=> strengthen international supervisory coordination
=> prevent regulatory arbitrage and promote equal conditions of competition
=> ensure the taking of investment and other risks are appropriately regulated and supervised
=> enhancing customer protection
ESMA’s powers related to consumer protection?
=> develop ‘draft regulatory technical standards’ to be submitted to the European Commission for endorsement
=> adopt guidelines and recommendations with a view to promoting the safety and soundness of markets and convergence of regulatory practice
=> issue warnings in the even that a financial activity poses a serious threat to the realization of its objectives
=> temporarily prohibit or restrict certain financial activities
conditions for the exercise of ESMA’s temporary product intervention powers?
=> there is a significant investor protection concern or a threat to the orderly functioning and integrity of financial market or financial stability
=> the risk is not sufficiently addressed by existing regulatory requirements under EU law
=> the measure is proportionate
=> no adequate national measures have been taken (yet)
EU financial law => appropriate administrative sanctions?
=> in the case of a legal person, maximum administrative fines of at least 5 million EUR or of up to 10% of the total annual turnover of the legal person
=> in the case of a natural person, maximum administrative fines of at least 5 million EUR
=> maximum administrative fines of at least twice the amount of the benefit derived from the infringement where that benefit can be determined, even if that exceeds the above-mentioned maximum amounts
Payment Services Directive 2/Markets in Financial Instruments Directive?
=> PSD 2:
- authorization & operating conditions for PSPs/public supervision of PSPs
- ensuring the balance between the interests of PSP & consumer:
–> transparency/parties’ rights & obligations in relation to payment services
- individual consumer redress:
–> detailed liability rules allocating losses from fraud. forgery and error between PSPs & users/PSPs
–> rules improving the procedural position of consumers
(public & private law grammar?)
=> MiFID:
- authorization & operating conditions for ISPs/public supervision of ISPs
–> a high level of harmonization of supervisory powers and administrative sanctions
- no individual investor rights
- no private law remedies under EU law for aggrieved investors:
–> principle of civil liability ultimately not included
- harmonizing effects in national contract and tort laws vary across the EU
(public law grammar?)
financial law => hybrid enforcement: manifestations
=> financial supervisory authorities generally have powers to facilitate compensation
- a ‘minimum power’ to receive from the trader, on the trader’s initiative, remedial commitments for the benefit of consumers
=> some financial supervisory authorities have explicit powers to order a financial institution to provide compensation (even against its will)
