I collected some cases of the European Court of Justice in the area of consumer protection and taxes where Hungary was affected. I start with taxes, the second part will deal with consumer protection cases. Let’s start with a tax case where Hungary won against the Commission. The Court ruled in its judgement in the case C 253/09 that it is not discriminatory if only amounts paid for properties purchased can be deducted from the tax base of property sold where the property purchased is in Hungary. This sounds logical, as it was also established by the Court, saying that “there is a direct link between the tax advantage granted and the initial levy. First, that advantage and the tax levy are applied to one and the same person and, second, they both relate to the same tax” and “that the objective of the legislation at issue is to avoid – upon the purchase of a second principal residence in Hungary – the double taxation of the capital invested in the purchase of the previous residence that has been sold”. However, the Court looked a little further: “While the property transactions carried out in other Member States might also have been subject to similar or even identical taxes to that at issue, it must be noted, however, that in the current stage of the development of EU law, the Member States enjoy a certain autonomy in the area of taxation provided they comply with EU law, and are not obliged therefore to adapt their own tax systems to the different systems of tax of the other Member States in order, inter alia, to eliminate the double taxation.” So, according to the Court, one way of further integration can be a harmonization of these taxes also and a mutual recognition of taxes paid in another member state.This harmonization has relevance to a problem now widely discussed, the importance of which is secondary but some way emblematic. The issue is the registration tax and the amendment of the law about road transport, which introduced draconian fines for Hungarians who avoid the – very high though recently decreased – registration tax on passenger cars by registering their car in a neighbouring country where this tax does not exist or is lower. There is a European Directive on the harmonisation of car taxes, mainly targeted at the tax continuously paid in different countries on vehicles registered in that country. The annex to this directive lists a number of specific taxes in different countries but the registration tax in Hungary is not listed. There is also a draft directive, which wants to harmonise further the conditions of the obligation to re-register cars moved from one member state to another. In both the directive and the draft, there is a precise definition of the residence which defines where a car has to be registered and pay taxes. In contrast to this definition, the Hungarian law does not define residence but takes the registration in the residence register as a formal condition. There are two lists of conditions, one for the driver, which acknowledges the situation of those who are abroad temporarily (for work, for example) but the formulation of the conditions for the owner (operator) of the vehicle are chaotic. Driving a car rented abroad or registered on a foreign company – for which the driver may work – is, however, only authorised for one day for someone who does not have a temporary residence abroad. This is also causing problems. For those, however, who stay abroad but do not want to give up their permanent residence in Hungary (or have a temporary residence in Hungary) to go to Hungary in a car registered on their name can mean a fine of up to 3200 Euro and losing their car. This is clearly offending the right for free settlement and move within the EU and also the spirit of the mentioned directive, and the re-registration directive is still far away and has only partial impact. Recently a judgement of the Court in the joined cases C 578/10 to C 580/10, can mean some hope that at least when their case comes to the

European Court of Justice, the Hungarian regulation may be declared contravening European Law. The judgement namely concerns the Dutch registration tax, and says: “that Article 56 EC must be interpreted as meaning that it precludes legislation of a Member State which requires residents who have borrowed a vehicle registered in another Member State from a resident of that State to pay, on first use of that vehicle on the national road network, the full amount of a tax normally due on registration of a vehicle in the first Member State, without taking account of the duration of the use of that vehicle on that road network and without that person being able to invoke a right to exemption or reimbursement where that vehicle is neither intended to be used essentially in the first Member State on a permanent basis nor, in fact, used in that way.”, which means that not only the tax paid regularly, but also the tax paid on registration cannot be levied on a vehicle which is not used “essentially in the” country “on a permanent basis”. By the way, the Hungarian registration tax was once subject to proceedings at the European Court of Justice, when the question was again about proportionality (also referred to in the judgement in question), i.e. that the registration tax on used vehicles has to take into account the depreciation of the vehicle, i.e. can be levied only on basis of its real value and not on its purchase value.

This time about a case which got some publicity in Hungary and one which did not. It concerns customer protection, which is in the powers of the EU as a unified market clearly requires uniform consumer protection rules.

The cases were so-called "references for preliminary ruling" where a national court dealing with a topic which is subject to European law, can ask the European Court of Justice to interpret a European regulation or directive. A lot of these cases are about whether a certain national law is in line with European legislation as if it is not, it cannot be applied. In most cases if a directive is not implemented correctly, the directive should be applied, except against individuals if the national law is unfavourable to the State (this means that a Member State cannot benefit from its own failure to implement the directive). (for example <a href=" http://curia.europa.eu/juris/showPdf.jsf?text=&docid=91168&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=704378" target="Blank">Case 8/81, Ursula Becker v Finanzamt Münster-Innenstadt</a>). But also interpretation of a regulation can be asked from the Court.

In the <a href="http://curia.europa.eu/juris/document/document.jsf?text=&docid=122164&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=876641" target="Blank">case (C-472/10) between the National Authority for Consumer Protection (Nemzeti Fogyasztóvédelmi Hatóság) and Invitel Távközlési Zrt, a telecommunications company, </a> the Hungarian court proceedings were about the right of the provider to charge its cost from expenses due to a specific form of payment to the client who chose this form of payment. The client had a contract - fairly frequent - where in exchange for a benefit (like free or cheaper purchase of equipment) the client undertook not to cancel the contract for a certain binding period. Thus, it did not have the possibility to chose another provider due to the increase of the charge. Another aspect of

the fee increase was also taken into account by the Court: " term included in the general business conditions of consumer contracts" enabling "unilateral amendment of fees connected with the service to be provided, without setting out clearly the method of fixing those fees or specifying a valid reason for that amendment".

The Court set out some guidelines in judging terms in the general conditions invalid: "The national court must determine, inter alia, whether, in light of all the terms appearing in the general business conditions" "and in the light of the national legislation" whether "the reasons for, or the method of, the amendment of the fees connected with the service to be provided are set out in plain, intelligible language and, as the case may be, whether consumers have a right to terminate the contract". Thus, the reason and method of the change of price must be set out clearly in the general conditions, but the absence of the right to terminate the contract is also a factor to be considered. Thus, the general interpretation in the Hungarian press that all clauses in the general conditions which give the provider the right to change the price are invalid, is too wide, there are conditions under which price increases - in particular if there are elements of cost which change - can be valid. There is one factor I miss actually from among these factors: it is the possibility of the consumer to change some behaviour to escape from the price increase. In this concrete case, the fee was tied to a certain method of payment and the change of payment method may have been open to the customer.

The other question was whether the national authority has the right to declare the clause found invalid by the national court invalid in respect of all other contracts. The answer of the European Court of Justice to this question was also yes: "it does not preclude the declaration of invalidity of an unfair term included in the standard terms of consumer contracts in an action for an injunction, provided for in Article 7 of that directive, brought against a seller or supplier in the public interest, and on behalf of consumers, by a body appointed by national legislation from producing, in accordance with that legislation, effects with regard to all consumers who concluded with the seller or supplier concerned a contract to which the same general business conditions apply, including with regard to those consumers who were not party to the injunction proceedings"

This means that if national legislation gives the right to the consumer protection or similar authority to declare invalid the clause which was found invalid by a court also in respect of consumers who were not parties to these court proceedings.

The <a href="http://curia.europa.eu/juris/document/document.jsf?text=&docid=79164&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=877326" target="Blank"> other case (C-137/08) between VB Pénzügyi Lízing Zrt. and Ferenc Schneider </a>, the question again is the validity of a clause in the general conditions, this time the court having jurisdiction for a case between the service provider and the client. It is normal practice to assign a court which has jurisdiction in a case. This is also often contained in the clauses of general contractual conditions. Under Hungarian law, the court on the seat or residence of the defender has default jurisdiction. That would mean that the service providers suing customers would have to sue them at the court where they live and this is usually avoided by this clause, prescribing the jurisdiction of

the court close to the service provider. As these are in the bigger cities, typically in Budapest, they can be assumed to be usually more experienced in business law.

The court in which the case, in conjunction with which the preliminary ruling was requested, suspected that this clause of assigning jurisdiction may be invalid and thus asked the European Court of Justice whether it can refuse to handle it. The question was also raised whether a clause in a contract can be considered invalid when the client did not contest its validity before.

The Court suspended the case until the judgment in another <a href="http://curia.europa.eu/juris/document/document.jsf?text=&docid=74812&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=877434" target="Blank"> (C243/08) between Pannon GSM Zrt. and Erzsébet Sustikné Győrfi </a> where it was established that: "The national court is required to examine, of its own motion, the unfairness of a contractual term where it has available to it the legal and factual elements necessary for that task." Thus, the court could declare on its own motion invalid the its assignment and refuse to handle the case.

A more interesting question is, which finally has to be decided by the national court and sorry enough, I did not find any information about the result of the case in the Hungarian court, whether such an assignment can be declared invalid.

The court found that a “term whose purpose is to confer jurisdiction in respect of all disputes arising under the contract on the court in the territorial jurisdiction of which the seller or supplier has his principal place of business, obliges the consumer to submit to the exclusive jurisdiction of a court which may be a long way from his domicile. This may make it difficult for him to enter an appearance. In the case of disputes concerning limited amounts of money, the costs relating to the consumer’s entering an appearance could be a deterrent and cause him to forgo any legal remedy or defence. Such a term thus falls within the category of terms which have the object or effect of excluding or hindering the consumer’s right to take legal action”. Thus, taking into account the circumstances, such a term may be invalid. The court did not establish that such a term is necessarily invalid, just that it can be invalid (“must be considered in the light of the particular circumstances of the case in question (see Freiburger Kommunalbauten, paragraph 22)”) and that if it is, the court assigned in the contract can refuse to deal with the case. There is one gap in the argumentation of the court: as mentioned, in Hungary the default court is the one on the seat or domicile of the defendant, thus, when the customer wants to sue the provider, the default court is also not necessarily one close to him/her. On the other hand, the argument is valid when (as in the concrete case) the provider sues the customer.

 It is for the national court, ruling on an action for an injunction, brought in the public interest and on behalf of consumers by a body appointed by national law, to assess, with regard to Article 3(1) and (3) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, the unfair nature of a term included in the general business conditions of

consumer contracts by which a seller or supplier provides for a unilateral amendment of fees connected with the service to be provided, without setting out clearly the method of fixing those fees or specifying a valid reason for that amendment. As part of this assessment, the national court must determine, inter alia, whether, in light of all the terms appearing in the general business conditions of consumer contracts which include the contested term, and in the light of the national legislation setting out rights and obligations which could supplement those provided by the general business conditions at issue, the reasons for, or the method of, the amendment of the fees connected with the service to be provided are set out in plain, intelligible language and, as the case may be, whether consumers have a right to terminate the contract.

 it does not preclude the declaration of invalidity of an unfair term included in the standard terms of consumer contracts in an action for an injunction, provided for in Article 7 of that directive, brought against a seller or supplier in the public interest, and on behalf of consumers, by a body appointed by national legislation from producing, in accordance with that legislation, effects with regard to all consumers who concluded with the seller or supplier concerned a contract to which the same general business conditions apply, including with regard to those consumers who were not party to the injunction proceedings;

–        where the unfair nature of a term in the general business conditions has been acknowledged in such proceedings, national courts are required, of their own motion, and also with regard to the future, to draw all the consequences which are provided by national law in order to ensure that consumers who have concluded a contract with the seller or supplier to which those general business conditions apply will not be bound by that term.

http://curia.europa.eu/juris/document/document.jsf?text=&docid=79164&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=877326

In Case C-137/08,

REFERENCE for a preliminary ruling under Article 234 EC, from the Budapesti II. és III. kerületi bíróság (Hungary), made by decision of 27 March 2008, received at the Court on 7 April 2008, in the proceedings

VB Pénzügyi Lízing Zrt. Ferenc Schneider,

 It was in those circumstances that the Budapesti II. és III. kerületi bíróság decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘1.      Does the consumer protection guaranteed by [the Directive] require that – irrespective of the type of proceedings and whether they are inter partes or not – in the context of the review of their own competences, the national courts are to assess, of their own motion, the unfair nature of a contractual term before them even if not specifically requested to do so?

2.      If Question 1 is to be answered in the affirmative, what criteria may the national courts take into account in the context of that review, in particular in the case that the contractual term does not grant jurisdiction to the judicial body corresponding to the registered office of the service provider, but to a different judicial body which is located close to that registered office?

3.      Pursuant to the first paragraph of Article 23 of the Protocol on the Statute of the Court of Justice annexed to the Treaty on European Union, the Treaty establishing the European Community and the Treaty establishing the European Atomic Energy Community, is the possibility precluded for the national courts to inform the Ministry of Justice of their own Member State that a reference for a preliminary ruling has been made at the same time as making that reference?’

Waited for:

Case C-243/08,

REFERENCE for a preliminary ruling under Article 234 EC from the Budaörsi Városi Bíróság (Hungary), made by decision of 22 May 2008, received at the Court on 2 June 2008, in the proceedings

http://curia.europa.eu/juris/document/document.jsf?text=&docid=74812&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=877434

Pannon GSM Zrt. V Erzsébet Sustikné Győrfi,

 Article 6(1) of Council Directive 93/13/EEC of 5 April 1993, on unfair terms in consumer contracts, must be interpreted as meaning that an unfair contract term is not binding on the consumer, and it is not necessary, in that regard, for that consumer to have successfully contested the validity of such a term beforehand.

2.      The national court is required to examine, of its own motion, the unfairness of a contractual term where it has available to it the legal and factual elements necessary for that task. Where it considers such a term to be unfair, it must not apply it, except if the consumer opposes that non-application. That duty is also incumbent on the national court when it is ascertaining its own territorial jurisdiction.

3.      It is for the national court to determine whether a contractual term, such as that which is the subject-matter of the dispute in the main proceedings, satisfies the criteria to be categorised as unfair within the meaning of Article 3(1) of Directive 93/13. In so doing, the national court must take account of the fact that a term, contained in a contract concluded between a consumer and a seller or supplier, which has been included without being individually negotiated and which confers exclusive jurisdiction on the court in the territorial jurisdiction of which the seller or supplier has his principal place of business may be considered to be unfair.

in Océano Grupo Editorial and Salvat Editores, paragraphs 21 to 24, the Court has held that, in a contract concluded between a consumer and a seller or supplier within the meaning of the Directive, a term, drafted in advance by the seller or supplier – which was not subject to individual negotiation – the purpose of which is to confer jurisdiction in respect of all disputes arising under the contract on the court in the territorial jurisdiction of which the seller has his principal place of business, satisfies all the criteria necessary for it to be judged unfair for the purposes of the Directive.

it cannot however rule on the application of those general criteria to a particular term, which must be considered in the light of the particular circumstances of the case in question (see Freiburger Kommunalbauten, paragraph 22).

term whose purpose is to confer jurisdiction in respect of all disputes arising under the contract on the court in the territorial jurisdiction of which the seller or supplier has his principal place of business, obliges the consumer to submit to the exclusive jurisdiction of a court which may be a long way from his domicile. This may make it difficult for him to enter an appearance. In the case of disputes concerning limited amounts of money, the costs relating to the consumer’s entering an appearance could be a deterrent and cause him to forgo any legal remedy or defence. Such a term thus falls within the category of terms which have the object or effect of excluding or hindering the consumer’s right to take legal action, a category referred to in subparagraph (q) of paragraph 1 of the Annex to the Directive (see Océano Grupo Editorial and Salvat Editores, paragraph 22).

And then:

 Following the delivery of that judgment, on 2 July 2009, the referring court informed the Court of Justice that it no longer considered it necessary for the Court of Justice to reply to the first and second questions referred in its decision of 27 March 2008. However, the referring court stated that it still wished to obtain an answer to the third question.

Having regard to those considerations, the Budapesti II. és III. kerületi bíróság decided to refer the following additional questions to the Court of Justice:

‘1.      Do the powers of the Court of Justice under Article 234 EC include that of interpreting the concept of “unfair term” referred to in Article 3(1) of Directive 93/13/EEC of 5 April 1993 and the terms listed in the Annex to that directive?

2.      If the answer to the first question is in the affirmative, can a reference for a preliminary ruling seeking such an interpretation – in the interest of the uniform application in all Member States of the level of protection of consumer rights guaranteed by Directive 93/13 – ask what aspects the national court may or must take into account should the general criteria laid down in the Directive apply to a particular individual term?

3.      If the national court itself observes, where the parties to the dispute have made no application to that effect, that a contractual term is potentially unfair, may it undertake, of its own motion, an examination with a view to establishing the factual and legal elements necessary to that examination where the national procedural rules permit that only if the parties so request?’

On those grounds, the Court (Grand Chamber) hereby rules:

1.      The first paragraph of Article 23 of the Statute of the Court of Justice does not preclude a provision of national law which provides that the court which initiates a preliminary reference procedure is at the same time to inform, of its own motion, the Minister with responsibility for Justice in the Member State concerned.

2.      Article 267 TFEU must be interpreted as meaning that the jurisdiction of the Court of Justice of the European Union extends to the interpretation of the concept of ‘unfair term’ used in Article 3(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts and in the annex thereto, and to the criteria which the national court may or must apply when examining a contractual term in the light of the provisions of that Directive, bearing in mind that it is for that court to determine, in the light of those criteria, whether a particular contractual term is actually unfair in the circumstances of the case.

3.      The national court must investigate of its own motion whether a term conferring exclusive territorial jurisdiction in a contract concluded between a seller or supplier and a consumer, which is the subject of a dispute before it, falls within the scope of Directive 93/13 and, if it does, assess of its own motion whether such a term is unfair.

http://curia.europa.eu/juris/document/document.jsf?text=&docid=122166&pageIndex=0&doclang=en&mode=req&dir=&occ=first&part=1&cid=1581821

In Joined Cases C-578/10 to C-580/10,

REFERENCES for a preliminary ruling under Article 267 TFEU, from the Hoge Raad der Nederlanden (Netherlands), made by decisions of 12 November 2010, received at the Court on 6, 8 and 9 December 2010 respectively, in the proceedings

Staatssecretaris van Financiën v L.A.C. van Putten (C-578/10), P. Mook (C-579/10), G. Frank (C-580/10),

Article 56 EC must be interpreted as meaning that it precludes legislation of a Member State which requires residents who have borrowed a vehicle registered in another Member State from a resident of that State to pay, on first use of that vehicle on the national road network, the full amount of a tax normally due on registration of a vehicle in the first Member State, without taking account of the duration of the use of that vehicle on that road network and without that person being able to invoke a right to exemption or reimbursement where that vehicle is neither intended to be used essentially in the first Member State on a permanent basis nor, in fact, used in that way.

  Thus, if the vehicles at issue in the main proceedings, which are not registered in the Netherlands, are intended to be used essentially in the Netherlands on a permanent basis or if they are, in fact, used in that way, there is not actually a difference in the treatment of a person who resides in the Netherlands and uses such a vehicle free of charge and a person who uses a vehicle registered in that Member State on the same conditions, since the latter vehicle, which is also intended to be used essentially in the Netherlands on a permanent basis, was already subject to vehicle tax on its first registration in the Netherlands.

51      In those circumstances, the charging of vehicle tax on first use on the road network in the Netherlands of vehicles which are not registered in the Netherlands, is justified in the same way as the tax due on the registration of the vehicle in the Netherlands, mentioned in paragraph 46 of the present judgment, is, provided that the tax takes account, as appears to be required by the 1992 Law, of the depreciation of the vehicle at the time of that first use.

52      On the other hand, as is apparent from paragraph 47 of the present judgment, if the vehicles at issue in the main proceedings were not intended to be used essentially in the Netherlands on a permanent basis or were not, in fact, used in that way, there would be a difference in treatment between the two categories of persons mentioned in paragraph 50 of the present judgment and the charging of the tax concerned would not be justified. In such circumstances, the connection of those vehicles with the Netherlands would be insufficient to justify the charging of a tax normally due on registration of a vehicle in the Netherlands.

53      Even if such a difference in treatment might, in some circumstances, be justified by an overriding reason in the general interest, it is also necessary for the tax to comply with the principle of proportionality (see, to that effect, the order in van de Coevering, paragraph 27 and the case-law cited).

54      Since, on the one hand, it is not apparent from the order for reference that, in the disputes in the main proceedings, it has been established that the vehicles in question are intended to be used essentially in the Netherlands on a permanent basis or that they are,

in fact, used in that way and, on the other hand, neither the referring court nor the Netherlands Government has put forward other overriding reasons in the general interest to justify the restriction at issue, it must be held that Article 56 EC must be interpreted as meaning that it precludes legislation of a Member State which requires residents who have borrowed a vehicle registered in another Member State from a resident of that State to pay, on first use of that vehicle on the national road network, the full amount of a tax normally due on registration of a vehicle in the first Member State, without taking account of the duration of the use of that vehicle on that road network and without that person being able to invoke a right to exemption or reimbursement where that vehicle is neither intended to be used essentially in the first Member State on a permanent basis nor, in fact, used in that way.

In Joined Cases T-80/06 and T-182/09,

Budapesti Erőmű Zrt, established in Budapest (Hungary), represented, in Cases T-80/06 and T-182/09, by M. Powell, C. Arhold and K. Struckmann, lawyers, and also, in Case T-182/09, by A. Hegyi, lawyer, v European Commission,

http://curia.europa.eu/juris/document/document.jsf?text=&docid=115786&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=876287

In Case C-253/09,

ACTION under Article 226 EC for failure to fulfil obligations, brought on 8 July 2009,

European Commission, v Republic of Hungary,

It follows that, under the tax regime in question, there is a direct link between the tax advantage granted and the initial levy. First, that advantage and the tax levy are applied to one and the same person and, second, they both relate to the same tax.

77      In that context, it should be noted that the two requirements that the levy be identical and applied to one and the same person have been found to be sufficient to establish the existence of such a link (see, inter alia, Case C-35/98 Verkooijen [2000] ECR I-4071, paragraph 58; Case C-168/01 Bosal [2003] ECR I-9409, paragraphs 29 and 30; and Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt, paragraph 42). In addition, it must be noted that the Commission has not expressly disputed that the tax advantage in question is granted to the same taxpayer in relation to the same tax.

78      In the light of the foregoing, it must be found that the restriction stemming from Paragraphs 2(2) and 21(5) of the Law on taxes is justifiable by the need to preserve the coherence of the tax system.

It should be remembered, first, that the objective of the legislation at issue is to avoid – upon the purchase of a second principal residence in Hungary – the

double taxation of the capital invested in the purchase of the previous residence that has been sold.

objective of avoiding double taxation under the Hungarian tax system.

 While the property transactions carried out in other Member States might also have been subject to similar or even identical taxes to that at issue, it must be noted, however, that in the current stage of the development of EU law, the Member States enjoy a certain autonomy in the area of taxation provided they comply with EU law, and are not obliged therefore to adapt their own tax systems to the different systems of tax of the other Member States in order, inter alia, to eliminate the double taxation