Editorial

Citation

Howells, G. (2010), "Editorial", International Journal of Law and Management, Vol. 52 No. 5. https://doi.org/10.1108/ijlma.2010.01052eaa.001

Editorial

Article Type: Editorial From: International Journal of Law and Management, Volume 52, Issue 5.

The United Kingdom's recently established Supreme Court surprised many commentators when it held bank charges were not capable of review under Unfair Terms in Consumer Contract Regulations 1999, at least as regards the adequacy of the price in relation to the service provided. This was an unexpected outcome to many, not least because this approach differed from both the judgments of the High Court and Court of Appeal[4] and the tone of its own previous decision in Director of Fair Trading v. First National Bank[5].

The Supreme Court's decision can be justified as a matter of interpretation. The approach of the Supreme Court was to view all the costs of a bank account as a part of a package that together formed part of the price. One aspect of the price - the bank charges - could not be unpicked. That is a reasonable stance. However, defining the extent to which terms are protected from review because they form part of the price/quality review is a key debating point on the scope of the European Directive and it is unfortunate that the European Court of Justice was not allowed to give guidance to all the courts across Europe on a case which so directly raised the issue.

The Supreme Court considered a preliminary reference was unnecessary both because their Lordships considered the matter to be clear (acte clair) and, moreover, even if the Court of Appeal had been correct to say incidental and subsidiary charges could be subject to review it had wrongly applied the test in this case as the charges comprised 30 percent of the revenue and so were not peripheral. However, that still left the more technical interpretation of the detailed judgment of the High Court as a possible interpretation.

However, it was clear the Supreme Court wanted to deal with the issue as a domestic matter and saw the political and regulatory process as a more appropriate route for addressing concerns about bank charges. Such a solution, which is now being developed by the OFT, may in the long run be the best approach.

Given the potential significant impact on how personal bank accounts are run, the regulatory process may be a better forum than the courtroom for developing policy in the round. That task will not be easy for consumers are known to have difficulty in assessing how bank charges will impact on them and in any event to be reluctant to change bank accounts; a stance which may even be rational if they cannot really determine how different sets of charges and charging policies will impact on them.

As for the implications of the decision for consumer contract law more generally, the Supreme Court decision may insulate more terms from review if the bundled approach is maintained. Indeed as every contract is a delicate balance of terms in relation to price it is easy to see that if the core bargain is to be exempt from review then in many cases it will be hard to draw a clear line between the main and peripheral terms. Equally failure to draw such a distinction can emasculate unfair terms law.

The unfair terms directive is likely to be subject to reform at the European level in the Consumer Rights Directive, which is currently being redrafted. This is the occasion when the European legislator can give a lead as to the proper scope of review. However, any such provision needs to be clear and unambiguous or consumers and businesses will still be left puzzling over just which terms can be challenged.

Geraint Howells

Notes

1. 1.

   S.I. 1999/2083.

2. 2.

   [2009] 3 W.L.R. 1215.

3. 3.

   [2008] EWHC 875 (Comm).

4. 4.

   [2009] EWCA Civ 116, [2009] 2 WLR 1286.

5. 5.

   [2002] 1 AC 481.